Holiday Discounting – Don’t Give Away The Store!Sep 10, 2014 - by Neil Capel
Your longer-term tests in the months leading up to the holiday season should focus on downstream impact. Say you’re testing a free-gift-with-purchase offer, for example. A long-term view of the group (also known as a cohort) that received the message will reveal how likely customers were to make a repeat purchase at full price or purchase a different product without discounting. Cohort analysis will give you the ability to deploy multiple tests and measure the downstream impact in parallel. By segmenting customers into individual discount cohorts, you can measure the long-term impact of varying discount levels and discounting techniques, such as purchase floors, mystery discounts and free shipping.
Long-term tests can answer questions including:
What discount level drives the highest increases in customer lifetime value?
What discount types increase revenue in a welcome series vs. cart abandonment series?
Which are most effective for increasing purchase frequency?
At what point in any given exchange / series should a discount be offered?
The marketers that combine both the short and long-term views, informed by intelligent testing, are best able to achieve short-term success and long-term viability. We recommend that you begin these tests now with new customers, rather than with your existing customers who already have established patterns and expectations when it comes to discounts.
In the end you’ll have the data you need to ensure that you’re boosting average order value in the holiday season by attracting seemingly “one-and-done” purchasers to both purchase now and stick around as frequent, high-value customers; as well as giving discounts to your already engaged and loyal customer base without eroding their desire to buy at full price moving forward.
Here are the discounts and offers that you need to be focused on for the upcoming holidays:
Test offering free shipping with a pricing floor to encourage higher average order values. According to Forrester, with more than a quarter of US online adults reporting they purchased additional items to reach the free shipping threshold.
Offers pegged to a specific purchase floor, such as “Save $20 with $200 purchase” can increase your average order value while still delivering the benefits of discounting. For the holiday season, we recommend testing a combined discount approach where consumers can receive 10% of a regular purchase (or free shipping) with the added bonus of receiving a larger percentage discount if they meet the floor.
One Sailthru client saw conversion rates jump 69% with mystery discounts compared to their standard offer. Many marketers are talking about this approach as response rates to email and other channels are often dramatically increased through this approach. Driven by the thrill of a potential high value offering, customers are opening, clicking and then once onsite, often browsing and buying.
Gift with Purchase
This type of promotion has historically been successful for department store commodities; however, it offers any brand the opportunity to both reward the customer with an additional gift for themselves (or regifting!) and gives you the opportunity to test the value of a product that you’re considering carrying full time.
If you don’t already have a loyalty program, now is a good time to start one before the holiday season. This will give customers further incentive to buy their gifts with you so that they can reach milestones needed to achieve valuable rewards. For those customers who you’d normally expect to purchase once over the holidays, incorporate loyalty program messaging in your purchase confirmation emails to encourage them to continue to purchase with your brand after the holiday season wraps up.
Discounts with Urgency
A tight time constraint on a promotion is a proven way to boost conversion. Leading ecommerce companies like Amazon even run full “holiday calendars” on their sites, so customers can see the last days by which they’re eligible for discounts, gift-with-purchase, free shipping, and, of course, guaranteed delivery by Dec. 24. Leading up to the holidays test urgency with flash sales to clear pre-holiday inventory or simply to re-engage customers as you prime them to remember your brand before their holiday shopping begins.
By testing these discount strategies now, you’ll be saving this holiday season and beyond by not impacting lifetime value in over the long-haul. Want to find out how to optimize mobile and what personalization pitfalls to avoid this coming holiday season? Get our complete holiday playbook today!
— Neil Capel, CEO & Founder of Sailthru