For many years, there has been intense discussion about the concept of customer lifetime value. According to this concept, loyal shoppers will make many purchases over their lifetime, thus enabling companies to accrue long-term profits from those shoppers. This concept further suggests that price-sensitive shoppers may not be worth pursuing because they tend to be more transactional and focused more on discounts, making them less profitable.

But is this reasoning always correct? Read on!!

As Jack Neff reports for Advertising Age, the common wisdom may not be right:

“Price-sensitive shoppers have long been pariahs of marketing, seen as cash-strapped deal seekers who are unprofitable because they switch brands relentlessly. But research from a marketing-analytics firm ( Dunnhumby USA) finds price-sensitive shoppers come from all income and demographic groups, are often more brand loyal than others, and spend more in supermarkets on average than shoppers less focused on price.”

“The research disputes conventional wisdom that loyalty programs should shun the biggest deal seekers because they’re unprofitable. But what really flies in the face of conventional wisdom is the study’s finding that even the most price-sensitive shoppers are profitable for retailers — and they can be profitable for brands, too. Brands hurt their profits the most when deals that should be targeted just to price-sensitive shoppers also reach others who would pay full price without them.”

What do YOU think about this?

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