BRANDTHINK Insight: How to make an offer your customer cannot refuse

First published as a two-part series in IT@Work, The Sun, Mon, 8 Oct 2001 and 15 Oct 2001

So, you have already decided on the strategic action to take for your marketing efforts: who to target, where to advertise, what database to use and the promotional mechanism to use. So what next?

At some point, you will have to make an offer that your customer cannot refuse. I’m not talking about your positioning or the value you will bring to your customer once they purchase your product, service or brand. I’m talking about the offer that will make that transaction happen. I’m talking about the elements at which a buyer and seller can shake hands on. Examples of this include the price, product configurations and delivery schedules.

Examining the offer is a crucial part of marketing development. Too many times we expect advertising agencies to weave a magic band and solve all problems. But in reality, that cannot be further from the truth. If you have a great offer, you can get away with bad advertising (not too often though), but if you have a bad offer, no amount of advertising money can make it succeed.

In direct marketing, the offer you make determines the course of action for many of your customers. In fact, the “offer” will contribute about 40% to whether your direct marketing will be considered a success or failure. So, what kind of offers can you construct if a sale is what you’re after?

Pricing

The most common offer is made on the basis of pricing. Typically, during a promotion, you will find that many companies offer discounts off their list prices in order to drive volume. You see this often among retailers of departmental stores. In many cases, you will see retailers run a “loss-leader strategy”, offering a selection of products at a significant discount in order to drive traffic to their store or online catalogue.

Discounts are not the only way to tinker with the pricing. Sometimes, you can offer an introductory price in order to allow new customers to sample your product or service. Usually limited only to new customers, you can focus this offer towards new customer acquisition.

Another way to look at pricing is also to look at ways where you can segment your audience and develop pricing packages specific for each audience. If you look at the telecommunications market, you can see this segment-pricing structure at work with the pre-paid and the post-paid market. Using different tier pricing will allow your business to serve different markets with seemingly different needs (therefore pricing) without cannibalizing the sale of each segment.

Unit of X?

You can change the pricing of your offer by developing a special pricing that is based on volume. For example, instead of offering a 20% discount on a t-shirt, you may offer 2 t-shirts for a lower price. You may also bundle several related products together into one special price. This can also be in a form of special product bundles (think Microsoft Office) or collection sets (think First-day Covers). A client of mine often does this during the festive seasons.

The advantage of pricing it this way is that you will be able to maximize your profits (the margins for selling two items is more than selling one) while at the same time still offer your customers an offer they perceive as valuable. However, you will have to consider this in lieu of your marketing objectives. A larger order requirement will mean less volume of customers and vice versa. You will have to balance between building a large customer base or driving large amount of sales.

Shipping and handling

Perhaps a more appropriate factor to consider if you’re running a direct sales or an e-commerce sales program, is to offer to waive shipping and handling charges. This can be done to encourage sales during a slower period, or can be an incentive for a large order. For example, you can offer free shipping for orders over a certain amount. That way, you can drive action towards a result that would bring in better returns.

Limited time offers

Remember those “buy now and save”, or “for a limited time only” offers? Well, placing a time limit on the offer can help drive action within a specific time frame. What it does is create a sense of urgency surrounding the offer, psychologically influencing your customers to react to the offer as soon as possible. After all, people hate to have missed out on a good offer, right?

Guarantees

E-commerce sites, or direct sales channels for that matter depend on guarantees to drive sales. The guarantee serve as a way to build trust and assurance among their customers that the product or service they buy would be able to meet their needs. Guarantees lower the risk of try-outs for customers, especially if you’re a fairly new company or have a product or service that is not well known yet. Even large branded companies are also offering money-back guarantees for their products.

Incentives

A relevant incentive will most likely pull added response. Incentives can be in the form of gifts that accompany the purchase of the product or contests. Be sure to make that incentive appeal to your target audience. Make it relevant to the needs, wants and desires of your customers.

Incentives don’t have to be completely tied to simply a product purchase. You may offer incentives for an action that you would prefer your customers to take. For example, you may offer an incentive for buying more products, buying it now or in desired quantities. Although incentives can be a great way to drive action, there is still an issue you have to be wary of. Sometimes, customers may be too attracted to the incentive rather than the product. This is a problem if your business depends on repeat business (it should). You will have to ask yourself this question: Are they buying your product or the incentive? You will most likely not see the customers who are more attracted to the incentive than your product again unless of course, you offer them similar incentives.

Valuable Information

Popular among business marketers, an offer for information that is useful to the customer can be a great incentive for a prospect to respond. Although it may not generate immediate sales, an offer for information sources such as white papers, articles or events such as training or seminars may place the prospect into the buying mode. They may not buy now, but at least you’ve put them into the process to do so in the next few steps. Most importantly, you’re beginning to identify the need and the solutions you can offer.

Such offers become even more effective with complex, highly configurable products or services such as consulting, large enterprise systems and even advertising. The prospect may need to go thorough numerous buying decisions such as vendor evaluation and selections before they commit to a purchase. If the information offered directly benefits the daily work of the prospect, you may have positioned yourself to benefit from that relationship.

Deferred payout

Remember those offers from music CD clubs? To be honest, I’ve never seen one in Malaysia, only while I was overseas. The offer I’ve seen is simple: Buy 6 CDs (or books) for $1 and agree to buy six more in 12 months. Frankly I think the idea is brilliant. Another example is a magazine offering 4 trial issues for consumption.

As the marketer, what you’re really putting your foot in is the classic acquisition versus retention approach to marketing. Deferred payout means you’re willing to invest in obtaining the prospect as your customer and patiently reap the rewards over a period of time. You may not see the immediate profits right away. After all, how much can you make selling 6 CDs for $1? On the other hand, what you’ve gained instead is a long-term customer.

Usually, you will be able to break-even on offers such as these after the minimum agreed period is over. The crunch comes when you continue to receive orders from those customers long after the required 12 months. If you remember my article some weeks back about the benefits of customer retention, this is a good example on how to increase the customer lifetime value. Convincing these customers to stay will be a much easier job since they already know who you are, the level of service you provide and your reliability.

Payment terms

Finally, a great way to drive action is to offer flexibility in payment arrangements. Flexible payment arrangements may include offers such as credit terms and payment deferments such as “Pay nothing for 6 months” type of offers. Aptly suited to larger ticket items, the objective here is to make it easier for the customer to purchase from you where he or she may otherwise not be able to do. Auto vehicles, homes, entertainment systems, even furniture businesses usually offer such programs. Offering flexible payment terms could also mean offering your customers a variety of ways to pay for the purchase. This could be accepting major credit cards or other payment methods such as Direct Debits, Cash on Delivery or via Telegraphic Transfers.

Conclusion

That completes an overview of elements you can customize for an offer that you can present to your customers. One of the most exciting things about marketing is that anything is possible. This is where it gets interesting; you can improve the offers on the table (and more complex no doubt) by combining several options into one dynamic offer.

Your offer doesn’t even have to be groundbreaking or terribly original. You just have to be in a position to offer a very good deal to your customers. The best way to determine that is to test them out. Testing factors within a direct marketing campaign has always been the crux of a successful campaign. By testing the elements, you will be able to see which element works best for you and you will end up with happy customers and a healthy bottom line.

[Written by Jui Hong Teoh, Managing Director, BRANDTHINK Malaysia. First published as a two-part series in IT@Work, The Sun, Mon, 8 Oct 2001 and 15 Oct 2001]