Promos: The Necessity Retailers Love to Hate

July 19, 2017

By Anna-Lisa Ulbrich

Question: Do you send promotional emails to your housefile?

Answer: Of course, we do! Customers have come to expect promos in email.

Question: Do you offer promotions (Free Shipping does not count!) on your catalog cover to your housefile?

Answer: No. It diminishes the brand.

Answer: No. It violates the cover.

Answer: No. We do not want the coupon sites to pick up the offer.

Answer: No. We do not want to train our customers to only shop on promos.

Answer: No. We simply do not believe in promotions, but what else can we do to drive response rates?

We hear all the above (and more!) reasons why clients are averse to using promotions on their mail pieces to their housefile. Five years ago, I might have agreed with them. But, oh my, have the times changed. The reality of it is that except for a few niche categories, the DTC responder universe is NOT growing. This means that more and more, you must compete for wallet share from the same pool of prospects, but shoppers are smarter and savvier than ever. Part of being a smart shopper is shopping on price (thanks, Amazon!) but also on customer service, brand loyalty, quality and uniqueness. Premium, high quality brands such as Serena & Lily, Coach, Neiman Marcus, Lafayette 148, Boden, Restoration Hardware, Williams-Sonoma (the list goes on and on) use promotions on their catalogs, but not in a willy-nilly, one size fits all approach.

We advise clients all the time: If you are willing to promote to your housefile via email, why not also allow a promotion on your most expensive marketing vehicle? Plus, you likely do not have 100% email capture on your housefile and there may be lapsed customers who are not receiving your promotions. However, there is a smart balance and strategy to using promos via the catalog. Many clients use a staggered catalog promotional approach so as not to A) Truncate full price demand that they would have gotten from buyers who do not need a promo, or B) Step on the toes of other online or email promos that are running concurrently.

You may still be reluctant…

But it still diminishes the brand!

  • You do not have to scream major discounts at your customers. There are more subtle ways of being promotional by limiting it to a specific category, or offering a tiered discount which would encourage a higher AOV.

But is still violates the cover!

  • You should strike a balance between your beautiful cover photography and a dotwhack or cover wrap. While the promo does not need to be a fluorescent yellow dotwhack, it does need to be noticeable on the front and back cover (remember, 50% of consumers receive their catalogs face down!). Here are some creative tips:
    • A promo can look like a natural extension of a brand, even an upscale one, if the cover’s imagery and design are created to accommodate it.
    • A pretty picture is not spoiled if the shot was taken with all the “prettiness” clear of the lower right hand corner where the promo is planned.
    • Cover promos must stand out but with brand standards in mind (if blood red 72-point font is not in the brand standards, do not feel you must use it!).
    • If a brand’s customer expects savings of some sort, and so many today do, it is a disservice not to include one.

But we still do not want the coupon sites to pick up the offer!

  • Frankly, some retailers do not care, but for those that do, you can create a unique promotional code that is inkjetted on the front and/or back cover that is good for one time use. This process is easily facilitated by service bureaus and/or printers.

But we still do not want to train our customers to shop on promo!

  • There is a fear that if a customer is acquired via a promo, then they will only shop on promo. This is a fallacy. We have evaluated the impact of promotions over time for many retailers, and we find that customers acquired with a promo are no less valuable over time. We find that even if a customer’s demand curve falls off faster, the up-front lift from a promotion of 15% off or greater is enough to keep LTV flat or even higher over time. That said, weak promos like 10% off are not generally significant enough to move the needle, and Free Shipping is so standard now that most would say it is not even a promo but simply the cost of doing business online.

We do not believe in promotions, but what else can we do to drive response?

  • Order starters: Take a signature item, like the pool lounger for Frontgate or the cashmere wrap sweater for Garnet Hill, and feature them at special introductory price points as a way of driving response rates. These items should be high volume drivers to make a real impact.
  • Merchandising Mix: Adding spontaneous “pick-up” items to your assortment. For example, furniture is a high consideration purchase with a longer sales curve. Categories like table top and decorative accessories help to drive faster response rates.
  • Lower AOV: Response rates and average order size are always inversely related. Most Home DTC brands have an AOS closer to $200 than $300 or $400 because of the balance of their merchandise mix as indicated in the bullet above. For example, you can get $2 sales per piece by having a $400 AOS and 0.5% response rate OR by having a $200 AOS and 1% response rate, in which case you are growing your file twice as fast.

A note about testing promotions on catalog front/back covers – the modern-day waters are muddy! It is difficult to get a clean read on offer tests in the mail today because a prospect has so many opportunities to find different promotions. We know promotions work, but testing is not always conclusive, especially if the offer is barely promoted in/on the catalog. Also, in this day and age of promotions, catalog promotional testing results are muddied by other promotions in other channels: Email, home page, social, etc. and promo code tracking might only give you 30% of the results, anyway.