Most companies offer sales, special discounts, or rebates to move merchandise, increase sales, bring in new customers, or reward frequent customers. But how often are you testing different options to see which one(s) achieve your goals quicker or more profitably?
Do you always run a BOGO (buy one, get one half off or free) sale to move merchandise? Next time, consider testing something a little different such as a “40% off your first item and 60% off your second item” promotion. Those customers who would have not come into your stores because they didn’t want to purchase two items might consider this promotion since they can save on just one purchase, and those who need or would consider buying two items are attracted to the offer, too. You may end up bringing in more customers and moving more merchandise than a traditional BOGO without sacrificing any margins. In fact, you might increase profit because the average discount per purchase would likely be less than 50%. Of course, the only way to know for sure is to test it!
The same is true for B2B companies who use rebates and other incentives with dealers, distributors, and buyers. Try testing some new ideas or slight modifications of your traditional promotions.
We have learned from our own market research firm that testing is key to keeping costs down and boosting margins. For example, we maintain the Iowa Opinion Panel (IOP), a statewide opt-in research panel that helps our clients get answers faster and at a lower cost. In order to continually add new members to the IOP, we offer incentives to current panelists if they recruit new IOP members. At times, we have short-term referral drives and offer panelists a bonus for each new member they recruit on top of their usual incentive.
In order to explore whether a higher bonus would encourage more people to refer their friends and family members, we conducted an experiment. The IOP was split into two equal groups. The first group was offered twice (2x) as much as the usual referral incentive amount. The second group was offered two and-a-half (2.5x) times as much.
After the referral drive ended, we compared the number of new sign-ups and found that, although the higher incentive did bring in a few more new panelists, the difference was not statistically significant and not worth the extra costs involved. We demonstrated that the lower referral bonus – which saves us (and our clients) money – can be used going forward without missing out on a significant number of new recruits.
Stumped for new discount or promotion ideas to test for your business? Try some of these if you are in retail:
- If you sell bulky or heavy items, offer free or low-cost delivery
- Bundle items and offer a heavy discount on the second item (e.g., buy bottle of shampoo and get conditioner for 50%)
- Offer a cash discount if a customer reaches a spending level (e.g., spend $100, get $25 off)
- Hold a charitable drive in your store and offer a discount to anyone who brings in a donation
- Offer discounts only on slow days or during slow times
- Customer loyalty discount (e.g., tenth item or visit is free)
- Referral offer (customers give friends special discount cards or refer online)
- Free gift with purchase
- Mystery coupon (come in store to reveal level of discount)
- Free use of a tool or technology in the store (e.g., room planning tool in a paint or furniture store)
- Free class(es) with purchase
- Offering one or two big sales a year instead of constantly discounting
- Access to other events with a purchase (e.g., free or discounted tickets to Auto Show at an auto parts retailer)
Here are some ideas to test online via your website or social media pages:
- Flash sales (short, limited time sales)
- First time shopper discount
- Abandon cart offer (extended to online visitors who didn’t buy)
- Special offers for liking, following, or sharing on social
- Exclusive social only offers
- Retargeting offers (shown to people who have visited your site once they are online again)
- Special discounts offered to followers of bloggers or local celebrities
- Sending special coupon codes to select customers to use online
If you operate in a B2B environment, some of these options might work well for you:
- Free limited time trial prior to requiring a subscription or purchase
- Free (or faster) delivery once customer hits purchasing threshold
- Experiment with different types of rebate programs: try volume, growth, retention, and a mix for incentives rebates
- Free or low-cost consultation with purchase
- Extra services with purchase
- Guaranteed pricing for a specific time period
- Free or reduced repair services for a specific time period
- Upgraded warranty
Before choosing a promotion to test, give careful thought to your goals for the promotion. Is the main goal to introduce new customers to your company or to specific products or services? Or is your goal to increase the average sale, move out old merchandise, or increase revenues overall? Remember to evaluate how the specific promotion might impact your brand identity. For example, if you offer higher-priced products or services, you probably do not want to hold frequent sales or offer steep discounts which may impact the perceived value of your offering.
Whatever you decide to test, make sure you promote it a the same level you promote your other sales, discounts, or rebates so that it is an accurate test.