Promotions Giveth and Taketh Away

Sep 26, 2005 8:52 PM  By

Promotional offers can increase response rate and demand per catalog among both the house file and prospect list segments, says Michael Grant of Scarsdale, NY-based catalog consultancy Michael Grant Direct. But the subsequent impact can vary by segment, so be sure to measure the downstream results.

Among customers who have bought from your catalog before, subsequent mailings without offers will generally produce response rates and average order values on a par with historical levels, all other things being equal.

But among those who have never ordered from you before, a discount on their first transaction with you can “condition” them to always expect an offer. The subsequent productivity of these new buyers may well be less than of those buyers who were acquired without a promotion. This means you could see a degradation of house file performance as these new buyers permeate your buyers file.

As a result, Grant says, “you must measure the future performance of those buyers acquired via promotions in demand per catalog or contribution terms, and compare them to those who were acquired without a promotion. This should be done over a period of time, since you will not be able to make this determination by looking at just one mailing. This analysis will help you know how offers affect the future performance of customers acquired with a promotional offer.”