Why Offering Discounts Through Social Media Is Bad Business for Nonprofit Organizations

There’s significant data compiled by multiple sources indicating that “getting discounts” is the top reason why people engage with an organization’s social media channels. So it seems logical that if you want to bump your number of fans and followers, offering discounts is a surefire way to go. And it works – if your sole measure of success is chasing these types of (perhaps less meaningful) metrics. But, before you go crazy with the discount offers on Facebook and Twitter just to get your “likes” up, here’s another thing that’s true: Offering discounts through social media channels cultivates a “market addiction” that will have long-term, negative consequences on the health of your organization.

I recently wrote a post called “Death by Curation” within which I shared data indicating the non-sustainable cycle that museums enter when they must rely on new, progressively more expensive “special” exhibits in the hopes of achieving attendance spikes (what has since been referred to by a reader of this blog as “Blockbuster Suicide”). In many ways, offering discounts creates a similarly vicious cycle whereby a visitor-serving organization finds itself realizing a diminishing return on the value of its visitation.

When an organization provides discounts through social media it trains their online audience to do two not-so-awesome things:

 

1) Your community expects more discounts

Here’s where your organization breeds an online audience of addicts accepting discounts…and, strangely enough, becomes addicted to offering discounts itself. Posting a discount to attract more likes on Facebook (or to get people to engage with a social media competition, etc.) will very likely result in a bump in likes and engagement. But know that in doing this, you are verifying that your social media channel is a source for discounts. Discounting for “likes” attracts low-level engagers (they are liking you for your discount, not your mission), and prevailing wisdoms increasingly suggest that your number of social media followers doesn’t matter. It is far better for your brand and bottom line to have 100 fans who share and interact with your content to create a meaningful relationship, than to have 1,000 fans who never share your message and liked you just for the discount.

I can hear the rumbling now: Some of you are thinking, “But we’ve used discounts to attract more likes and it worked” (i.e. it generated more likes). Over time, however, these low-level engagers will stop following you if you do not continue to offer discounts. That is, after all, the reason why they followed you in the first place…and you have shown them that, yes, you will post discounts on social media. This is the start of the addiction: In order to keep these likes, you need to offer more discounts.

Try this: Simply stop offering discounts. Over the course of a few months, your number of likes will go down (because these people only liked you for the discount, not your awesome, socially conscious content). They were not actual evangelists – and cultivating real evangelists to build a strong online community is the whole point of social media. You want folks who actually care about what you’re doing and will amplify your message (not the “we are offering a discount” message – which is the content that, unfortunately, frequently gets the most shares and perpetuates this cycle).

 

2) Perhaps more importantly, your community waits for discounts

Here’s where becoming an addict takes a toll on the organization’s health. Data indicates that offering coupons on social media channels – even once – causes people to postpone their visits or wait until you offer another discount before visiting you again. Worse yet, the new discount generally needs to be perceived as a “better” offer (i.e. an even greater discount) to motivate a new visit. This observation is consistent with many aspects of discount pricing psychology, whereby a stable discount is perceptually worth “less” over time. In other words, the 20% discount that motivated your market to visit last month will likely have a diminishing impact when re-deployed. Next time, to achieve the same outcome, your organization may have to offer a 35% discount…and then a 50% discount, etc. You see where I’m going with this…

Here is the debunking of another popular misnomer that some organization’s use to justify their discount tactics: You are not necessarily capturing new visitation with discounts. In fact, data from the company for which I work suggests that the folks using your discount were likely to visit anyway…and pay full price! This is a classic example of an ill-advised discounting strategy “leaving money on the table.”

To compound matters, instead of hastening the re-visitation cycle, the “waiting for a discount” phenomena may actually increase the interval between visits for many visitors. The average museum-going person visits a zoo, aquarium, or museum once every 19 months. If you offer a discount, while you may not attract a larger volume of visitation to your organization, you may accelerate your audience’s re-visitation cycle on a one-time basis. This sounds great…until you realize the significant downsides to this happening: Your audience just visited your organization without paying the full price that they were actually willing to pay and they likely won’t visit your organization again for (on average) another 19 months. On top of all this, IMPACTS data illustrates that the steeper the discount, the less likely visitors are to value your product and return in a shorter time period.

Think of it this way: A visitor coming to your museum in May 2012 would likely visit again in December 2013 (i.e. in 19 months). Let’s say that you offer them a discount that motivates them to visit in October 2013. Now, you’ve linked their intentions to visit to a discount offer…and decoupled it from what should be their primary motivation – your content! And, by doing so, you’ve created an environment where content as a motivator has become secondary to “the deal.” In other words, you will have moved your market from a 19-month visitation cycle to a visitation cycle dependent on an ever-increasing discount. Can your organization afford to keep motivating visitation in this way?

So, how do museums get addicted to discounts, too? Well, we sometimes confuse the response (i.e. a visit) to the stimuli (i.e. a discount) with efficacy. Once a discount has been offered to motivate a visit, we regularly witness the market “holding out” for another discount before visiting again. And what are museums doing while the market waits for this new discount? Sadly, often times the answer is that they are panicking.

If you run a museum, you’ve probably spent some time in this uncomfortable space – we observe the market’s behavior (or, in this case, their lack of behavior), and begin to get anxious because attendance numbers are down. What’s a quick fix to ease the pain of low visitation? Another discount! So we offer this discount…and, in the process, reward the market for holding out for the discount to begin with. This is the insidious thing about many discounting strategies: They actually train your audience to withhold their regular engagement, and then reward them for their constraint. We feed their addiction and, in turn, we become addicted ourselves to the short-term remedy that is “an offer they can’t refuse.”

