Despite a seemingly nonstop deal-of-the-day bonanza this past holiday season, retailers remained careful in determining how to position price cuts.
There is no magic number or percentage off that ignites customer response, say retailers. Merchants balance inventories with profit margins and test response to various offers, tweaking along the way.
“We constantly analyze our promotional offerings to determine what worked and how to do it even better next time,” says Greg Ahearn, SVP of marketing and e-commerce at Toys “R” Us, Inc. The toy retailer began planning its strategy for the next holiday on December 26, but it analyzes its in-store and online promotions throughout the season and adjusts them along the way, he says.
“That has a lot to do with experience and history — what performed, what were the price points and what I can afford,” says David Mamane, president and CEO of MyJewelryBox.com. “We're in the business to make money; I'm not ready to give stuff away.”
The ease of collecting information fast from social media feedback or online metrics, allows for a lot of tweaking on the fly, say the merchants.
“Online is terrific for your ability to within days or hours, get response on what consumers are listening to and what's causing them to change their behaviors,” says David Friedman, president of marketing at Sears Holdings Corp.
Mamane says he looks at click-to-conversion rates and adjusts his marketing efforts “so you can't get caught with a quarter-million-dollar mistake.” MyJewelryBox.com offered doorbusters on Black Friday and Cyber Monday and increased its advertising spending in 2010 to run a campaign of more than $1 million for the holidays, using Google Ad-Words, display ads, pay-per-click ads, banner advertising and e-mail blasts.
Free shipping scores big
But while deals of the day get the attention, retailers and analysts agree that free shipping was the biggest weapon that e-tailers wielded during the 2010 holiday season. A survey of online merchants from supplier Stamps.com found 64% say it was their most effective promotion, well ahead of discounts and promotional codes (22%), gifts with purchase (14%) and buy one-get one deals (13%).
Free shipping works: According to comScore, sales on Free Shipping Day were so strong this year ($943 million), that it passed Black Friday in popularity among online shoppers.
“With free shipping, you're on an even playing field,” with larger brick-and-mortar retailers, Mamane says. “Now it costs nothing for this item to get to your doorstep.”