Sweetening the deal

Offering incentives such as discounts, free shipping, and gifts with purchases has been part of catalog marketing for decades. And now that the Internet has become a viable channel for many catalogers, some are using incentive programs to convert Web browsers into online buyers.

Many online surfers could use an incentive to stop and shop: Research firm eMarketer estimates that only half of the 33.1 million Web users who browse or research products online actually buy via the Web. And more than 77% of online shoppers and 64% of those who haven’t shopped online say that deeper discounts would get them to buy more via the Internet, according to New York-based market research firm Jupiter Communications.

Penny Wise, a Bowie, MD-based office and janitorial supplies cataloger, offers discounts on all Internet orders to increase online sales and curb competition. Although in its catalogs Penny Wise claims to have the lowest prices on more than 25,000 items, it offers an additional 3% discount on purchases made through its Website. The company also takes $10 off a buyer’s first online purchase and is considering online sweepstakes, product giveaways, and auctions. “We give customers incentives to try our Internet site and to place orders themselves rather than through a phone rep,” says president Gary Luiza.

By motivating more customers to shop online, Penny Wise can cut operating costs, which in turn will increase the discounts offered in the future, Luiza says. So far, the company’s 800-number costs and service rep expenses have dropped. What’s more, return rates on online orders are 10% lower than on phone orders because customers are extra diligent when inputting their orders and “catch mistakes right away,” Luiza says. Penny Wise has also increased its cross-selling and upselling five-fold through the site because “online buyers prefer the ‘Net’s soft-sell approach.”

Other marketers’ online incentives go beyond discounts. Perfume marketer Fragrancecounter.com provides free shipping and gift wrapping, while cosmetics marketer Avon gives away bath products with online purchases, and food cataloger Omaha Steaks offers “buy one, get one free” incentives and sends a free entree with every online-ordered shipment.

Computer Discount Warehouse (CDW) has several online incentive programs, which helped grow its Web sales to $125 million, or 6% of total ’98 revenue. The Northbrook, IL-based computer cataloger designs its programs to “increase traffic and reward online purchases,” says spokeswoman Ann Fahey-Widman. For instance, CDW gave away a “millennium” clock to every Web customer who ordered Microsoft’s Office 2000 software.

CDW also sends its Buyer’s Edge e-mail newsletter in four versions, tailored to various segments of its online audience, such as Macintosh users and PC users. The newsletters feature unadvertised specials, including free gifts and limited-time offers. The e-mail specials are not advertised in the print catalog, though customers can order the items by phone. But registering online to receive a newsletter is “the only way customers hear about these particular specials,” Fahey-Widman says.

While online incentives can boost short-term sales, some critics worry that they could hurt catalogers in the long run. “Online marketers should concentrate on how people buy rather than giving away margins,” says Ken Wruk, president of Web Promote, a Vernon Hills, IL, Internet marketing services company. Indeed, according to eMarketer, providing secure transaction software and easy navigation and ordering are the top factors in converting Web surfers into online buyers.

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