Reward and Avoid

If you own a business in 2011, at the end of each month you are probably thinking, “I need a quick sale now.” The need for quick sales usually leads to discounts, coupons and direct response marketing. The push for direct response marketing is statistically heightened during poor economic times on both sides of the Open/Close sign. Direct Mail typically goes up because consumers are more likely to want to open their junk mail and seek out coupons and savings.

More direct sales benefit the business, while more savings benefit the consumer. Coupons in the newspaper, mail, email and websites can have businesses busier than ever and customers happier and more willing to justify an extra purchase or two. Everybody wins…but is it a short-term solution to a prolonged problem?

In short, yes. Just because a retail store needs immediate sales, it does not necessarily mean heavy couponing is going to get them through the recession or drought (or whatever term seems appropriate). It may actually set them up for breaking point down the road where they must decide to lower prices or lower a returning customer base.

Once a retail business or brand goes down that road of constant coupons, forty-percent-off sales, and free gift promotions, it becomes more difficult to turn the car around and not sling a few passengers around in the process.

A company can unconsciously train their customers to expect lower prices and, in essence, actually de-value the brand. After months of reduced pricing and paper coupons, it will likely be impossible to raise prices back to the normal, profitable retail prices without losing the loyal customer base, which will always be the lowest lying fruit.

Kohl’s is a big player in the realm of advertising apparel, particularly where coupons are concerned. The saying goes, “If you pay retail for anything at Kohl’s, you’re a sucker.” A large percentage of Kohl’s customers shop around for what they want, but hold off on the purchase. Then when the coupons pour in or the clearance racks make way for a new turnover, the customers are ready and they get what they want at 40 to 70% off. Their sales are so frequent that customers naturally think, “Why buy this now at retail price, when I can wait a week and practically steal it?”

Now, Kohl’s can obviously get away with it because of their size, large inventory, and brand relationships. And, chances are, it is part of their continued strategy to some degree: constant sales, low prices for name brands. But how do smaller retail shops follow suit? Your average mom and pop or regional retailer cannot continue to cut their profit margins and spend advertising budgets on coupons. If discounts and coupons are too frequent and too absurd, a smaller company can only go through so many customer base changes before they are all gone.

One way to combat this trap door is to reward your loyal customers as opposed to luring in savings-seekers. A routine e-mail launch or web-only offer is a cost-effective route so long as the profit margins are not entirely in jeopardy. Instead of giving $10 off or 40% off or giving away free product, work in a free or discounted service that may have an intangible price tag. Include a redeemable coupon or insert on their next purchase IN their shipment box or in their shopping bag – but be ready to continue as an ongoing part of your business model. The reward is that customers get savings for committing to your brand, and you get rewarded by gaining more committed customers who probably will glady share their story with trusted friends and family. Do giveaways of a related or ancillary product, not the real deal.

Notice that Polo perfume does not simply give their perfumes away, but rather they give the branded makeup bag away with your purchase of the perfume. This inherently makes the customer feel special that they get something free for spending $80 on a 6 oz. bottle of perfume. The scent, the bottle, the logo, and the sexy model on the cover of the box are still $80 (and a bargain at that), but the bag is dispensable, needless and nearly valueless. So the longtime, loyal fans of Polo perfume have a less likelihood of getting ticked off in a year when that same bottle becomes $86.95…so long as that bag is along for the ride.

The “quick sale now” is what separates companies from shops. Invest in your customers for a better chance for them to invest in your brand. A frivolous coupon campaign attracts frivolous customers. There is never one right answer, but dropping prices without a continuity strategy in place is should not be the first move, but rather a last resort. It’s the same move that all other competitors have handy, too, so it does not fall in line with efforts of making your brand stand out.

If you tell your customers that you are different from those big box stores, prove it. Be different, not just discounted.

-Lance LaRue, Advertising & Creative Manager at Americom Marketing Ad Agency in Beaumont, Texas 2011