7 Value Offers
It’s no longer just fast food establishments and restaurants that need to offer “value meals” in today’s price-conscious marketplace. With US unemployment stuck at around 9½% most consumers are still extremely value conscious. In response, your firm just might need to develop a really attractive reduced price offer (aka its “value meal”) regardless of what business you’re in or which audience you’re targeting.
Shoppers cut back on discretionary purchases in 2009 and traded down on necessities in 2010 according to Booz & Company’s aptly named “Forever Frugal” research. Consumers’ budget-oriented mentality changed their shopping patterns resulting in a relative increase in small value, immediate needs oriented shopping trips as tracked by The Nielsen Company.
To ensure your firm that continues to get some piece of this newly “frugal” pie, you can’t rest on past purchase behavior. You need to motivate customers to purchase now and from you. This point was hit home last weekend when my family stopped at a local restaurant filled with parties. This good food, nice ambience but not fancy restaurant uses well-priced lunches and early bird specials to fill otherwise unused capacity. Their specialty drinks and coffees, on the other hand, are priced for profit.
7 Value offers
Regardless of your organization’s sweet spot in the market, here are seven promotional strategies to consider.
- Go old fashioned with traditional direct marketing offers. Use the ageless “Buy one, Get one free” or “Buy one, Get one half price”. Direct marketing testing has proved that the “Buy one, Get one free” offer does better than “Two for the price of one” The goal here is to increase order size.
- Give away your service. Attract customers by offering them free service that enhances your product. For example Uniqlo offers free hemming on jeans bought that day. This service ensures that customers need to keep the jeans.
- Lock them in with good deal on the initial purchase. Offer low prices on product that requires replacement parts. Examples are razors requiring blades and computer printers that require special ink cartridges.
- Entice them with freebies. Customers all love the word “Free” even if they don’t need the product. Offer customers something free with purchase. Remember the offer needs to be enticing. For example, buy one pair of slacks get a blouse for free.
- Come back later when we’re not busy. Offer patrons special pricing based on low traffic or usage times. This works well for service providers such as nail or hair salons that have slow periods, often on Mondays and Tuesdays. Make sure that you qualify your promotion. For example, a salon that offers reduced prices on Mondays and Tuesdays might exclude holidays.
- Get them back again, soon. Give customers a coupon good for a discount on a future purchase. This incents your current customers to buy now while the offer is still in effect. Include a use by date! Further, with coupons, there’s a good chance that a proportion of them won’t be redeemed.
- Give them more for free. Many restaurants offer bottomless cup of coffee or free soda refills. Keep the offer to something with a variable cost that won’t kill your overall margin. Make sure that you qualify what and when this offer is good for. You don’t want someone to have one cup of coffee without another purchase during busy hours.
7 Economic factors to consider
Before you apply these offers to your business, examine the economics of your situation to understand the impact of the bottom line. Among the factors to consider are:
- Are the slow times in your business when you’d like to drive traffic? Of course you must be practical. How many people want to shop at 4:00 a.m. (or work those hours?)
- What are your fixed and variable costs?
- Do you have high margin products that you can either discount or offer in combination with your special offer?
- Do unlimited refills make sense?
- Are there additional items you can sell to generate profitable sales?
- Can you target your price conscious customers in a way that only they receive your promotions, such as direct mail, email or text message?
- What happens if the promotion is highly successful? (Think of some of the challenges that Groupon users have discovered.)
The reality is that in the current market, most merchants have excess capacity and need to incent prospects to buy from them. While you can continually run specials, customers will be trained to wait for a sale. Therefore, the best offer is one that mainly discounts incremental sales in ways that you can afford, without giving away too much of the margin on the sales you would have gotten anyhow.
Which types of promotions work well for your company and why? Have you tried any promotions that haven’t worked and what did you learn from them?
Here are some related articles you may find useful:
- 8 Steps to construct a sales forecast
- What marketers can learn from LeBron James—It’s the total offer
- How not to price: Time Warner Cable raises its pricesIs a digital line forming to get your product?
- What Shake Shack and Pre-Owned Merecedes have in common
- What Ice Cream Sundaes and Starbucks’ Via Have in Common
Photo credit: StuartPilbrow via Flickr