Like most addictive – but ultimately deleterious – items, there is no denying that discounts “work” – provided that your sole measure of the effectiveness of a discount is its ability to generate a short-term spike in visitation. But, once the intoxicating high of a crowded gallery has passed, very often all that we’re left with is a nasty hangover. My advice to museums and nonprofit organizations contemplating a broad discount strategy on social media: Just say no!

 

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Posted on by colleendilen in Community Engagement, Management, Marketing, Museums, Nonprofit Marketing, Nonprofits, Social Media, Technology, Words of Wisdom 6 Comments

About the author

colleendilen

MPA. Chief Market Engagement Officer at IMPACTS Research & Development. Nonprofit marketer, Generation Y museum, zoo & aquarium writer/speaker, web engagement geek, data nerd, marathoner, nomad, herbivore

6 Responses to Why Offering Discounts Through Social Media Is Bad Business for Nonprofit Organizations

  1. Jasper Visser (@jaspervisser)

    Excellent post Colleen, thanks.

    In response to especially the title I’d like to stress though that offering coupons might occasionally be Good Business, especially if you want to check on the ROI of your online marketing strategies. Do people visit more often if they get a tiny discount on Facebook for a special event? So, can we get people to visit us because of our Facebook efforts? Coupons can answer these very important questions.

    (A “free” alternative is telling different entrances or starting hours to people at different platforms, although this might confuse some people.)

     
    • colleendilen

      Hi Jasper. Thanks for your comment!

      While I generally believe that it is a bad practice to promote a broad discounting strategy, I agree that there may be appropriate opportunities to selectively deploy coupons based on a number of considerations. Even in these instances, I still think it’s important to keep in mind that if an organization uses a discounting strategy to measure the ROI of its social media, then it still risks devaluing its own content. It is hard to target a discount with surgical precision – and the very connected nature of social media invites sharing and pass-along that may creep beyond the intended recipients (folks will “like” you for the discount, though they aren’t evangelists for your cause).

      Instead of coupons, I tend to favor “value adds” or other premiums that reward loyal social media followers with unique engagement opportunities and/or experiences. Much like coupons, these are easily trackable and serve the positive function of engendering additional storytelling opportunities for key evangelists (but don’t devalue admission). In the end, I think that a lot of the outcome depends on positioning. If you frame the coupon as a reward for engagement, then it may be perceived differently than as a pure discount – especially if it’s a one-time experiment to measure ROI.

       
  2. Ken Mayes (@kenmayes)

    I have often thought the same thing. More so for Groupon like offers, where the institution only get 1/4 of it’s ticket price, over discounts institutions may offer on their own. Interesting enough, I have offered Foursquare and Facebook check-in offers with very poor results.

    I recently spoke with a zoo director who said that their admission is ~$20.00 for an adult but the average price they receive per an adult is closer to $8.00, due to coupons, free days, and frequent visits from members.

    One of the main reasons I think museums (ZAMs) offer discounts is because attendance is an measure of “success.” We are always asked how many people did you see last year but never asked how many artifacts did you acquire.

    What is your take on selling memberships under the “if you visit twice a year, it pays for itself” statement?

     
    • colleendilen

      Thanks for the comment, Ken.

      Memberships are an entirely different beast and your question is a great idea for a post. Thanks for the inspiration!

      Discounting on social media generally “attracts” lower-level engagers that would have visited your ZAM anyway at full price, and encourages sharing of the discount over online channels rather than mission-related content that builds more substantial affinity for the organization. Membership, however, can be structured as a gateway to engagement for continuous support. Even “if you visit twice a year, it pays for itself” memberships require visitors to conceptually commit to that second visit (if they are buying the membership for that “discount”). This could be good or bad business based on a number of factors such as the museums’s membership visitation, conversion rates from low-to-high level members, etc.

       
  3. Karl Voigt

    Thanks, Colleen. I wholeheartedly agree with your position. In reading your response to Jasper, can you provide examples of what considerations might be appropriate for a selective coupon deployment?

     
  4. colleendilen

    Hi Karl. Great question – and one that I should have preemptively addressed in my reply to Jasper. My recommendation is to decouple couponing as a strategy/tactic from social media distribution channels. Successful promotions align the medium, method and channel; however, the best couponing strategies tend to be “contained” and surgical, whereas the most successful social strategies avail themselves of virality and scale. In my mind, the best deployment strategies are ones that don’t risk this incongruence, and tend to target a very specific audience via a discrete channel. For instance, as Jasper suggested, couponing is a viable means of indicating the efficacy of a marketing campaign – provided that one is able to reasonably ensure that the redemption is attributable to the marketing effort and not the product of a “pass along discount.” Most of these type of campaigns actually happen in the good, old-fashioned, offline world (e.g. an offer in a print ad where the pass along factor may be 2x…not the 25x that we see online). I also think that opportunities exist for select deployments as rewards for persons with whom you have already engaged. These type of couponing strategies often have a qualifying element to them. For example, suppose that an organization was hosting a special event or program: Perhaps the coupon is only available to members or email subscribers? This is a very targeted effort that both rewards current users for their engagement, while concurrently incentivizing future engagement from would-be users. I have also observed similarly successful “re-marketing” strategies where a coupon-based offer has been deployed to recent visitors to incentivize a repeat visit. (For example, three months after purchasing a ticket online and, thus, providing an email address, the organization emails a special offer to discount a re-visit or apply the initial ticket cost to a membership conversion). So, to summarize, when it comes to coupons, I believe that other channels (beyond social media) are most effective since they enable better targeting, a more accurate measure of ROI, provide an opportunity to reward/thank current constituencies, and serve to accelerate re-visitation/re-engagement.

     

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