Forbes reports you can convert 70% of the consumers from their loyal product with the thrill of the deal. How is this possible with traditional coupons converting less than 2/10 of a percent (0.16%)?
There are 3 criteria that are critical to making it happen.
But first, to understand how to get consumers to try out a new product, we have to consider why consumers are loyal to a particular brand. While the taste, cost or other features are certainly a factor to keep purchasing the same brand, there are others:
- Consumers don't want to risk getting an inferior product,
- They don't want to take the time to consider the options
- They don't have a reason to try something different
So what can we do to influence their decision? Coupons? Price? Something else?
Coupons? Coupons are delivered to consumers via newspapers, direct mail, receipts, and apps. With these methods, redemption rates are in the 0.8% neighborhood (not close to 70%). But the story gets worse. Most of those coupons are clipped by people who were going to purchase the product anyway - 80% (or more). So when you combine the facts, you get a 0.16% conversion rate.
Price? Stanford Business studies show, that consumers will actually pay more for an alternative product if they feel that they are getting a special deal.
It's the thrill of the deal.
In addition, the studies show that a promotional strategy actually generates more revenue.
Does this actually work in the real world? Absolutely. I was at a liquor store with a friend of mine who was picking up his usual beverage of choice. On the way in, he got a coupon for a more expensive brand from the agent at a tasting table. Even though the alternative was more expensive (even with the discount), he was very happy with the purchase - and couldn't help share his experience.
It was the thrill of the deal.
But how can a coupon where you hope for a 0.16% conversion get a rate around 70%? It's timing.
Timing is the key.
Distributing coupons ahead of time is too far from the time the consumer is making their purchasing decision. It doesn't give any rush. In fact, wading through a pile of uninteresting coupons is a frustrating experience. Instead, getting the deal to the consumer as they are about to make a decision leads to generating the 70% conversion rate.
The last criteria is making them feel special. In my example with my friend, he was so excited getting upsold to a more expensive product because of the promotion (sure), but it was also because it was only offered to a limited number of customers. To get the promotion you had to be at the store during the tasting and pass by the tasking counter. That doesn't sound very special. if you consider that out of the thousands of customers that walked through the store that week and maybe 50 people got the coupon, then that's a pretty select group. Or if you look at it as he got the coupon but a neighbor who came in an hour earlier didn't, then that starts to get the message across.
This last criteria is one of the big differences between offering the consumer a personalized deal to putting up a discount sign on the shelf.
To summarize, the 3 criteria to 70% is:
- Timing - getting the deal to the consumer as close to their purchasing decision as possible
- Promotion - getting a special price as incentive to try something new
- Personalization - making the person feel special by not offering the deal to everyone
It's the combination of timing, promotion and personalization that generates a 70% conversion rate. It is the thrill of the deal!
Bryan Pearson. March 15, 2017. "How Retailers Can Maximize The Power of Coupons" Forbes. https://www.forbes.com/sites/bryanpearson/2017/03/15/research-reveals-how-retailers-can-maximize-the-power-of-coupons/#1d4730d12f01
Marguerite Rigoglioso. December 17, 2011. "Everyday Low Pricing May Not Be the Best Strategy for Supermarkets" Stanford Business. https://www.gsb.stanford.edu/insights/everyday-low-pricing-may-not-be-best-strategy-supermarkets
