Sale Discount Strategies that Influence Shopper Behavior

Customers are predictable. Shoppers, even wealthy shoppers, take notice when something is on sale, when there's a way to save money. And sales can effectively mold shopper behavior. In direct marketing terms, a "sale" corresponds to the "offer." I am becoming more and more aware of how important a compelling offer is in marketing. Even though sales discounts are best known in retail, B2B buyer behavior is also influenced by various offers.

Let's look at some typical online sales. I hope they will stimulate your own creative thinking so that you'll come up with some compelling offers on your own website this season. 

Keeping Shopper Interest

You know that it's important to keep your website, especially your front page, changing and refreshed. This way you give returning shoppers a reason to see what is new, thus greatly increasing the chance they'll make another purchase. Changing your sale offers every few weeks is one important way of keeping your store fresh and exciting.

Let's distinguish, however, sale pricing from your overall pricing strategy. This isn't about being the low price leader in your category vs. prestige pricing. Such marketing decisions effect overall positioning and targeting rather than shopper behavior within your online store. I'm talking about short-term pricing strategies that will encourage shoppers who enter your store to make a purchase, and, hopefully, purchase more than they were initially planning to. Your shopping cart program may not be flexible enough to implement all the kinds of pricing I'll suggest, but if you work creatively, you can probably implement most of them.

Sales Tools

You have at your disposal several powerful tools that affect price -- at least the customer's perception of the price.

1. Shipping Charges. Since shipping is often a significant part of the total online transaction, one way to get shoppers' attention is through offering free shipping for certain items. Free shipping for all products is a strategic (long-term) positioning approach, not a tactical (selective) approach. In an attempt to keep prices low, few online stores offer free shipping on all products all the time.



2. Lower Prices. The most common type of sale is low prices on a few popular items. These can be "loss leaders" in which the merchant takes a slight loss for a few items in hopes of getting shoppers to purchase other, higher-margin products. You might also get a better price on sales items by purchasing a larger-than-usual quantity that can help you absorb a lower margin on these items.
   
   CompUSA's brick-and-mortar stores sometimes use "instant rebates" that are taken off the price at the check-out stand. An "instant rebate" is another way of cutting the price. You might pass over "just another sale," but "instant rebate" is a newer concept and may attract shopper's attention long enough to make a purchase decision.
3. Bundled Prices. You can offer a sale that involves the purchase of several items at the same time. The advantage of this type of sale is that you help increase the total transaction amount in this way. Buy one, get one free. Three for the price of two. 50% off the second item. Save 22% over individual prices when you purchase the kit. If you purchase three or more we'll throw in a free (something).



4. Rebate Discounts. Rebates are usually funded by the manufacturer rather than the retailer. But retailers can announce "$27.00 after the rebate. You save $15." The manufacturer, in this case, isn't out of pocket a full $15, but only $7.50 or so, since 50% or less of the buyers get around to filling out and mailing the rebate form in a timely manner.



5. Coupons. If your shopping cart will give a discount for coupons, these can be offered via e-mail and they give the customer the particular satisfaction that comes from receiving a discount that not everyone gets. You could offer a coupon that is only good for new shoppers, if your program will support this.

As you structure your sale, do what you can to make your "offer" compelling. Make sure that you indicate a date when the sale will end. This increases urgency to purchase now when the "limited time" sale is in progress. You could offer a "Free Gift" to the first 50 purchasers. Of course, a strong guarantee should be a part of your regular store policy, but you can offer an "extended guarantee," a "guaranteed buy-back agreement," or a "double-your-money-back guarantee" to make a sale offer stronger.

It's important that you don't just have a sale to have a sale, but to fulfill a particular strategy that will move forward your profits. Depending upon your marketing needs, you'll probably want to structure your sale around one of four main goals.

1. Focus on Getting a New Customer

Sales that target new customers generally offer very low prices on a few popular products. For example, a book club may offer "Your choice of three books for $1." It comes with a one-year subscription that requires purchasing several other books at regular price. Loss leader sales are often designed to attract new customers with the idea that they will come back again and become regular customers. Your sales discount is figured as part of your "customer acquisition cost." If you can quantify the average sales from a customer over a one- or two-year period, then you'll know how much you can allocate to acquiring that customer.

