Free shipping has become the default promotion all e-retailers offer during the holidays, so much so that customers have come to expect it. How do you set yourself apart from your competitors and help your customers cut through the clutter during the holiday season?
Here are five tips on how you can approach promotions in a brand-centric (and margin-friendly) way.
1. Promotions Shouldn't Be One-Size-Fits-All.
The best way to figure out what works for your customer is to test.
Understand that you don't have to offer free shipping carte blanche. Instead, look at your average order value and go 20 percent above it, ie.: if your average order value is $40, offer free shipping when a customer spends $50. You'll end up driving higher-priced orders and increasing your margins--a win for both the customer and for your business. You'd be amazed at how often a higher threshold performs at the same rate as a lower one.
2. Promotions Don't Have to be a Race to the Bottom.
Many companies think promotions eat into margins. If you work at one of those companies, you really need to change your mindset and discover how to have the right mix of consumer impact and company benefit.
Look at alternative ways to give higher-value promotions to your customers. While free shipping is a great standard, it may not be inviting the return purchase behavior you want. For that, you need a bounce back offer.
A bounce back offer is a great way to bring customers back, especially during the holiday season when a customer could only be shopping with you because what you sell is on Mom's Christmas list. For example, a bounce back offer for $20 off your next purchase when you spend $100 today encourages a one-time customer to become a repeat visitor. From a margin perspective, the discount can now be distributed between two purchases, lowering the overall margin impact versus a single transaction promotion.
3. Promotions Can Be Born Out of What You Do Well.
Free shipping and discounts are an ROI game that can vary. Conversely free returns can actually be a great marketing tool for your company if you make great products that have low return rates.
By analyzing your current return rate, you can end up promoting a benefit where you can already calculate downside. It can end up just being a value-add differentiator for the customer this holiday season. If you're an omnichannel retailer, you need to be looking at variations of this offer: "Free ship to store," or "free in-store returns," which can bring more customers into the store to hopefully buy more. Also, keep in mind that this is an expanding option, so be sure to understand what your competitors currently offer.
4. Promotions Should Not Treat All Customers Equal.
The key is to give the right offer to the right customer. To do that, you need to segment your customers and give them different promotions, based on what acquisition programs they used to find you.
For example, a customer might have found your website through an organic search that has little (to no) cost for you. Therefore, your global acquisition cost is not being utilized for this customer. You can use that built-in cost in the form of a promotion to help secure the conversion. Conversely, a customer who costs you more to acquire might not get a promotion or could only get 10 percent off.
By identifying the channels that are acquiring the most valuable customers, you can determine if you can offer more promotion to that customer segment. For example, if a customer used the search term "denim jeans," and you know from your data that the shopper will buy four pairs of jeans over the next year, versus those who come to you from the search term "t-shirt," then offer the denim jeans customers a bigger discount.
5. Promotions Should Be Creative and Flexible.
Remember, the holiday season is the most competitive time of the year; every retailer is vying for wallet share. Promotions don't have to be a margin-losing proposition.
Instead, think of how to get more customers in the door (and more eyes on your website) and bring them back long after the holiday season is over. While other retailers are worried about helping customers check off their shopping lists, you'll be focusing on keeping customers coming back for more. Keep in the back of your mind that just like clothes, one promotion size does not fit all!
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Nathan Richter advises top enterprise clients including Best Buy, QVC, Urban Outfitters, Sports Authority, and PETCO on website optimization. A veteran of digital marketing and online retailing, Richter has extensive hands-on experience helping enterprise clients implement successful multichannel marketing campaigns. Richter has directed online marketing and site optimization programs for David’s Bridal, QVC, The Franklin Mint, and dELiA's.
December 12, 2013
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