Strategy: Promos: What Really Works?
Offer B is better from a marketing viewpoint, however, because higher response rates put more buyers in the 12-month bucket. So increasing the average order size isn’t as important as increasing the response rate. Therefore, you shouldn’t structure offers to increase the average order, because that generally comes at the expense of response.
If you want to maximize response rates, don’t set offer-qualifying dollar minimums too high. If your average order is $75 — per offer A — that means approximately 80 percent of your orders fall below that average. Setting a threshold at $99, or even $75, means only a small percentage of buyers will be attracted to the offer.
So let more buyers qualify. Test no dollar minimum. This has encouraged more people to order and increased response and average order sizes in tests I’ve conducted. Also, customers who usually spend more than the order minimum will lower their spending to hit the minimum if there is one.
10 Simple Offer Rules
- Know why to make the offer and use it strategically.
- Prepare a pro forma; do your financial analysis.
- Test offers against other offers.
- Don’t overtest offers within a drop.
- Don’t make offers during peak season if possible.
- Don’t overuse an offer; retest it against a control or another offer.
- Know what your competition is doing — you might need offers just to stay competitive.
- Your sample size must yield statistically valid results.
- Expect some decline in the impact of an offer over the control if the offer is repeated.
- Read the results, and act on what you see.
Promos are key tools in the marketing toolbox, and customers often shop for the best. Follow these simple rules, and determine which offer works best for you.
Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. Reach him at (302) 539-7257 or firstname.lastname@example.org.