Consumers are always on the lookout for a good deal. And with the sheer number of incentives, discounts, points and promotions now on offer – not just in the run-up to Christmas, but throughout the year – brands and retailers have taught them to become even more cost-conscious. So with 2026 on the horizon, how do brands secure loyalty and preference in consumers’ minds without joining in the discounting death spiral?
Brands’ loyalty and promotions strategies have been repeating the same errors for some time – and, what’s more, it’s now becoming a key issue for business leadership, not just marketers. Over 70% of respondents to a study by Talon.One and Harvard Business Review, ‘Getting Strategic About Incentives’, said loyalty and promotions were either extremely or very important to their executive leadership team, but only half said they were also extremely or very effective.
It may not feel like a cost but businesses typically discount around 18% of their revenue away.
Sam Panzer, Talon.One
The problem is that brands have become as addicted as shoppers to discounts, in pursuit of topline growth, when in reality the resulting sales spike simply delays purchases or pulls future revenue forward, cannibalising full-price sales. The result is entrenched discounting with weak margins and poor attribution.
“It may not feel like a cost but businesses typically discount around 18% of their revenue away. It’s one of the leading costs in the overall marketing estate,” warns Sam Panzer, director of industry strategy at Talon.One.
As we head into 2026, it’s time to ‘stop the rot’ and look to alternative strategies that can deliver value, engage the customer and build loyalty – all while protecting the bottom line.
1. Unify promotions and loyalty under one incentives strategy
“At their core, promotions and loyalty are about the same thing – value exchange,” states Panzer. “In promotions, the value exchange is short-term while loyalty is longer. But in both cases, it needs to be about more than giving a discount.”
Discounts have been the go-to for companies because they don’t force leadership to confront some of the more fundamental issues facing their loyalty and promotions programmes: siloed data, technological limitations and unclear prioritisation. “Promotions, especially, get neglected by the C-suite. You feel that no-one wants to own the price and promotion strategy, despite being two of the four Ps. Leadership is more focused on brand promise but, if you get in the habit of discounting too much, that becomes your central brand promise,” Panzer warns.
The first step, then, is to bring loyalty strategy and personalised promotions together in the organisation, dive down into the data to understand the behaviours these mechanisms are driving and make sure they receive sufficient leadership support to succeed in both the short and long term. This is where incentives marketing comes in. It’s plain to see that leading brands and retailers have made this integration central to their product, pricing and promotional strategies – consider the prominent role of Clubcard and Nectar Prices at Tesco and Sainsbury’s, for example.
The benefits of integrated promotions and loyalty are numerous, Talon.One and HBR’s report found. Improved customer loyalty, increased sales and better customer experience were all cited by between 56% and 60% of respondents, while around 40% also pointed to improved data capture, better marketing ROI and better-performing promotions as positive outcomes.
2. Avoid the discounting death spiral
It’s difficult to understate – and to reverse – the damage excess discounting does to profits. As Panzer notes in a presentation titled ‘Avoiding the Discount Death Spiral’, a brand with a 30% gross margin running a 15% discount promotion will need to double sales volume just to keep profitability flat.
Yet, without strong leadership and oversight of promotion and loyalty strategies, brands make the same mistakes over and over again. “A poor CRM manager who needs to drive revenue or an inventory manager who needs to move excess stock doesn’t have any other tools in their toolbox, so a 20% off discount keeps going out,” Panzer explains. “And there’s the standard approach to promotions planning, which is to look back at last year and try to do it 5% better. If your trend line is negative around your ability to stick to full price, you’re just rearranging deckchairs on the Titanic.”
Instead, the business needs to look at how loyalty and promotions can activate against the brand story and brand values, rewarding customers for engaging more deeply with the business, and unlock more of what makes the business great. “There’s a much bigger story to be told if they can get proper leadership support,” Panzer insists.
If your trend line is negative around your ability to stick to full price, you’re just rearranging deckchairs on the Titanic.
Sam Panzer, Talon.One
This revolves around two key principles for promotions, according to Panzer’s ‘Avoiding the Discount Death Spiral’: ‘Do less’ and ‘Do better’. By removing promotions that don’t deliver and ceasing to target unprofitable customers, brands can avoid wasted spend and protect profit margins. A discount only ever satiates a customer’s desire for a deal, but with a clear brand and customer objective in mind, it’s easier to identify brand-building promotional mechanisms that support the business and its goals.
3. Focus on the promotions that work
The consumer desire for a deal or bargain won’t go away, but it isn’t their only objective when interacting with brands – or the only incentive a brand can offer to achieve its own business objectives.
If a brand seeks to increase average order value, for example, instead of a blanket discount it could introduce product bundles. For the consumer, this means they can stock up on regular purchases.
Alternatively, perhaps the brand needs to even out the sales cycle and maximise off-peak purchasing. With time-fenced deals outside peak times, the consumer can also access lower prices when they wouldn’t normally be in market.
Even simply encouraging consumers to proactively manage the data a brand holds about them can have a strong value exchange for both parties. By creating loyalty point rewards for completing a quiz or preference centre, the brand can collect and update relevant CRM data while the consumer receives more timely, better-quality offers.
“It takes more creativity on both sides of the value exchange,” Panzer insists, “widening the aperture on both the behaviour and the reward. Other than transactional value, what can we do to reward customers with emotional recognition, convenience or a feeling of exclusivity?”
4. Prioritise profitability and personalisation
It goes without saying that feelings of recognition and exclusivity can only really be achieved with a certain degree of sophistication in personalisation – and this also plays into improved performance of promotions. Redirecting just 25% of the spend that’s allotted to mass promotions towards greater personalisation can double a brand’s return on investment, according to research by Boston Consulting Group cited in Panzer’s presentation.
In the ‘Getting Strategic About Incentives’ study from Talon.One and HBR, 62% of respondents at organisations that have started personalising promotions said they have seen increased sales, and nearly half (47%) say it has increased loyalty. However, siloed data and departments, combined with a lack of leadership, can lead to struggles in personalisation. So effective promotions must begin and end with a unified approach to the customer overall.
The direction of travel is clear: half of those surveyed in the research are increasing use of personalisation this year, versus only 3% decreasing it. Meanwhile, around two-thirds are increasing their integration of promotions and loyalty, the profitability of their loyalty schemes and the profitability of discounting and promotions.
Panzer concludes: “The business needs to be liberated to think more holistically about the value exchange in loyalty and promotions. There isn’t much of a boundary between loyalty and promotions; it’s applied behaviour, economics and consumer psychology. If we can gamify the personalisation layer and help customers towards bigger loyalty rewards in the future – especially if you can address consumer challenges by segment – it starts to get really interesting.”
To learn more about Talon.One and incentives marketing, visit our microsite on incentives marketing.
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