Practical Ecommerce

Incentives That Create More Sales

What makes a customer commit to that profit-boosting holiday purchase? One respondent to a survey conducted by the e-tailing group summed up the heavily promotional mindset of today’s online shopper this way: “Find something that no one else has been able to find, with a coupon and free shipping — and it is perfect!”

In the “Holiday ’06 Mindset of the Multichannel Shopper Study,” more than 1,300 consumers (68 percent women, 32 percent men) at the cusp of the shopping season clearly demonstrated their deal orientation.

Asked, “How would you characterize your shopping behavior when buying gifts for the holidays?” 54 percent identified themselves as deal seekers who prefer to buy at sale prices; 34 percent purchased some full-price items and some sale items based on convenience. Only 12 percent focused on finding the perfect item regardless of price. Promotional patterns truly dominate.

Additionally, when asked about online shopping’s role in buying gifts, shoppers said saving money (46 percent) was of secondary importance when weighed against saving time (55 percent) — the consumer’s most precious commodity. Further supporting the promotional shopper’s bent, 44 percent of those surveyed said they typically comparison-shop three sites to ensure they get the price they believe is fair before they make a final purchase decision.

Promotional merchandising tactics abound

The web has not only fostered a very efficient price shopper but has embraced the promotional shopper through a plethora of tactics. Not surprisingly, when it came to buying gifts online last holiday season, shoppers said their biggest influences were free shipping and more traditional sales and specials.

Coupons are an up-and-comer given the cross-channel potential. The customer’s interest in receiving a little something extra can also be seen in high rankings of the free-gift-with-purchase offer, a tried-and-true tool long leveraged by the beauty industry and now gaining traction in other categories.

The web’s ability to efficiently deploy limited-time deals on site as well as via email inspires shoppers to make impulse purchases and keeps customers coming back to see what’s next or new.

The shopper speaks, but does the merchant deliver?

Given our knowledge of consumer influencers, it is interesting to note how merchants in the 9th Annual Mystery Shopping Study engaged their customers. It is important to recognize that consumers are very savvy; once they see promotions in place, they come to expect those offers will always be available.

Therefore, merchants must make prudent decisions with the bottom line in mind when they deploy these promotional tools. A “members-only” promotion lets visitors or non-registered purchasers know there are truly benefits to being a member of the “club.” Our research indicated this holiday season saw significant behind-the-scenes promotional activity targeted to select customers.

The Sharper Image encourages visitors to sign up for “unadvertised” special offers as well as sneak previews of new products, knowing its best customers will want to be “in the know.”

Free shipping — a customer favorite

The all-time customer favorite, free shipping, is a tactic that can be manipulated in many ways and one that mostly manifests itself with conditions, as the chart above indicates. It’s rare today to see merchants with an unlimited free shipping policy, though it can certainly serve as an effective customer acquisition tool.

In-store pickup is also a feasible option; the majority of merchants who offer this service present it as a convenience feature for shoppers. Residual merchant benefits arrive in the form of additional, often impulse spending beyond the original purchase when the customer visits the store.

Outlets outperform

The web has wisely adopted one of retail’s most successful tactics as evidenced by the online outlets and dedicated clearance areas that now grace many of the most successful ecommerce sites. They are robust and well-merchandised, as exemplified by Barnes & Noble’s Sale Annex. From its adept use of top seller promotions to the “Deal of the Day” to mirroring percent-off tables at retail, Barnes & Noble is one merchant to emulate. Best deals and bestselling subjects are also highlighted in the Sale Annex and sign-up for the newsletter is prominent.

Another clear growth area centers around couponing. This tactic can have much iteration with options that ideally include both online and offline redemption, depending on a particular merchant’s goals. They can be promoted on site for a product or category, or on a site-wide basis, where emails alert customers to their presence. Circuit City reinforces its three-channel mode of operation via a coupon that acknowledges the customer’s intention to visit the store with a video offer tailored to his/her specific preferences.

Each channel also has an opportunity to offer specials beyond time-based promotions, testing price and exclusivity, as can be seen in the Patagonia web specials example below.

Promotion’s winning combination

The power of promotion results from the winning combination of a real value complimented by creative execution. Endless opportunities to meet customer expectations and simultaneously boost the bottom line ROI exist when promotions are managed effectively.

Practical Ecommerce

Practical Ecommerce

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  1. Legacy User March 31, 2007 Reply

    Once again, the guys over at Practical eCommerce have written an informative article. I would add that an e-tailer's reputation should also be strongly considered, I mean anyone can promise free shipping and a bunch of incentives, but how many are actually going to deliver on their promise. I also say "call the toll-free number to make sure they have a professional atmosphere and double check the offer." Thanks.

    Frank Dappah is the director of ecommerce at Priceshoppe.com

    — *Frank Dappah*

  2. John Lindberg March 1, 2009 Reply

    One of the keys to profitable free freight offers is the fact that as package weight increases, the shipping cost per pound decreases sharply–BUT the revenue per shipping pound remains constant.

    This fact provides you with a funding method to make free freight or agressive shipping incentives based on minimum orders both possible and easy to calculate.

    For example, the current $8.05 per pound cost to mail a 3 ounce package ($1.51 first class mail rate) is much higher than the $2.54 per pound cost to mail 5 pounds ($12.70 priority mail rate), but your revenue increases sharply as the order quantity and ship weight goes up. This simple principle remains true for much heavier packages as well.

    Once you know your product revenue per pound and your declining product ship cost per pound, you can quickly develop attractive free freight and shipping incentive offers based on calculated order minimums.

    John Lindberg – President
    EFULFILLMENT SERVICE INC