Strategy What You Need to Know About Promotional Offers

By Stephen R. Lett

Promotional offers such as free shipping, 10 percent off, $5 off and a free gift can be extremely effective in boosting response and sales. But are you using promos correctly, or are you over-using them?

Many catalogers offer promotions to all customers and prospects. There's sometimes no objective behind the offer, other than to increase sales. What's more, offers are used without prior or proper testing — in fact, they're offered without any financial analysis at all. This month I'll focus on when and how to use promos — and whether you should use them at all.

Some marketers often feel pressured — often from management looking for more sales — to devise offers for the wrong reasons. Or they think they should offer a promo simply because a competitor does. It's important to your bottom line to use promotions strategically, for example to reactivate previous customers, acquire new ones, convert inquirers to buyers, or stimulate sales from your housefile during your slow season.

But why give away promotional dollars if you don't have to? Have a purpose for making offers. No doubt, your marketing toolbox must include promos from time to time. But continued, widespread use of promotional offers can negatively impact your bottom line. Here's why:

- Customers come to expect them. Repeated use of promos conditions customers to expect offers the next time they order, which can lessen the impact. For example, a customer may not feel motivated to buy now because she knows another offer will be right behind the current one. In a sense, we create promotion-driven buyers.

- The cost can have a negative impact. In certain customer segments, it's difficult to lift response enough to offset the added cost of giving the offer to everyone. Again, the more frequently you give offers, the less impact they have.