Retailers know that if there was ever a time to keep their customers happy it’s now. They also know that finding new customers costs more time, resources and money than keeping existing customers. One way retailers are trying to keep economy-squeezed consumers satisfied is with discounts, and the key to effective discounting — without sacrificing ROI — is understanding your customers’ needs and motivations.
Here are five ways to make sure your discounting is on-target, customer-centric and profitable:
1.   One size does not fit all
The same discount offer will not fit the needs of all customers. Some are impulse buyers willing to pay full price; some are “coupon clippers†who won’t buy anything at full price but will buy something they don’t need if it’s on sale. Then there’s a range in between. Understand the differences between your customers and then use that insight to vary offers based on their discount-sensitivity.
2.   Test for the right mix
Start to learn customer differences by looking at the percentage of total items they purchase at a discount. Then compare how they respond to communications with a discount vs. those without. Try replacing discount offers with more relevant, full price product offers for those customers less sensitive to discounts. The right mix of discount and non-discount oriented offers will gradually emerge.
3.   Don’t over-discount
Many companies use discount offers and coupons in most of their customer communications, trying to drive loyalty. Although it’s often an effective strategy that drives traffic and purchases, discounting constantly trains customers to look for and wait for deals – lowering the chance that they will buy at full price. And then there’s the ongoing cost of the discount itself.
4.   Accept their terms
Make your offers consistent with customer shopping preferences. For example, if they like to buy in-store, your offer should emphasize store location and convenience in addition to the discount. You might prefer them to purchase online, but offering free shipping if they purchase online is not likely to work.
5.   Don’t rush to slash
Try to understand what motivates or turns off individual customers. For example, you probably have a large number of customers who have abandoned online shopping carts multiple times. They may be hesitating to complete the purchase because they just can’t stomach the shipping charges. Try testing free shipping for these people before you rush to discounting the product. You might just increase your conversion rate in the process.
Andy Cutler is chief strategy officer at Mercury, a Boston-based, insight-driven marketing agency that drives growth and profitability for clients through enhanced customer experiences.
In tough times like these, the first thing many marketers cut back on is marketing and related marketing programs.
Advertising Age recently reported a $600 million cut to advertising and promotional budgets. Even Federal Express is feeling the pressure. FedEx, along with several other advertisers, dropped out of the Super Bowl after having participated for the last several years.
Spending cuts are affecting many different businesses. However, media planners who anticipate cutting resources in these tough times may want to reconsider acting too fast without considering all the facts.
Conservative Consumer Behavior
Yes, the news is filled with negative stories about cautious consumers in this fledgling economy. But even though consumers are spending less, experts have noticed their spending behaviors mostly affect industries including shopping, traveling, entertainment and consumption of higher-end brands. As a result, consumers are responding to these tough economic times by turning to discretionary leisure activities that don’t cost a lot.
Connecting with Consumers
But advertisers can still benefit since more time spent watching television, surfing the Internet, playing video games and engaging in other at-home activities means it could be easier to catch consumers in a more receptive state of mind.
When consumers engage in activity outside of home, there are usually too many distractions like driving, cell phone use and interacting with others that easily diverts their attention.
Advertisers know that their messages are much more effective when delivered in a less distracting environment – whether it’s through television, a magazine or the Internet. This gives them the best opportunity to establish a connection.
Do you agree?
Peter Koeppel is a Wharton MBA and president of Koeppel Direct, a full-service media buying agency based in Dallas.
The other day I went to the grocery store and stopped in the OJ section to pick up a carton of Tropicana. When I reached for it, I quickly drew back my hand as I was faced with some cracker jack looking generic orange juice. Where’s my Tropicana with the straw punctured in an orange? Maybe Tropicana is pulling a prank and I’m secretly being filmed for a commercial like Burger King did when they pretended to eliminate the Whopper from their menu. It was then I realized this was no joke. Tropicana ripped out their straw, squirted orange juice in my eye and changed their package design.
I imagine what went on during the brainstorm session of creating their new packaging. They began to discuss how the economy crisis is affecting people’s spending habits when some genius said, “I have an idea. Instead of maintaining and building loyalty, why don’t we change our classic, trustworthy design to a generic one and deceive consumers into thinking they’re buying a store brand of orange juice?†I couldn’t help but feel betrayed and offended by their decision. I thought Tropicana was all about the orange, not the green. If they had stayed true to their core and reminded me why they were worth my money rather than trick me to squeeze some extra pennies, I wouldn’t have questioned my loyalty to them.
