Promotions … Don’t Train Your Customers

Who doesn’t like a good money-saving deal? It’s human nature to want to save money. "Free shipping! $10 Off! Gift with order! Save 20%! Buy one get one free!" These are all common offers that motivate customers to purchase. We all know that promotional offers increase the rate of response. How do you keep from conditioning customers to expect a promotion? The simple answer is that you don’t.

Consumers have been conditioned to expect an offer such as free shipping, and catalogers are afraid not to give them one, especially if they've done so in the past. What should you do? Not offer the customer a promotion knowing your competition does? The pressure to give an offer to both customers and prospects is overwhelming, especially online. Coupon websites like Retailmenot.com help condition consumers to look for a promo before placing an order. We all do it. I feel promotional conditioning, in general, is on a greater scale than ever. The management of promotions and the strategy behind them is important to reduce the “conditioning” factor.

The best way to reduce the possibility of conditioning is to use marketing copy to make the promo feel like it’s a unique offer. “This week only” or “through a given date only …” This type of message creates a one-time sense of urgency. Copy plays an important role in the creation of offers.

Promotional strategy differs for the housefile (your current customer list) vs. prospects vs. the web. It also varies from one-time and multitime buyers. For example, offers to prospects need to be stronger in order for them to make a first-time purchase. The same is true for the web, where internet-only buyers are looking for deals. Stronger promotional offers can also be used to convert one-time buyers into two- and more time customers.

The effectiveness of promotional offers varies depending on the offer. I've done a great deal of A/B split testing and here are how offers rank based on actual data:

1. Free (or flat) shipping — always No. 1
2. A fixed dollar amount off the order
3. A fixed percentage off the order
4. A gift

Note: When selling B-to-B, we've found that a percent off most often is the strongest offer.

Offers need to be meaningful. The consumer wants to feel the offer is a good deal. Here are my eight simple rules when using promotional offers:

1. Use offers strategically. Know why you're making the offer. Don’t just make an offer to feel you're making one.
2. Prepare financial pro-forma to define the results needed to justify the promo. There is a cost when making a promotional offer.
3. Always test the offer against another offer and against no offer to both customers and prospects. The results might surprise you. Don’t make assumptions.
4. Don’t overuse an offer; mix it up! Keep the offer “fresh.”
5. Make the offer without a minimum dollar amount for the order. Scary? Perhaps. No minimum purchase amount will increase the response rate and the average order size. If you feel you need a purchase minimum, be sure not to set it too high.
6. Trust the results and roll out the offer with confidence. Test the winning offer against another offer.
7. Design offers to increase the rate of response, not to increase average order value. Increasing the average order size could be at the expense of the response rate.
8. The offer should have a call for action with an expiration date.

In summary, customers can become conditioned to offers. Some consumers will only purchase when a strong offer is made. To reduce the risk of conditioning, vary the offer every mailing. And work on the copy as suggested previously. Be aware that conditioning the consumer is likely; do what you can to minimize it.

Stephen R. Lett is the Founder and Chairman of Lett Direct, Inc., a catalog consulting firm specializing in circulation planning, forecasting, digital marketing, and analysis since 1995.