Of the many common misperceptions about promotions, the most glaring is the belief that they are simply a short-term tactic to jump-start sales and move unwanted merchandise.
Promotions can be used to attain these goals, but using promotions in this manner only is like a crash diet. You can get quick results, but you cannot keep the weight off if you do not maintain the behavior.
Thanks to the data-driven nature of the Internet, promotions now have the ability to not only drive immediate sales, but achieve long-term results. The Internet allows you to customize a variety of promotional incentives to each phase of the consumer’s purchasing life cycle to maintain a more profitable and loyal customer relationship over time. But, like any proper diet, it requires discipline and ongoing maintenance.
Why current promotional programs miss the mark. Years ago I worked for a major apparel retailer. Goods would ship into the store and, like clockwork, six weeks later they would go on sale. As a result, our customers became trained to wait it out and shop on the cheap. This promotional strategy not only hurt our margins, but it cultivated unprofitable behavior with both price- sensitive and -insensitive customers. By rewarding all of our customers for being sale shoppers, we gradually turned all of our customers into sale shoppers.
Figuring out how to shape profitable consumer behavior is no easy task. And with more than $100 million poured into promotional programs by marketers in 2000, even nondiscount retailers and services are taking up the challenge. Forrester Research, Cambridge, MA, interviewed 50 marketers for a report on customer loyalty. Each said he plans to spend more on his customer retention efforts, and that he would employ many different types of marketing tools to drive retention and loyalty. However, many also acknowledged that they did not have the right technology to measure the return on investment on these loyalty programs.
Most promotions — from coupons in the Sunday paper to a gift with purchase at a retail channel — are not able to provide this technology. Nor can they tell you whether a customer needs an incentive to purchase your product. Online promotional programs, on the other hand, can be targeted at the household level and tailored to the stage of the consumer’s relationship with the brand. Online promotions provide the tools and technology that help marketers distill response information and react in real time.
How the online marketplace is changing the industry. The ability to dynamically target a prospect or customer with a personalized incentive or message based on his specific profile is unique to the data-driven nature of the Internet. By coupling self-described demographic information with click-through behavior, category interests, online surveys and segmentation modeling, you can target, track and retarget customers to efficiently shepherd them through the five stages of the purchasing life cycle — awareness, trial, purchase, habit and loyalty.
A wide range of e-marketing promotional tools stimulate this migration, from coupons and rebates to sweepstakes and loyalty points. When targeting these tools based on your customers’ browsing behavior, shopping preferences and demographic information, you have the timely consumer insight to guide your promotional spending and maximize the desired response.
Using promotions to build stronger, more profitable relationships. How do you use promotions to drive shoppers from prospects to profitable customers?
Motivate your customers throughout their buying life cycle with a contact and re-contact strategy that is personalized and relevant to their behavior.
Have your prospects expressed interest in your product or service by an e-mail click-through or survey response?
Do they prefer coupons or free shipping?
Are they more likely to redeem your offer if it is for use only at a specific channel, such as a bricks-and-mortar location versus an online site?
Using the unique capabilities of the Internet to gather and act on this type of data is vital. Informational Resources Inc., Chicago, found that 74 percent of online users will give feedback online, but only 38 percent of sites ask for it. Are you exploiting all the possible data points to understand what you need to do to motivate shoppers?
By breaking your prospect or customer base into micro-segments, you can customize your campaign to increase sales and reduce costs over time with each group. Increase volume from your price-sensitive consumers by giving them a 20 percent-off coupon for their purchases, while enhancing profit from your price-insensitive segments by sending them an e-mail touting an additional use of your product for their next purchase. In both instances you move the product, but you protect your margin and discount only to the segment that will not purchase without it. The key is to learn and act on behavior throughout the process so that you are not using generic, mass-distributed offers with your loyal, repeat customers or continuing to underwrite your unprofitable, sale-only shoppers.
A strong component of your entire marketing strategy. Promotions provide a strong call to action for both your prospects and existing customers. By using the Internet to identify which consumers are just discovering your product or service, and which are loyal customers, you can execute promotional programs that cultivate relationships that are healthy to your bottom line. This learning can be applied across all customer touch points, whether it is a print, television, in-store marketing or traditional direct mail campaign.
As you gain deeper consumer insight, you learn more about how to make your customers profitable, in turn making promotions a smart, long-term component of your entire marketing mix.