Do Promotions Condition the Consumer?

by Stephen Lett

Free Shipping! $10 Off! Take 20%! Promotions such as these are very common today. Consumers have been conditioned to expect an offer and catalogers are afraid not to give them one. We do know that promotions increase the rate of response. We also know that gross margins can suffer as a result. But what should you do? Not give an offer when your competition does? The pressure to give an offer to both customers and prospects is overwhelming especially on the web.   Coupon websites such as Retailmenot.com, Groupon.com, Couponcabin.com and other sites have helped condition consumers to look on the internet for money-saving coupons before they shop. We all do it. I think promo conditioning in general is on a greater scale than ever. Therefore, the management of promotions and the strategy behind them is very important.   The best way to reduce the possibility of conditioning is to use the copy to make the promo feel like it’s a unique offer. “This week only” or “through x date only …” This type of message makes it feel like this is urgent and a one-time special. Copy plays an important role in the set-up of offers.   Promotional strategy differs from the house file vs. prospects vs. the web. It also varies from 1x vs. 2 and more time buyers. For example, offers to prospects (non-buyers) need to be stronger in order for them to bite. The same is true for the web where internet only buyers are looking for deals. Stronger promotional offers can also be used to convert 1x buyers to 2 and more time customers.  

At Lett Direct, we have done a great deal of A/B split testing of offers over the years. We have lots of history and data on all types of offers. From our experience, here is how offers rank:  

  1. Free (or Flat) Shipping – Always #1
  2. A fixed dollar amount off the order.
  3. A fixed percentage off the order.
  4. A free gift.

OUR THIRTEEN SIMPLE RULES WHEN USING OFFERS

  1. Know why you are making the offer. Use offers strategically.
  2. Prepare a pro-forma; do your financial analysis.
  3. Test the offer against another offer.
  4. Don’t over test offers within a drop.
  5. Don’t over use an offer; Re-test against a control or another offer.
  6. Alternate offers to keep it fresh and spark interest.
  7. Make the offer you are using in your mailings, available on your website.
  8. Know what your competition is doing.  You might have to use offers just to stay competitive.
  9. Consider making the offer available on one (or more), of the coupon sites.  This is especially recommended if your competition is doing so.  You do not want to lose the order to your competition if a customer finds their coupon.
  10. Consider joining “National Free Shipping Day”, on 12/16/16.  You can view more information at: www.freeshippingday.com
  11. Make sure your sample size gives you statistically valid results.
  12. Expect some decline in the impact of the offer over the control if the offer is repeated.
  13. Read the results and act on what you see!

In summary, buyers can become conditioned to offers. Some consumers will only purchase when a strong offer is made. To reduce the risk of conditioning, vary the offer every mailing. And, work on the copy as suggested previously. Be aware that conditioning the consumer is likely and do what you can to minimize it.