Strategy: Promos: What Really Works?
Promotions have become a regular part of doing business and something the consumer expects, especially this year. More than half of all catalogs, in fact, offer some type of promo, and some 20 percent of them offer free shipping!
Promotional offers motivate consumers to buy, helping customers overcome any resistance to purchasing. They’re also designed to encourage buyers to order more of a given item. But what really works?
Here are some of the most effective catalog and multichannel offers, and the best practices for them.
Most Common Offers
In order of effectiveness, the most common promotional offers are:
- free (or flat) shipping;
- a dollar amount off, can be a tiered amount;
- a percentage off; and
- a free gift with purchase.
Free shipping offers can increase revenue per catalog (RPC) by 20 percent or more. Obviously, there’s a cost associated with offering free shipping, and not all catalogers can afford to make that offer. If you’ve used a free shipping offer, test flat shipping — charging a flat shipping amount regardless of order size. I’ve tested at $2.95, $3.95 and $4.95, and seen no difference in response at those various levels. In most cases, flat shipping works as well as free shipping, and at least you’re covering some of your freight costs.
A dollar amount off the order generally outpulls a percentage off because consumers can relate to actual dollar amounts easier than they can calculate the percentage.
Free gifts with purchase are the least effective offers, but can still work. The return is better if the gift isn’t a product you’re selling, but something else that has perceived value.
Response Rate vs. Order Size
Which is better from the chart below, offer A or B? The results are identical in terms of the sales and RPC. But the response rates and average order sizes vary. An operations person might prefer A since there are fewer orders to pick and pack.