Consider using opt-in e-mail lists containing a coupon offer. Try e-mailing to your "house list" after removing those who have already purchased from you. Or use ads in e-mail newsletters where you instruct the buyer, "Use this special code to get our lowest price." Chances are only a few of your current customers read that particular newsletter.

Lower-end shopping cart programs may not be able to restrict certain offers from existing customers, but if they allow specialized programming, you may be able to invent a way that will keep most existing customers from getting a special price. There's no easy way to prevent a determined person from removing old cookies from a browser and entering a slightly different name, or a spouse's name, in order to get a discount. But if through some simple techniques you can prevent 90% or 95% of your old customer purchasers from getting a new customer discount, that's quite adequate.

2. Focus on Increased Sales

This more general goal to increase sales by lowering prices can backfire, of course, unless you are very careful to construct the sale so that you make enough money on each transaction. When the manufacturer offers rebates or price breaks and the discount is out of his pocket, not yours, e-merchants should jump at the opportunity to pass these savings onto shoppers.

Amazon.com's book section is trumpeting "Dummies Month," offering a $10 rebate on some "Dummies" books.

Amazon.com's software section is offering "Free Shipping on Jasc through April 29." This is probably some kind of manufacturer rebate or a special lower price offered by the manufacturer for a limited time period.

The Sports Authority is offering "Biggest Rebate Ever. 1 Week Only! Over $2000 in Rebates. Save as much as $400 on name brand Treadmills! Cash in on BIG savings when you shop for Apparel, Electronics, In-Line Skates and MORE!" Lower prices do increase your sales -- especially when shoppers know that they are getting a special lower price.

3. Focus on Selling High-Margin Products

A third sales goal is to sell more expensive products that come with a higher profit margin. Your "$20 off" sale for a $400 item appeals to the good shopper instinct, but may reduce the sales price only 5%, still leaving a healthy margin for profit. Look for manufacturer's rebates on popular high-ticket items and show the price "after" a $30 manufacturer's rebate. Bundling several accessories with a higher-ticket item is one way of increasing the perception of value without lowering your margins much.

MicroWarehouse displays an ad that proclaims: "Last Chance! Offers Expire April 30, 2001! $100 Off any Laptop" followed by the limitations in fine print. This is apparently a store rebate rather than a manufacturer's rebate. But since it requires mailing in an invoice or packing slip, MicroWarehouse will benefit from the fact that a large percentage of purchasers will procrastinate and forget to mail off the rebate in time. The goal is to sell high ticket items that sell from $1100 and up. $100 off really costs MicroWarehouse closer to $50 when you subtract those who forget to send in the rebate. This figures to a 2.5% to 5% rebate but the $100 is a compelling figure that will help drive sales of high margin products.

4. Focus on Increasing Minimum Order Total

A very important goal for online merchants is to increase the minimum order total. This not only increases revenue, but cuts processing costs as well, since this is a single transaction rather than multiple transactions to achieve the same total. As I surveyed offers in several online stores this week, I saw a number of forms of this approach.

Amazon.com has an interesting offer: "Feed your need to read -- buy 4 or more in-stock books and get free shipping on 3 of them!" They limit this offer to books ready for immediate shipment, and have other caveats. The goal here is to increase the total order amount using by shipping costs rather than lower item prices as the inducement.

CDNow has a similar offer. "Go ahead... Overindulge on DVDs. Buy 2, 5, even 12 DVDs and pay only $4.95 standard shipping!" This too encourages a higher total order amount.

Amazon.com offers free shipping for all tools and hardware orders over $199 -- again, using shipping as a way to drive a higher total order price.

I hope you'll experiment with using sale discount strategies to drive revenue in your online store. What do you have to lose? Well-designed sales are one way where you can fulfill the humorous adage: "Lose a little on each sale, but make it up in volume." Change that to "Lower profit a little on each sale, but make it up in volume," and you'll have a winner.