What loyalty program discount dependence costs you
The short answer
Loyalty program discount dependence is the share of your members who mostly buy on discount. Flag members with more than 70% of their units bought on promotion or member discount, then compare their spend, margin and frequency with full-price members. If discount seekers are a large share of the program, the member discount is subsidizing deals more than rewarding loyalty.
Why it matters
A loyalty program built to reward your best customers can drift into a discount club, where much of the member benefit goes to shoppers who only buy on price. Measuring the overlap shows how much margin the program spends on loyalty and how much on deals.
The question to ask
Copy this into Lexi as written.
What the answer looks like
Illustrative output on sample data
Illustrative example: how Lexi answers this for a toy retailer with 120,000 active members. It splits members by discount use and compares revenue and discount dollars.
- Discount-seeking members: 32% of members, 29% of revenue, 58% of discount dollars
- Full-price members: 39% of members, 48% of revenue, 17% of discount dollars
- Everyone else: 29% of members
What the data shows
Almost a third of members take over half the member discount and bring in under a third of member revenue.
What it means
Their gross margin per customer is about a third of full-price members'. Many joined during holiday sales for a stacked code, while birthday club joiners behave like full-price members.
What to do
Stop stacking member codes on holiday sales and promote the birthday club at sign-up.
Want me to compare the margin each member group generates?
Frequently asked questions
How do I define a discount seeker?
Use the share of a customer's units bought on any discount, including promotions, markdowns and member pricing, over at least two years. A threshold such as 70% marks customers who rarely pay full price. Require a minimum number of purchases, so one sale-period order does not define a customer.
Is it bad to have discount seekers in a loyalty program?
Not on its own. Discount seekers still bring revenue, and some move toward full price over time. The problem comes when they take most of the member discount, especially stacked on sale prices, while bringing little margin. Design benefits so the deepest rewards go to customers who also buy at full price.
How can loyalty program discounting be reduced without losing members?
Change the shape of the benefit before its size. Stop stacking member discounts on sale prices, move value into points, early access and events, and keep a member price on a smaller set of lines. Test changes on a share of members and compare retention and margin before rolling them out.