Promotions
This is separate from online marketing and a lot of what is mentioned below depends on what your platform can handle. If you have a flexible platform, you can get creative in the promotions you offer and that can open new doors to incremental sales.
When I set out to create promotions, I lay out some goals I want to achieve and look at forecasts to see what I need to push hard. Again, pull year to date data and last year’s data (segregate November and December) to create a baseline. Here’s what you’re looking for:
- Top 10 products by units
- Top 10 products by dollars
- Average order value (total revenue divided by total number of orders)
- Units per transaction (total number of units sold divided by orders)
Break these numbers down by:
- Year to Date (YTD) 2009
- 2008
- November and December 2008 (if you have time, track these data points by week)
Compare your YTD 2009 numbers to your 2008 and November/December 2008 numbers. Is there growth this year over last? What’s the delta between YTD 2009 and holiday 2008? Create some goals that you want your promotions to achieve, such as:
- Promotions should result in 10% AOV increase
- Promotions should result in 10% UPT increase
- Promotions should bump Product X into the top 5 products for a given period
For promotions that involve increasing AOV and UPT, consider these options
- Set a qualifying order amount (based on product sub-total) to get free ground shipping
- Tiered discounts (e.g. Save 10% When You Spend $50, Save 15% When You Spend $75, etc.)
- Gift with purchase when you spend $X
- Buy 2 (or whatever amount) and get the third at 50% off
- Gift with purchase when you buy products A, B, C
If you need to increase sales volume on specific products consider offering a discount on that particular product. Examples include:
- Save X% when you buy Product X
- Get the second unit at X% off
Try creating bundles and promoting it as a separate SKU and offering a discount. You’re enticing customers to buy more than one product and providing an incentive to do so.
Put these promotions on your shared calendar so everyone on your team knows what’s coming. Stage products your promoting so that all the shipping team has to do is slap on a shipping label. If you’re like me, create a spreadsheet and track the promotions on a daily basis to get a sense of what they’re doing. Be sure to share these great results with your team and higher ups so everyone can share in the excitement of what they’re taking part in.
Next up…Online Marketing!
Showing posts with label promotions. Show all posts
Showing posts with label promotions. Show all posts
Thursday, July 30, 2009
Thursday, July 17, 2008
To Ship Free...or Not?
Free Shipping is a staple promotion among online retailers and for good reason. A recent PayPal and comScore study showed that 43% of shoppers abandoned shopping carts because of shipping costs. That leaves 57% of shoppers who started a shopping cart to go through your checkout process and dropoff because of other reasons (i.e. taxes, price shopping, etc.). Depending on numerous factors, your conversion rate may be around the 2% range.
Free Shipping may be more of a drain on retailers’ bottom line nowadays because of rising fuel costs. Recently, UPS updated their fuel surcharges to as high as 32% for air shipments! So this opens up a variety of questions for an online retailer that wants to increase (or at least maintain) year over year revenue numbers in this not-so-favorable economic climate.
Should I Keep Free Shipping?
Dig into your numbers and see what impact free shipping has on order volume, conversion rate, average order value, shipping costs, shipping revenue and margin before and after the fuel prices rose. If these numbers were favorable before fuel prices became burdensome then you need to consider keeping the promotion active and changing some qualifiers. After all, this is a temporary (not sure how temporary) situation and economic downturns are an opportunity to gain market share and grow rapidly when the economy turns around.
I have always approached free shipping promotions as a way to boost order volume, units per transaction, average order value and conversion. To do this I put in minimum order values to qualify for the promotion. There are multiple factors to consider, including: average online order value, shipping discounts you receive and your competition.
As a rule of thumb, I start with the minimum qualifying order value as the online average order value. Then I look at what increase in AOV I’d need to achieve to offset the lost shipping revenue to maintain a favorable margin. In most cases this has turned out to be 15% more than current online AOV. What you’ll find is that you may realize a 40% increase in actual AOV from the promotion.
Your shipping discounts and competition will weigh in on where you actually set the minimum order qualifier. If you ship out large volumes with UPS or FedEx you probably get great discounts. If not, renegotiate your rates with your rep and be sure to use their competitors to your advantage (i.e. tell your UPS rep that you’re strongly looking at FedEx for ground shipments and vice versa). If your own competition is offer free shipping at lower order amounts then you need to see what you can do to get near that level because you want to take away their customers. This leads into the next question….
What Alternatives Do I have?
To cut down on your shipping costs and offer free shipping at low order amount qualifiers you can consider using USPS. Using regular mail offers advantages over the other carriers because it’s a lot cheaper. However, disadvantages are present when using USPS. For example, you don’t get tracking with regular mail. Tracking only comes with Priority mail and even that is close to useless because you only see when it leaves and when it reaches the customer. The lack of visibility of what happens in between can cause customer service nightmares. But, it’s still worth a look if you’re selling non-perishable items and tell customers up front what to expect.
