Contributions to Profit: Plan for 2007, Part II

Last month in this column, I defined the basic psychological and behavioral groupings of prospects and customers as suspects, prospects, triers, buyers and advocates. Developing marketing plans with these groups in mind can increase your results and profitability.

This month, in the second of a three-installment series that concludes in the December issue, I’ll explore some strategies and tactics you can implement to accomplish this. For the purpose of this discussion, let’s assume that you’ve done a proper circulation plan and already know who you suspect will become your customers. Your suspects have become prospects by way of list research, and you’re ready to develop powerful promotions to move them up the food chain.

1. Convert prospects to triers using promotions. Promotions are a powerful way to acquire customers and offer something beyond merchandise to stimulate the first sale — and beyond.

Before you mail any new promotion or offer to acquire customers, always do your math up front. Ask, “What are the potential profit and loss ramifications of my offer?” Then calculate best- and worst-case scenarios in a spreadsheet. Look carefully at your offer’s initial return on investment. Just as important, project out these scenarios to the downstream lifetime value of your initial promotions.

Also, consider your brand and its image in your promotion and offer development. Ask yourself, “Do I want to be a promotionally driven company? How will my prospects interpret that?”

In the catalog business, merchandise often is the offer, especially in higher-end catalogs. The more promotionally driven you are on the front end, the more you’ll need to be on the back end. Customers who initially look for a promotion to try your products, could be looking for additional stimulation in the future. So your single to multibuyer conversion ratios need to be monitored carefully.

2. What to offer. The most common offers are free shipping, percent off (save 25 percent off your first order) and dollar off promotions (save $9.95). When I was in the direct-to-consumer vitamin business, we successfully offered the product free with just a shipping charge (to be clear, the products were sold using a negative option continuity program, and we knew exactly what we could “spend” to acquire customers).

There’s also the free gift with purchase promotion. At the vitamin company, we gave away an unrelated item (a radio) to stimulate the initial order. At another company, we offered related accessories to get the first order. Other offers to test:
- Buy one, get one at $X off, a percentage off or free (a great way to build up average order size).
- Money-back guarantee offers (reduce the risk prospect has to take up front).
- 110 percent or double your money back guarantees.
- Free return shipping (“We’ll even cover the return costs!”).

Most importantly, always make your offers of a limited time nature to create urgency. And when you’re defining dollars and percentages off, add a threshold. You can develop multitiered offers, such as:
- Spend $75; save (or get) X.
- Spend $100; save (or get) Y.
- Spend $125; save (or get) Z.

In the final part of this series, next month, I’ll look at how you can convert triers (single buyers) to multibuyers and multis to customer advocates. «

Jim Gilbert is president of Gilbert Direct Marketing Inc. and professor of direct marketing at Miami International University of Art and Design. Contact: jimdirect@aol.com.