As if deception wasn’t enough of a shot to the heart, Tropicana created confusion among consumers. People either didn’t recognize them or if you’re like me, you wondered if their orange juice was going to make your mimosa taste bad. Was it not 100 percent juice before? A generic design put the quality at risk. It was lifeless, forgettable, and bruised the value of their brand. They destroyed their iconic soul and lost the core essence of what made them great.
Even though some loved the simple look, most wanted the classic design back. The new design didn’t resonate. Some called it, “the end of an era.†Consequently, after two months of consumer protests towards the package redesign, Tropicana has decided to return to the design we know and love. They made an expensive mistake, but they redeemed themselves by listening to their consumers. Branding is about building relationships out of love and loyalty, whereas marketing focuses on transactions. The economy crisis has become a pivotal test for companies. Tropicana taught us all a valuable lesson – don’t mess with the brand.
Jordan Sullivan is a marketing director for Chick-fil-A.
As the nation’s economy remains on shaky ground, there is no doubt in anyone’s mind that these are trying times. Everyone is being hit hard, especially retailers. With employers cutting 2.6 million jobs just last year – and two million more layoffs expected this year – employers everywhere are trying to cut costs, while improving business. Retailers across the globe are looking at how to weather the storm, and the ones who will come out on top are those who are willing to invest. Many retailers believe the obvious solution is to “hunker down†and try to ride out the economic crisis by halting all spending. However, retailers who resist this temptation and try to gain market share will have the best chance to grow customer loyalty in the long run. Once the market inevitably takes a turn for the better, they will be the winners in the retail industry.
Retailers are already looking for ways to put themselves ahead of the curve, get closer to their customers and extend brand loyalty. With fewer and fewer customers walking through the door each day, retailers are using technology as a strategic weapon to differentiate themselves and connect customers to their brands. Companies are looking beyond 2009 for ways to “do more with less†and maximize their existing technology investments to provide greater agility and flexibility. Cabela’s, a leading specialty retailer of hunting, fishing, camping and other outdoor goods, is working with Cisco and SCOPIX (a company that specializes in store operations analytics) to greatly improve the customer experience by using digital video surveillance technology to help managers monitor store traffic. SCOPIX’s web-based platform provides real-time insight into how customers are being served throughout the store and can send in-store alerts to be directly to a store managers’ mobile device so they can reallocate employees to the areas where customers are located. By being able to react promptly to issues on the store floor, Cabela’s believes they will be able to convert more sales opportunities and increase same-store sales. (more…)
Make no mistake about it, the 2009 economy is doing no one any favors and there are few bright spots to find. One good result is that poor economies force us to become more efficient with our resources. We need to get the most out of what we have at our fingertips.
Over the past few years, multichannel retailers have been forced to purchase systems to help optimize their channels. One system manages email, another manages direct mail, a third manages your web data, and still a fourth manages your search engine optimization and search engine marketing tactics. In the end, we have a number of disparate operations that have no understanding of the big picture in your marketing strategy. Now is the time to consolidate those efforts into a single source of truth.
For those of you who market across multiple channels, integrating the full customer view is a key to understanding the efficacy of your efforts. Take, for example, search engine marketing. Using just the data that you get from Google or your web analytics team, you can determine which search terms drive the most traffic or the most conversions and continue to invest down that path. But, is this really the right investment? A search term may drive more traffic, but is it the most desirable traffic that you are seeking, and what percent of offline transactions are affected by the search engine marketing? Now, if you were able to overlay the search information into the marketing database, you can see how many offline transactions were affected by search and apply lifetime value and profitability analysis to the keywords to make a more informed decision.
Here comes the good news- as customer interaction channels have proliferated, there has also been an explosion in integration technologies such as SOAP based web services to underpin our ability to programmatically pull together these new channels. The vendor community has done a pretty stellar job of using web services to create application programmatic interfaces (API’s) to aid in the integration effort. Now is the time to apply your energy and efforts to using those capabilities to create a comprehensive view of your customer and your marketing activities around that customer.
For those of you with IT departments to handle this opportunity, congratulations and consider yourself lucky! Those of you who do not have that luxury might be considering outsourcing; look for a solid marketing automation provider that offers a good hosting option. You’ll want a database structure that supports online and offline channels as well as an extensive capability to integrate with downstream execution engines such as email, behavioral targeting, POS and call center applications. Your goal? A single source to manage your entire marketing eco-system - consolidation that can cut your marketing infrastructure budget by 35-50 percent.
