Making good ideas work

Generating marketing ideas to increase sales, build the customer file, influence shopping on the Web, or persuade prospects to make their first purchase plays a critical role in the health of a business. The good news for smaller companies is that they tend to react more quickly to marketing ideas because they often have a more nimble organizational structure than a larger business. But sometimes the excitement surrounding the idea usurps the discipline of managing the idea throughout the organization — and therein lies the possible downfall of a good idea.

Whether you're a business-to-business merchant or a consumer marketer, you need to keep in mind that implementing a marketing idea can affect every facet of your company, and not always for the better. Let's look at some popular ideas and how to make them work for, rather than against, your business.

Ask any grumbling catalog/Internet shopper about his grievances and the perceived high cost of the shipping charges will probably be at the top of the list. So offering free shipping can be a great way to stimulate purchases or boost average order value (AOV). But promoting a free shipping offer may not work on all customer segments or in all channels.

For example, a high-end consumer apparel cataloger tested free shipping on three customer segments: prospects, best buyers, and lapsed or inactive buyers. The best buyers were most receptive; both response rate and AOV among them increased. Second most responsive were the lapsed buyers, whose response rate increased, though there was no significant increase in AOV. The surprise was the prospects, from whom there was no lift in response or AOV.

The moral: Free shipping can work, but just because customers complain about it doesn't mean omitting the barrier automatically translates to a sale. You still have to offer the merchandise and services shoppers want.

A midsize b-to-b cataloger wanted to offer free shipping (referred to as “free freight” in many industries) in an effort to increase the number of items per order. Promoted loudly on the front cover, the promotion ran for two months. Customer purchase orders promptly increased, but the cataloger was surprised that the number of customers who used the promo code to receive free freight was no greater than the number who did not. The cataloger concluded the offer did not work.

But when the season ended and the company conducted a full evaluation of the marketing programs, it discovered that even the customer segments that did not take advantage of the free shipping offer did increase their volume per order! Happily, the cataloger enjoyed higher sales and larger orders without having to pay as much in outbound shipping costs as it expected.

A trichannel merchant was ramping up its e-commerce business and wanted to offer free shipping for any order placed on its Website. Hypnotized by the allure of a cheap advertising cost and instantaneous orders, the company ignored the potential impact to the bottom line.

Two problems became visible once the orders began coming in. First, the minimum order amount threshold to receive free shipping was lower than company's average order value at the time, so the offer wasn't encouraging customers to buy more items or items at a higher price point.

What's more, the company had ignored is own financial model. Simply glancing at the financial statement, the merchant's annual fulfillment cost as a percentage of net sales ran much higher than industry benchmarks of 12%-15%. When you offer free shipping, you must be able to carry the burden of foregoing the shipping income from the customer, with the burden being a tradeoff for an increase in lifetime value or other relevant criteria. Overall, what should have been an exciting success for the organization was a financial nightmare.

You can explore new ways to enhance the productivity of a free-shipping offer, such as “Free shipping on your next purchase from our Website with today's minimum purchase of $XX.” In this way, you are not reducing the effectiveness of the customer's purchase today — and subsequently are not eroding profitability — all the while encouraging a subsequent purchase on the Web. To accelerate the impact of the offer, identify a limited period of time to redeem the free shipping (for instance, “offer expires in four weeks”). The caveat here is your operational system must be able to identify customers who made a qualifying purchase as well as provide a mechanism for redemption during the defined time frame.

If “buy today, earn free shipping next time” is too cumbersome for your infrastructure, try “buy today, earn a free gift card/gift certificate toward your next purchase.” If your organization already offers and accepts gift cards or gift certificates, then you will have greater flexibility in granting, redeeming, and tracking the transactions.

Particularly for shoe and apparel catalogers, the inventory nightmare of customers' ordering two sizes and returning one keeps the returns department constantly busy. The good news is that at least you have customers who are making a purchase. What about the customers who convince themselves not to place the order because they've concluded that ordering the wrong size and returning it is a huge hassle? How can you turn this bad situation around to a good experience? By promoting the Merchandise Return label (MRL).

The MRL — literally an oversize address label — is a service product from the U.S. Postal Service. (Some private companies, such as Newgistics, offer similar services.) What makes the MRL attractive to direct marketers is the ability to market it to customers as a benefit, in addition to the logistical benefit of enhancing the speed and deliverability of returned items.

For customers, the MRL is included in the box with their order. If a customer needs to return an item, he can simply peel off the MRL and place it on the box, then seal the box and take it to the post office or give it to the postal carrier. At that very moment, the customer pays no money for postage.