Look at your packaging materials. Can you cut down on your box dimensions, the type of dunnage used, and if product can be shipped without a box. The later is a perfect opportunity for apparel retailers and book retailers to use biodegradable plastic shipping wrappers because it can be folded down to nearly the exact dimensions of the product and is much lighter than using a box and dunnage.
When marketing your free shipping promotion be sure to use some real life cues to help get your message across. By shopping online your customers can save money (and time) by not traveling to a store and standing in line and they may save on sales tax.
Free Shipping may be more of a drain on retailers’ bottom line nowadays because of rising fuel costs. Recently, UPS updated their fuel surcharges to as high as 32% for air shipments! So this opens up a variety of questions for an online retailer that wants to increase (or at least maintain) year over year revenue numbers in this not-so-favorable economic climate.
Should I Keep Free Shipping?
Dig into your numbers and see what impact free shipping has on order volume, conversion rate, average order value, shipping costs, shipping revenue and margin before and after the fuel prices rose. If these numbers were favorable before fuel prices became burdensome then you need to consider keeping the promotion active and changing some qualifiers. After all, this is a temporary (not sure how temporary) situation and economic downturns are an opportunity to gain market share and grow rapidly when the economy turns around.
I have always approached free shipping promotions as a way to boost order volume, units per transaction, average order value and conversion. To do this I put in minimum order values to qualify for the promotion. There are multiple factors to consider, including: average online order value, shipping discounts you receive and your competition.
As a rule of thumb, I start with the minimum qualifying order value as the online average order value. Then I look at what increase in AOV I’d need to achieve to offset the lost shipping revenue to maintain a favorable margin. In most cases this has turned out to be 15% more than current online AOV. What you’ll find is that you may realize a 40% increase in actual AOV from the promotion.
Your shipping discounts and competition will weigh in on where you actually set the minimum order qualifier. If you ship out large volumes with UPS or FedEx you probably get great discounts. If not, renegotiate your rates with your rep and be sure to use their competitors to your advantage (i.e. tell your UPS rep that you’re strongly looking at FedEx for ground shipments and vice versa). If your own competition is offer free shipping at lower order amounts then you need to see what you can do to get near that level because you want to take away their customers. This leads into the next question….
What Alternatives Do I have?
To cut down on your shipping costs and offer free shipping at low order amount qualifiers you can consider using USPS. Using regular mail offers advantages over the other carriers because it’s a lot cheaper. However, disadvantages are present when using USPS. For example, you don’t get tracking with regular mail. Tracking only comes with Priority mail and even that is close to useless because you only see when it leaves and when it reaches the customer. The lack of visibility of what happens in between can cause customer service nightmares. But, it’s still worth a look if you’re selling non-perishable items and tell customers up front what to expect.
Look at your packaging materials. Can you cut down on your box dimensions, the type of dunnage used, and if product can be shipped without a box. The later is a perfect opportunity for apparel retailers and book retailers to use biodegradable plastic shipping wrappers because it can be folded down to nearly the exact dimensions of the product and is much lighter than using a box and dunnage.
When marketing your free shipping promotion be sure to use some real life cues to help get your message across. By shopping online your customers can save money (and time) by not traveling to a store and standing in line and they may save on sales tax.
Sunday, April 13, 2008
Promotions Test
I recently ran a split test on an email list featuring two unique promotions. The first was free ground shipping on orders of $85 or more and the other was 15% off $85 or more. I chose $85 because I wanted to raise the bar by 10% over the current site AOV.
Each promotion was mailed to over 70,000 subscribers (total list is over 140K) and I waited to see which performed better. It was amazing to see how many orders were submitted for the free shipping promotion. In fact, the 15% discount email only generated 13 orders compared to the 89 orders for Free Shipping. I realize the studies show that more people are willing to pay full price and receive a shipping discount, but, I wanted to see if it held true for this subscriber base. The shipping cost on an $85 order is $7.50 and its clear that the better savings belonged to the 15% discount. According to this test, more people were willing to pay full price on products and receive free shipping because shipping costs are seen as an inconvenience. Be careful when you do a shipping promotion. You should clearly define the restrictions of free shipping because you don't want to send an order to Mexico (for example) for free.
Test promotions on your subscriber base and see what works for you. Always be willing to test because its the only way you'll learn what works and what doesn't work.
Each promotion was mailed to over 70,000 subscribers (total list is over 140K) and I waited to see which performed better. It was amazing to see how many orders were submitted for the free shipping promotion. In fact, the 15% discount email only generated 13 orders compared to the 89 orders for Free Shipping. I realize the studies show that more people are willing to pay full price and receive a shipping discount, but, I wanted to see if it held true for this subscriber base. The shipping cost on an $85 order is $7.50 and its clear that the better savings belonged to the 15% discount. According to this test, more people were willing to pay full price on products and receive free shipping because shipping costs are seen as an inconvenience. Be careful when you do a shipping promotion. You should clearly define the restrictions of free shipping because you don't want to send an order to Mexico (for example) for free.
Test promotions on your subscriber base and see what works for you. Always be willing to test because its the only way you'll learn what works and what doesn't work.
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