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Marketing With Discounts and Promotions

Retailers went deep and wide when it came to discounts this past holiday season with mixed results. But as consumers’ expectations for discounting continues, how do businesses continue with promotional strategies without losing their shirts?  

Some businesses’ knee jerk reaction is to cut back on everything and anything, but Amy King, vice president of business intelligence at Valpak, warns businesses not to rush into a discount strategy, but to start with a plan – and then stick to it.

She shares some straightforward do's and don'ts of promotions and discounting and advice on how businesses can monitor their campaigns to make sure they are generating revenue.  

Best known for the familiar blue Valpak envelope filled with discounts, Valpak has been in the promotions game for 40 years and was a pioneer in offering coupons on the Web when Valpak.com launched more than 10 years ago. Valpak helps more than 54,000 businesses a year and has a wealth of experience across industries. “Valpak knows how to structure a discount strategy that not only works, but is profitable,” says King. 

Here are five tips that King and her colleagues offer:

1) The discount should be relevant and make sense for your business.

Make sure the offer is appealing to your clientele and fits how your customer buys from you. For example, Buy One Get One Free (BOGO) appears to be a strong offer on the surface, but if your customer wouldn’t typically buy multiples at the same time, it is not likely to work well.  Be sure you understand your customer so that the offers are relevant,” says King.

Also, businesses must stay focused on the objective of the advertising campaign.  “Offers should match the behavior that you’re trying to create,” says King. That might mean using themes or offers that encourage repeat visits. Also, diversify your offers to appeal to different types of consumers.

2) Be committed to your campaign.

One of the most important parts of any direct mail program is frequency. You need to advertise consistently so consumers see it and can respond when they are ready.

 “Sometimes a consumer sees the offer but they don’t respond right away,” says John Widmer, Valpak’s Audience Research Manager.

 Depending on the buying cycle of an industry or personal economics, businesses need to remember it can take several months or more for a consumer to respond. “That has to do with need and timing,” says Widmer. “Consumers look for an offer that is appealing and has value, and they may respond immediately. But with big ticket, high commitment items, they are likely to take more time to consider the offer and wait until they need to make the purchase.”  

 “They may not seek you out unless you’re right in front of them when they need you which is why it is important to advertise regularly,” says King.

3)  Mail to the right homes – don’t waste your advertising dollars.

 How do you know who to mail?  Target your mailings to your best potential customer and then decide how large an area to mail.

 You wouldn’t stand on a street corner and shout your offer to random traffic would you? To get the best use of your time and energy, you’d want to target your message to the people most likely to respond.  Do the same with your direct mail advertising.  Take advantage of marketing partners that can provide you the latest research as well as consumer targeting by geography, demographics, behavior and past expenditures.

 As for how large your mailing should be, that’s not just a budget question. 

“When asked, “How far would you drive for an offer?” consumers in our focus group told us that the better the offer, the further they would drive,” said Widmer. “If it’s a good offer, a high ticket offer, then they are willing to go further.”

 Now, think about your business. How far can you go? Don’t overextend your business to the point where it may impact your bottom line or service level. For example, if you’re in a service industry and have a limited number of trucks, you may need to limit the territory where you mail.  

4) Balance strong discounts against your bottom line

 “Sure, universal offers such as $15 off $50 may get customers to respond,” says Widmer, “The problem is that businesses don’t take the time to structure discounts that get consumers in the door AND still make them some money.”

 “Look at your product mix. Look at your margins… because if you don’t, that’s where you’re going to get burned,” warns King. “Be smart and evaluate what you can reasonably offer.  And don’t be afraid to put in appropriate exclusions on specific items that don’t fit the discount model.”  

5) “But I can’t discount”

 Some businesses don’t want to discount because they are afraid it will cheapen their brand or they don’t have the margin to support eye-catching discounts.

 “They are concerned – and should be -- about coming up with something meaningful and sustainable,” says King. “For that, there are different strategies they can use.”

• If you can’t discount, showcase your every-day values.
• Lead with the offer or value statement.
• Promote new items with a discount.
• Reward multiple visits to the business. For example, if the customer eats at your restaurant three times, the fourth visit could be free.
• Require the purchase of another item that has a high mark-up such as beverages.

But sending out a well-planned campaign is only part of what it takes to be successful with a promotional strategy. Follow up is critical to success.

Success is a science

 And once consumers do respond, measure results against your objectives.  Was your goal to generate new customers?  To drive phone calls?  To promote a new menu item?  Make sure you compare results against those goals. 

 “And don’t just staple the coupon to the receipt and put it in the register. Analyze the transactions. Did those customers just buy the discounted item or are they spending more?” said Keith Malo, Valpak’s research services director.  Valpak research shows that well-planned discounting typically prompts customers to spend more.

Be prepared, or it could flop

 When businesses discount or offer a coupon for the first time, they may not be prepared for the response it will generate. King warns that could be a mistake.

 “If you drive consumers to experience your product or service and you’re not prepared to be at your best, you might as well shoot yourself in the foot” said King.

 “Educate and train your staff to accept the coupon.  Not only so you can measure it, but also so the consumer feels wanted, welcomed and appreciated.  Training your staff to handle promotions coupons is just as important as the offer itself.”

 Although many businesses depend on a seasonal rush, a well-planned, trackable incentive or discount will continue to connect them to their customers throughout the year.

But will they come back?

 An offer gets them in the door the first time, whether they come back again is up you and your staff.

 “Build your customer experience so they will come back. You want to be a quality provider,” says King. “No one can substitute providing good customer service – it’s essential to understand what that experience is like from your customers’ point of view.”

 Valpak offers advertisers a call tracking tool which allows businesses to not only track where calls are coming from, but allows them to listen in to recorded calls.” Advertisers are sometimes shocked when they realize what goes on in the interaction between consumers and their staffs.

 “A coupon is not going to solve that kind of problem,” says Malo. “It’s going to create demand, but it’s not going to cure customer relations.”

 The way to achieve success with discounts and promotions is to be prepared.  Work with a trusted, experienced partner and research what others are doing on the Web. “Your best strategy is to do your homework and then measure, measure, measure” says King. “Tracking your return on investment is critical to a long-term, successful campaign.”

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About the Author

I work at Valpak, where we provide our advertisers with the most effective direct marketing programs by connecting them to our Valpak audience.

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