Promotions- Friend or Foe?

I think we can almost all agree that we'd love to have a healthy active file of customers who shop at full price, eliminating the need to promote expensive offers that eat away at the bottom line! Unfortunately, in an economy where even the luxury market is taking a hit, it's hard to compete at full price. A recent report by comScore noted that "rising prices" was the number one concern for consumers, regardless of their income range. In fact, it was highest for the $100K+ HHI group.

More and more, we are hearing from clients that they are cutting back on promotions, especially during the fall/holiday season. The offer frenzy of the last few years has taken a toll on financial statements. On the flip side, clients are also looking to use promotions in a more proactive, strategic way.

We are seeing a renewed focus on the customer experience and lifecycle with the brand. Opportunities to proactively plan offers include:
1) New customer thank you program- Welcome to the brand (increases repeat purchase rates)
2) Event-triggered promotions, ranging from birthdays to shopping cart abandonment
3) Reactivation of lapsed customers (still less expensive, in most cases, than external prospecting)

There is good news. We have done extensive subsequent value studies on the impact of discounts, free shipping, and sale offers. Nine out of ten times we find that the subsequent value of customers acquired with a discount is higher in the long run than full price customers. The goal when testing offers is to focus on the impact to your average order size- and of course the bottom line. The more a customer spends initially, the more valuable they are in the long run.