The snow skiing season is still a few months away. Still, in preparation for the upcoming season, the ski equipment promotions are underway. One of my favorites comes from Granite Chief. This is a fine retailer of ski equipment in Truckee, California. Each year, the company makes an offer to its customers: Purchase your Ski Service Card by August 31st for $100 and you will have a credit balance for $200 to be used on any of the company’s repair, mounting, tuning and boot-fitting services. Each time the card holder has equipment serviced by the store, Granite Chief will deduct the labor cost from the customer’s Ski Service Card credit. The credit is good only for labor. Any unused balances are not refundable and will not be carried over to the next season. The card expires on May 31, 2010.
This is a common approach to discounting (see Video #43: Four Simple Pricing Rules in Hostile Markets on StrategyStreet.com). The trick with a discount is to limit the customer segments who qualify for the discount. In this case, the store limits the discount to those who purchase a membership card. The store, then, further limits the discount to a total dollar amount.
We have seen many examples of club member discounts over the years. These discounts go to customers who have a particular relationship with the company. In some cases, the relationship is that of employee. For example, Delta subsidized new computers for its employees in a program it sponsored with PeoplePC. In other cases, the relationship is a bit looser. These are often “friends and family” programs that extend discounts to chosen customers. For example, recently Saks offered 25% off to “friends and family.” In a similar program, Banana Republic offered 25% off to its “friends and family” holiday shoppers. The codes for this discount program circulated by email on the internet. Not exactly exclusive, was it?
The Granite Chief program is an example of the second type of club member program. These programs offer discounts to members of company-sponsored clubs or affinity programs. Here the company is more specific in the definition of the customers who qualify for the discount. Programs falling into this category include frequent shopper cards offered by grocery stores. In another example, Chico’s, the apparel retailer, offered its best customers membership in the Passport Club. This club offered a permanent 5% discount for every $500 the customer spends.
All of these club member discount programs increase total sales and confirm customer loyalty. For more on approaches to discount products in ways that limit the discount to select customers, please see StrategyStreet/Improve/Pricing/Brainstorming Ideas/Change the Components of the Price.