In the end, this economy is forcing organizations to adopt new ways to become more efficient. Often adopting new technologies to help consolidate decisions and efforts into one source does this. If there is a bright spot to the economy of 2009, it may be that it helps to usher in a new era that empowers marketers to make better decisions across their channels and become more efficient with their marketing budget. The knowledge and technology to accomplish this is within reach; now’s the time to find it and use it.
Jeff Hassemer is vice president, product management of Entiera.
Amid the current economic crisis, some retail experts believe that retailers aiming at wooing more consumers into the store during the upcoming holiday season may want to provide the layaway payment plan to needy consumers. This plan will allow shoppers to reserve craved merchandise while unable to pay right away. The layaway plan may have several benefits to retailers offering them:
First, with its help, certain customers would be able to buy the merchandise that they would otherwise not be able to, and that would translate into more sales. Furthermore, the customer may evermore appreciate the additional service, as this purchase might be one of major emotional and psychological import, such as a wedding ring. When good times come, the appreciative shopper may pay back to the store by becoming a more loyal customer.
Second, the customer would need to pay at least one more trip to the retailer to pick up the merchandise once all payments are made. This means more traffic into the store and chances are that the shopper will purchase some additional products, while there on the second trip. Increased store traffic will also have psychological impacts on other shoppers and even on store employees. In this holiday season, store traffic is a hot commodity for retails large and small.
Third, the layaway plan offers a less risky financing alternative to the retailer than does store credit card issuance, because the retailer sets the rules and the regulations are not as stringent as in the case of credit card issuance and compliance is easier. In the case of approving credit cards, the borrower could default on payments and declare bankruptcy, causing major losses to issuers. Whereas in layaway, the retailer can simply forfeit the deposit and return the laid-away merchandise back to the store shelf.
Fourth, this plan is all about providing delayed gratification to the consumers (and their beloved ones for gift purchases) and will encourage the customers to do more responsible budgeting. In this way, I consider the layaway plan a socially responsible response to the economic crisis, given that reckless spending among consumers and homebuyers is widely regarded as one of root causes for the crisis.
For the downside, instituting the plan might involve personnel, legal and administrative expenses for the retailer—and unless demand for the service is sizable, the expenses may be hard to justify. Also, a successful and well-utilized layaway plan may necessarily cause strain on the inventory space and make some merchandise unavailable to those shoppers who are able to pay on the spot. Finally, this plan may make most sense in geographic areas where the impacts of the economic crisis have taken a bigger toll.
Direct response professionals are taking the mainstream media by storm, informing consumers about the cost saving benefits provided by DR and e-commerce in a shaky economy.
A.J. Khubani, president of CEO of Telebrands Corporation, visits “The View.†And no- there’s no politically charged conversations here!
Click here to watch as Michael Rubin, CEO of GSI Commerce, is interviewed on CNBC regarding the strength of e-commerce during the economic downturn.
The ERA Minute is a new feature where ERA members can film marketing tips that will be distributed throughout all of ERA’s channels and social networking outlets. If you’re interested in making the next ERA Minute, contact Tom Quash at tquash@retailing.org. Mark Stenberg from Iceland Health delivers two quick, valuable tips for launching a new health product in a down economy.
Note: The Honeyshed video in the post below is on auto-play. Please mute or pause that video before playing the ERA minute.
Retailers know that if there was ever a time to keep their customers happy it’s now. They also know that finding new customers costs more time, resources and money than keeping existing customers. One way retailers are trying to keep economy-squeezed consumers satisfied is with discounts, and the key to effective discounting — without sacrificing ROI — is understanding your customers’ needs and motivations.
In tough times like these, the first thing many marketers cut back on is marketing and related marketing programs.
The other day I went to the grocery store and stopped in the OJ section to pick up a carton of Tropicana. When I reached for it, I quickly drew back my hand as I was faced with some cracker jack looking generic orange juice. Where’s my Tropicana with the straw punctured in an orange? Maybe Tropicana is pulling a prank and I’m secretly being filmed for a commercial like Burger King did when they pretended to eliminate the Whopper from their menu. It was then I realized this was no joke. Tropicana ripped out their straw, squirted orange juice in my eye and changed their package design.
Make no mistake about it, the 2009 economy is doing no one any favors and there are few bright spots to find. One good result is that poor economies force us to become more efficient with our resources. We need to get the most out of what we have at our fingertips.
Amid the current economic crisis, some retail experts believe that retailers aiming at wooing more consumers into the store during the upcoming holiday season may want to provide the layaway payment plan to needy consumers. This plan will allow shoppers to reserve craved merchandise while unable to pay right away. The layaway plan may have several benefits to retailers offering them:
