Strategy What You Need to Know About Promotional Offers
Note: Assumes lost shipping revenue at 10 percent of net sales. And assumes mail costs for the free shipping is the same as the control. But if there's a dot whack or wrap promoting free shipping, the mail cost must be adjusted accordingly.
The chart shows that you need a $1.25, or 25 percent, increase in the revenue per catalog (RPC) mailed, which is a reasonable expectation for a first-time, free shipping offer to a zero-to-12-month housefile. I've seen a first-time, free shipping offer increase the RPC by as much as 50 percent. You're thinking, "Wow! Let's offer free shipping to our 'best' customers." But keep in mind, repeated use of free shipping will condition customers to wait for the next offer. Moreover, results will decline due to overuse. And finally, use of a free-shipping offer can significantly impact your next mailing results, because the offer is generating demand early in the customer's buying cycle.
When to Make an Offer
Examine when offers are being made. Is it during peak holiday buying season when customers are buying, anyway? I even see offers made on cyber Monday! Offer timing is critical. It's just as important to know when to make the offer as it is to know when not to.
I've also noted the importance of testing an offer, a relatively easy thing to do. If you've been running a free-shipping offer all the time, test no offer or another offer. Don't assume the offer works. Test and re-test. And know how much you need to increase response rates and/or average order sizes to cost justify the offer. Following are 10 simple rules for effective use of offers: