New Customers Reap Unlimited Rewards

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In the battle to win important market and mind share in the pundit-predicted crucial holiday season, companies are topping each other every day with free offers to attract new customers. Gloom-and-doom experts warn that fourth-quarter results may mean life or death for online players, especially for publicly traded companies.


So, who will win the race to capture consumer dollars and repeat business? It may not be too long before some companies quickly burn through their money with giveaways, while others put real sales on the books. Here is a lineup of some of the latest offers.


The Freebies


Most of the following offers provide shopping credits to consumers with no strings attached - come to our store and take anything you want up to a certain dollar amount. The deals will probably get more interesting as we get closer to Santa's sleigh ride.


• Buy.com/E*Trade: $100 credit for purchases on Buy.com. This promotion, e-mailed to existing Buy.com customers, credits them with $100 toward any purchase if they move a minimum of $1,000 in funds or equities into E*Trade. It's easy to sign up and there's a big payoff, but there is no purchase or trading requirement with either Buy.com or E*Trade. Since it is also "E*asy" to quickly switch away to another broker, this promotion may not be a big winner.


• RedEnvelope.com: $5 off of any purchase. A red envelope containing this offer was inserted into the clear bags that contain home delivery copies of The New York Times and The Los Angeles Times. Was this a sound investment? Most shoppers probably won't take the time for only five bucks. On the other hand, RedEnvelope will gain brand recognition and may stand out from the crowd of dot-com ads in traditional media - without giving away the store.


• Healthquick.com: $15 toward any purchase. This deal has been advertised in major newspapers and may result in brand building and trial or bargain seekers looking for $15 of free stuff.


• Snap.com: $20 toward any purchase from participating merchants through its site. Snap gets registered users and drives sales to affiliated retailers. Again, this offer may be attractive enough to get the attention of treasure hunters.


Smart Promotions


All of these offers for first-time customers are discounts of varying amounts with minimum purchases required. Consumers are exposed to the brands, and companies have an opportunity to demonstrate their service capabilities while building real sales volume.


• eToys.com and Gap.com: With a purchase of $75 or more, receive a $10 gift certificate for the other store. This cross-promotion helps drive sales for both retailers. They promote their offers to active buyers at the partner site without any promotional costs beyond the $10 gift certificate.


• Toytime.com: Spend $75 or more and receive a $20 coupon good for the next purchase. Toytime is ensuring that customers will buy at least twice to redeem its offer. This seems to be a good strategy that has helped achieve rapid sales growth and traffic.


• Mercata: A $50 credit for up to 50 percent of the value of any purchase. Mercata and its competitors bring groups of customers together to negotiate volume discounts. With this promotion, a product priced at $100 costs only $50. By offering this significant discount, Mercata is educating consumers about its new concept, encouraging trial and providing an opportunity for even greater savings if enough people buy the same item.


• Altavista.com and 800.com: $25 and $20, respectively, off minimum purchases of $100, and Petopia.com's: offer of $10 off minimum purchase of $20. These deals are simply electronic coupons to encourage trial - and they work if the prices are as good or better than the competition.


But will any of these price promotions turn first-time buyers into repeat, loyal customers? It's going to cost a lot of companies a lot of money to find out. On the Net, word of e-mail zips around quickly. Some users go from offer to offer to save on gift shopping. Perhaps the hope is that some customers will apply these credits to higher ticket purchases or that they will experience great customer service and shop again.


Analysts may need to rethink their dire predictions based on potentially overrated fourth-quarter results. Are record sales figures and new customer counts meaningful if a large proportion of those results are due to one-stop bargain hunters? We may have to wait until the second or third quarters of 2000 to see which firms survived the price wars and can count the most repeat customers. Isn't that what it's all about anyway?


Jonathan Singer is president of online marketing consulting firm GO /nter@ctive, Tenafly, NJ. His e-mail address is singer@go-i.com.
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