Oh no! My promotion is too successful
Most marketing departments have finally overcome being widely referred to as fluffy promotions or colouring in people. It’s an old adage which in 99.9% of cases could not be further from the truth.
Marketers are the voice of the customer, custodians of the brand, harness data to drive sales-enabling activity and build organisational profile and awareness.
These days, marketers are probably more regarded within organisations as a cost centre or spenders, and if you ask many finance departments, the “over-spenders”.
Right now, a lot of promotions activity is about driving out sales offers that will spark customers into action. Loyalty and gift card program owners are keenly wanting people to stay engaged by continuing to earn points or burn them through hot offers, to reduce liability on balance sheets.
When setting up a promotion, the marketing team has done the maths and 9 times out of 10, knows what the response will be. A response rate of 1-3% is good and if you can get 10? Well crack the champagne and start your own dance party because that is a winning campaign.
Yet what happens when the CEO and the CFO start squealing the house down because you have too much redemption and your offer is performing way too well? From experience, it can be a much more difficult position to be in than when the opposite happens.
With on-going market disruption through COVID impacts and new and emerging competitive forces, we’re hearing a lot more from CMO’s and other marketing leaders about having to justify the business impact of successful promotions.
So what do you do when you’re told your business is in a squeeze because of over-subscription to a tactical offer for which you are responsible?
1. Think about what the customer response is telling you and your business:
You’ve spurred your customers into action. They’re thinking about you. They’re talking about you. They’re taking action. They’re probably also forwarding your offer to friends and encouraging them to buy from you also. While it might all feel a bit much in the moment, be sure you have clearly recorded details of what you did in the first place to garner the attention. When the wind changes and down the track the C-suite is asking you what you are going to do to deliver an earth-shattering result next time, remind them of what it takes to get customer attention.
2. Shore up your supply chain:
A lot of interest and limited inventory can spell PR and customer service disaster. If your offer is going nuts and there is not enough of your product or service to go around, you can easily go from hero to zero . Make sure you have sufficient supply and quickly think about what to succinctly communicate to any customers you might have to let down.
3. Think about other flow-on financial impacts:
Free upgrade or VIP upgrade style offers are often popular ones. It feels like you can stimulate customer demand without it having to “cost” your business a whole lot more. However, what they can do is dramatically reduce the average sale price of the upgraded item or experience and put you in a whole lot more difficulty with the accountants. You can also attract a whole different type of customer to those that might usually buy a more premium service. If this is the case, you may need a “chaser” (no, not a stiff drink). Consider whether to put another offer in front of these customers driving them to buy an ancillary product or service, to get them into the swing of becoming a repeat customer at a more premium level or think about how you could utilise them to deliver you another higher priced customer through advocacy marketing activity.
4. What does the campaign performance say about your regular value proposition, pricing policy, loyalty or gift card program offer?
If customers are coming out of the woodwork en masse due to a perceived great offer, what are they saying to you about your regular pricing? Sometimes you can get lucky on promotion timing but if they’re not buying from you at standard rates outside the campaign period, then you may have a bigger problem.
5. Think about what kind of precedent you’ve set:
You’ve done it once. Highly engaged customers will be waiting for you to do it again. Before you even embark on an aggressive offer, think about what kind of ramifications it may have in the future. If you’re going to deeply discount in a critical retail period this year, think about what impact it will have on business objectives to keep building upon that level of sales growth in the same period next year. If you’ve dramatically cut your price once, your customers may expect you to begin doing it again and again (and we know what happens when you end up in that spiral). Have you also thought about alternative offer constructs for the future? For example, rather than discounting the face value of your gift card, would you be better to add some bonus credit, provide an extra small value card or free gift item with a purchase instead?
6. Go back to the numbers:
How is the cost of your offer being recognised? Usually everyone points to the marketing budget, but is that where the cost of an offer should really live? Time to remind the CFO it should be viewed in the P&L as a cost of sale, not a marketing expense.
So, the next time your promotion is too successful and the CMO goes diving for a paper bag so they don’t hyperventilate, take stock. You’re a marketer. We paint by numbers, not just colour them in.
How to run a promotion that works
At Wink we are a group of experienced loyalty, acquisition and retention specialists who have walked in your shoes.
If you want to run a promotion that will help your business win and keep customers, get in touch with the Wink team today.
This article first appeared as part of a Thought Leadership piece for The Gift Club penned by Kristie Atkins, Managing Partner at Wink