This blog posts explores ways to encourage higher basket sizes with intelligent discount mechanics. The application is much broader than returns, and so important in today’s challenged economic times: how can we protect profitability while giving value to customers?

We propose The Alpine Ridge Strategy¹ – an increasingly stepped discount rate to build baskets. It is well known that customers love free delivery and will basket build to just over the threshold, but this builds an incentive to continue basket building beyond that point: providing cash margin for the retailer and cheaper goods to the customer. An example Alpine Ridge Strategy would be:

• Free delivery when you spend £40
• £5 off when you spend over £60
• £10 off when you spend over £80
• £20 off when you spend over £100
• You should carefully explore the interaction between promotions and returns rates, and how to nudge customers to items they won’t return

1. Alpine Ridge Strategy is named for the road in Colorado’s Rocky Mountain National Park we were driving through as I debated the finer points of the approach with a good friend of mine who also works in eCommerce pricing.

Of course, there is nothing new here – stepped discount mechanics have been used intermittently by many retailers for years. What is important now is:

• We are operating in a highly challenging environment for both customers and retailers. Distribution costs – and the cost of living – are growing rapidly. Retailers who can give value to their customers and protect margin will win share
• The exact nature of the mechanic for your business requires great precision based on: distribution of basket sizes; gross margin by category; returns rate; share of wallet; customer frequency; expected customer elasticity and many others

Some examples of when the Alpine Ridge Strategy is best applied

DVS are expert in understanding each of these and working with you to refine, launch and test your Alpine Ridge Strategy. We combine data analytics expertise with the strategic mindset to ‘think bigger’ and understand the wider implications for your business. We can support you to build a launch mechanic and also to measure the effectiveness and impact on your customers and profitability.

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1. We’re answer focused
2. We’re flexible, for our clients and our team
3. We’re collaborative

We’re answer focused

In all of our projects, we worry about what the answer is and not how we got there. We are deductive in our communications, leading with the ‘so what’. Sometimes this answer comes from a detailed model, but often it’s a simple set of cross-cuts or some whiteboard time. We’re always passionate about method and happy to talk through that too, but it’s not how we bring our core value.

We’re flexible: for our clients

Our people flex around the needs of your business. We can support with short exploration phases, build out a proof of value with your business, as well as supporting the to implementation of a proof of concept. These different project phases need different skillsets and team sizes, and we will never push you to a team or project structure that doesn’t suit your needs We recognise that this is a key USP of Data Vision Services vs bigger consulting houses, and will endeavour to stick to this approach as we grow.

We’re flexible: for our team

We give back as we take with our team. It’s professional services, and so sometimes there are some longer hours – but we look to give back too. Some of these perks include: extra holiday allowance to use when you’re working on business development; time off for volunteering; option to work abroad for up to four weeks a year; and a flexible office space subscription you can use whenever you want.

We’re collaborative

We know that more diverse brains focused on a problem leads to a higher quality answer. So, we use that office space subscription. Working from home is a fantastic asset, but there are some problems you just need to write out on a whiteboard. We work closely with our clients and look to get together for at least fortnightly workshops. We work closely together as DVS, sharing ideas across our projects whenever we can. So when you have one person from the team on your project, you really get access to the whole team’s brainpower. It’s boring when we work alone!

Does this sound like the kind of company you want to work with? Check out the Contact tab and give us a shout.

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