Why do online shopping sites give extra discounts on apps?

Companies make a loss on every brand new customer they acquire.

For example All food tech companies such as Zomato, Swiggy, Uber Eats etc. spend anything between Rs.600 to Rs.2500 to acquire a new customer.

To become profitable the companies have to get maximum value out of a customer. [Life Time Value of a customer]

Life Time Value of a customer i.e, how many times the customer buys product/services from the same company in a lifetime.

Let’s take an example to understand: If we take Swiggy case if a customer is acquired for Rs.1200 and has done 50 orders in 3 months before he/she uninstalls the app and goes for another company service (Zomato).

Let’s assume every order from the customer in the last 3 months time Swiggy got Rs.30 profit. So, we can say that Swiggy got total value from this particular customer is 50 orders*Rs30 profit = Rs.1500. [Rs.1500 (profit) – Rs.1200 (customer acquisition cost) = Rs.300]

So, Swiggy has got Rs.300 net profit from a single customer. [If the customer stays loyal and continuous to order from Swiggy then Swiggy get more profit if the customer quits in the first month by doing only 10 orders. Swiggy will be in a loss)

So, in business generally the more the customer is loyal and uses the services regularly the more profits. [Companies thrive on retaining customers, not on new customers]

Therefore, companies have to increase the lifetime value of a customer and the best way is to hook a customer is with discounts and deals (everyone on this planet likes freebies doesn’t we?)

To answer your question…

An app is the best place to hook and give discounts because your smartphone is the best platform and you use it every day.

Convenient, fast, easy and best way to connect with you.

Note: All the numbers given in the answer are approx numbers and taken for the example…

Read about the best washing machines in India 2019 

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