Should Online Retailers Offer Senior and Military Discounts?
Discounts for special consumer groups, like senior citizens and those with military service, may help online retailers increase sales and build loyalty. But offering these types of discounts online can be difficult to manage and may impact long-term profit.
Retail marketers have different ideas about how well discounts work and when retail discounts should be employed.
Discounts Should Meet Business Needs
At one extreme, some experts believe that businesses should never, under any circumstance, offer discounts on products. Derek Halpern, the founder of Social Triggers, a marketing agency, dislikes discounts. Addressing a general business audience in a video, Halpern argues that the short-term sales increases a discount can provide are not worth the long-term damage done to a business’s profit and reputation.
Halpern, in this video, uses the example of brick-and-click retailer J.C. Penney, which, he claims, had become so dependent on product discounts that when it tried to switch its pricing model to offer everyday low prices, it failed. J.C. Penney customers had become addicted to the discounting. No one trusted the store’s regular prices, according to Halpern.
In spite of the arguments against discounting, in retail, discounts, like closeouts or similar, are often necessary for cash flow management or even to make space available for newer, better selling products. Thus, the most practical and pragmatic position regarding retail discounts may be to use discounts when they meet a specific business need and can be measured to ensure they are meeting that need.
With this in mind, senior citizen discounts and military service discounts may be a way that online retailers can both boost sales and build customer relationships, assuming that boosting sales and building relationships with these groups are business goals.
Seniors and Military Personnel Seek Discounts
Senior citizens and folks who have served in the military may be more prone to look for discounts.
There are, perhaps, two reasons for this.
First, so many businesses offer discounts or special offers for senior citizens or active military and retired military personnel that these groups have simply learned to ask.
A quick Google search for “senior discount” returns more than 126 million results. And sites like SeniorDiscounts.com and even the catalog of the AARP — formerly, American Association of Retired Persons — offers discounts for senior shoppers. SeniorDiscounts.com claims to have more than 250,000 listings for discount offers at retailers, restaurants, and similar.
… so many businesses offer discounts or special offers for senior citizens or active military and retired military personnel that these groups have simply learned to ask.
Second, senior citizens and military personnel may have relatively lower incomes and, therefore, may need to be a little more frugal, looking for discounts whenever possible. For example, in 2016 a U.S. Army E5 sergeant with five years of service earns $2,797.80 per month in basic pay or $33,573.60 annually as a base. The U.S. median household income is about $52,000. Thus, income may encourage these shoppers to look for discounts.
Seniors and Military Personnel Are Loyal Shoppers
When senior citizens or those eligible for a military discount do find a store offering a deal, they tend to become loyal shoppers.
A multichannel retailer in the northwestern U.S., for example, frequently doubles or triples its average daily sales on Tuesdays. Why are Tuesdays so potent for this retailer’s sales? It is because the company offers a 10-percent discount to senior shoppers. And in spite of the cost of the discount, Tuesdays generate the most revenue of any day of the week. Even when senior Tuesdays are compared to Saturdays, which are typically very strong for retailers with physical stores, Tuesdays win for this retailer.
The senior shoppers know that they can get a discount on Tuesday; those shoppers are very loyal to the retailer. If it is a goal to increase customer loyalty and encourage frequent visits, a senior discount might help.
It may be the case that online retailers consistently offering a senior or military discount could create loyal shopping relationships that would be worth more than the cost of discounting goods.
Seniors and Military Personnel Share Buying Experiences
Word of mouth marketing is a powerful way to promote a business. And senior citizens and military families are highly-networked, social-sharing machines, which, when endeared to a retailer, can help to promote that retailer to others.
Online retailers could test to learn if their military or senior discounts were, in fact, bringing in new customers. For example, a retailer could add a “How did you hear about us?” offer as a follow up for every new customer using the senior or military discount. When one of these new customers makes an initial purchase, she receives an email asking how she heard about the retailer. Include as a possible answer “A friend told me about your discount.”
Discounts As a Competitive Necessity
Depending on which retail segment a merchant serves, offering a senior or military discount may be a competitive advantage or a competitive necessity.
For example, imagine a senior citizen shopping for a new set of Calphalon cookware. A 13-piece set of stainless steel Calphalon pots and pans is available at Kohl’s for a regular price of $499.99. Ignore for a moment that Kohl’s is a frequent discounter and that nearly everything the company carries goes on or off sale almost weekly, and this senior shopper can still get these Calphalon pots and pans at a discount. Every Wednesday, Kohl’s physical stores give senior shoppers 15 percent off on many items, meaning that a senior could save nearly $75.
A retailer in direct competition with Kohl’s may find it necessary to offer a similar senior discount to be competitive.
Offering Senior, Military Discounts Online Creates Problems
Offering group-based discounts does, however, create some problems.
For example, how will an online retailer verify that a particular shopper is, in fact, a senior citizen or is active duty military?
In a physical store, a cashier can ask to see a driver’s license or, in some cases, ask for the shopper to present a military identification. But this may not be practical online.
Similarly, some suppliers will not allow online retailers to discount their products online. This forces online sellers to publish a long list of exclusions along with information about a senior and military discount.
For some retailers, offering a senior or military discount may be a way to engage a loyal consumer segment. But offering those discounts could create problems. Look at your retail industry segment and decide if a senior or military discount could help your business, or not.