AI exposes discount waste as retailers dump mass promos

Personalised offers slash average discount rates to 13% while lifting total redemptions to 60%.

Retailers are reworking loyalty strategies as artificial intelligence exposes the limits of discount-led promotions and shifts focus to profitability.

Metro Singapore is revamping its 68-year retail model with an omnichannel, AI-driven loyalty programme aimed at increasing repeat visits and customer value. Henry Christian, Head of Loyalty for Marketing & Partnerships at Metro Singapore, said retailers must move beyond price as the main driver. “Quick services, efficient delivery, prompt responses—these are the values that customers actually seek,” he said, pointing to broader expectations beyond discounts.

The change is moving loyalty from spend-based tiers to behaviour-driven engagement. Aaron Crowe, Head of Revenue in Asia Pacific at Eagle Eye Solutions, said retailers are now “rewarding customers on how they engage and not just what they spend,” targeting actions such as visit frequency and cross-category shopping.

Personalisation is delivering measurable results. Crowe cited Tesco’s 2024 Christmas campaign, which targeted 10 million customers and achieved a 76% conversion rate through tailored offers. Systems now process “nearly 3 billion interactions per minute,” enabling real-time targeting that increases conversion and reduces wasted promotions.

By contrast, traditional discounting is proving inefficient. Mass campaigns offering 25% discounts generate around 5% redemption, whilst personalised offers can reduce discounts to 13–15% and lift redemption to about 60%, improving returns and cutting unnecessary incentives.

Execution, however, remains a hurdle. Christian said “human beings are usually the biggest blocker,” citing internal conflicts such as ownership of customers who browse online but purchase in-store. Crowe added that aligning marketing, IT, and store operations is critical for any omnichannel strategy to work.

Profitability is also under pressure from servicing costs. Christian warned that “VVIP customers may actually be draining your resources,” as discounts, rewards, and service costs accumulate, meaning high spend does not always equal higher profit.

The shift reflects a move towards more precise marketing. Instead of broad promotions, retailers are targeting specific behaviours to improve efficiency.

As Metro rolls out its programme, success will depend on aligning teams, integrating data, and managing cost-to-serve. Retailers that continue to rely on blanket discounts risk margin erosion, whilst those adopting targeted loyalty models are better placed to sustain returns.