Are you feeling pressured to offer new coupons, discounts, and promotions online? You’re not alone. Almost every ad points to a new coupon code or special deal, so it’s natural to feel like you should run one of your own.
But with all of the promotional clutter, how do you give yourself the best shot at coming out on top? It’s simple: out-plan your competition. Arbitrary promotions are revenue-draining problems that provide minimal benefit to your business over the long haul. So if you’re just offering 20% off all shirts because it sounds nice, stop.
Before you start any promotion, make sure you fully address each of the following six milestones. Otherwise, you might just lose your proverbial shirt.
Step 1: Set your objectives
As soon as the idea of an online promotion enters your head, start creating a list of objectives the offer should achieve. Although the most obvious goal is to increase sales, take it a step further by splitting your objectives into primary and secondary goals. The primary objective is the reason you’re running the promotion, while the secondary goals are additional benefits of the promotion.
Take a look at this example from my imaginary hot sauce store to guide your thinking:
Proposed Promotion: 20% Discount on All Verde Sauces
Primary Objective (reason for promotion): Need for additional sales: purchases of verde sauces have dropped 18% in past three months
Reduce inventory levels of verde sauces to make room for more popular sauces
Drive traffic to verde sauce product pages to increase awareness of this product category
Provide information regarding new ways to use product, namely with specific recipes
Note how each of these objectives are focused toward benefiting my verde sauce category and overall business in the long-term.
Step 2: Select your audience
The next step in your promotional preparation is to decide who to share this promotion with. In some cases, it’s effective to blast your discount to everyone on the planet, but in most instances, it’s much better to segment. When deciding on your audience, use your objectives as your guide.
Take a look at this continued example:
Selected Audience: Customers who have previously purchased a verde sauce product
How does this audience meet my primary objective? Customers who are familiar with the product are most likely to purchase again. Additionally, they are more open to promotional communications and engaging with the new recipes.
There are tons of ways to segment your audience, so be selective to those who are best equipped to meet the primary objective of the online promotion.
Step 3: Pick your timeline
This one is pretty simple, but is rather important. Before you launch your online promotion, select your start and end date. Setting predetermined limits allows you to take better measurements after its expiration, and helps set expectations beforehand. This decision should also include strategic thought.
Adding to our example:
When does this promotion start and end? Promotion begins November 17 and ends November 24 (7 full days).
Why this specific timeline? The deadline for the next shipment of verde sauce is December 4, so want to adjust the order based on sales volume.
Step 4: Perform a pricing analysis
Out of all the steps, this one is the most important to your bottom line. Instead of grabbing a number out of the air (20% off, $15 off), a successful online promotion is based on pricing analysis. You’ll begin by looking at your margins from the products that will be discounted and subtract the discount amount from the total. As you continue the analysis, you’ll have to make decisions on how much margin you’re willing to sacrifice for the promotion.
Here’s a quick analysis from our example, although each promotion will vary:
What is the average margin on the discounted products?(Calculate margin by subtracting overall product cost from overall product price.)
Average Price for Verde Sauces: $15.00
Average Cost for Verde Sauces: $11.00
Average Margin for Verde Sauces: $4.00
Margin with 20% discount = $1.00
($15.00 x 20% discount = $12.00 price $12.00 - $11.00 cost = $1.00 margin)
With this example, you can see that a 20% discount leads to an average margin reduction of 75%. That’s a pretty steep discount, but since it aligns with my objectives, I’ll live with it for one week. If this were a longer promotion, I would likely reduce the discount or offer it on products with a higher margin.
Step 5: Create a communications plan
Now that you’ve got the details of your online promotion straightened out, it’s time to shift your focus on how to communicate it with your customers. Based on the audience and timeline you’ve selected, you can quickly come together with a plan to reach your customers.
Here’s more of our example:
What are the most effective ways to inform customers of this promotion? Dedicated email and social media
Why is this the most effective way? Current customers are most receptive to promotional emails and are more likely to follow us on social media channels. It also provides the quickest turnaround from an execution standpoint.
When will these messages be sent?
Email: November 7 at 11am
Social Media (Facebook and Twitter):
o November 7 at 11am
o November 10 at 5pm
o November 13 at 11am
o November 14 at 2pm
What is the creative for these messages? Fill in accordingly.
By having these milestones created ahead of time, your promotion will have more structure and you can plan for traffic spikes and/or questions.
Step 6: Prepare for reporting
To rock the follow up of your online promotions, establish a timeline for pulling reports and metrics. In this example, I would evaluate the results around November 29 so I’m ready for my next order on December 4. During the beginning stages, create tracking links for each of your communications outlets so you can measure how well each channel performed. Also, decide which reports you want to run and what success means to you.
By going through this promotions plan each time you run a new offer, you’ll greatly increase its efficiency. More importantly, you’ll begin using a more strategic approach to online promotions, which will better protect your online business and give you peace of mind.