Managing Promotional Offers and Finding the Equilibrium

Since the recession, cross-channel retailers have come to rely more and more on promotional offers to drive sales. Catalog and internet buyers have come to expect strong promotional offers, seemingly waiting for them before making a purchase.

Managing promotional offers and making sure they're well balanced within your catalog circulation, emails and online ads is a critical part of getting your marketing mix right.

Do you need deeply discounted offers to get consumers to buy? Deep offers have two big negatives: First, you have the margin hit of giving deep discounts. Second, you train customers to wait because they know the deep discount is coming. One alternative is to wean your customers off of waiting for the big offer by giving them a series of much smaller discounts so that they learn to expect frequent but not such dramatic discounts.

Will consumers buy at full retail price? Not if you’ve trained them to expect discounts. I’m a loyal customer of Borders who now waits for a discount before purchasing. Why? Because I buy so frequently, there's always a discount coupon waiting for me in my inbox. Now that I’m a platinum member and get an extra 10 percent off, I'm torn about making a purchase at a regular bookstore. I’ve come to expect 40 percent off every purchase I make at Borders. I even buy the Sunday New York Times there to save $2.00. The upside to Borders is that I’m loyal to their discounted prices. Note that Borders did file for bankruptcy in February.

Can you send more frequent emails to buyers who have responded to them? One of the emerging trends is that marketers are segmenting out buyers who have responded to email offers to send them more frequent emails than the rest of their email file. You can greatly ramp up the frequency of emailing coupons and promotional codes to customers who have responded to them in the past — a discount buyer is a discount buyer. I’ve also noticed (going back to my Borders example) that as soon as I use a coupon from Borders that I get an immediate series of fresh coupons over the next week to two weeks.