Are Promotional Offers Really Bad For Business? - The Digital Marketing, eCommerce & CRO Blog
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Are Promotional Offers Really Bad For Business?

Promos. A word that divides the realm of marketing, with one half of the verdant landscape proclaiming their virtues, the other denouncing their vices. Whatever you think, there’s simply no avoiding them both in your waking and working life, so you best figure out a way of dealing with them.

 

In a recent study released by RapidCampaign, the praises of promotions couldn’t be sung highly enough – not least because RapidCampaign purport to create, “exciting, dynamic and social promotions” themselves. However, reading into their research, there are certainly some facts and figures worth discussing and interesting points raised about the way we approach promotions as marketeers. Take a look at our analysis below:

 

 

The Raw Numbers

Of the 2,000 people that took part in the survey:

  • – 60% said that promotions directly affected their buying habits
  • – 25% claimed that a promotion caused them to make a purchase that they otherwise wouldn’t have made
  • – 28% of promo users spent more on purchases as a result of the promotion
  • – 27% were influenced to buy from retailers that they wouldn’t otherwise have purchased from

Which sounds just fine, but let’s take a look into what these statistics mean.

The term ‘buying habits’ is addressed very loosely in this context, and doesn’t really offer us much valuable information, but the following three figures certainly do! So let’s discount the ‘60 percent’ and focus on the others instead.

Using Online Promotions To Sell To New Clients

Generating business is a key part of, well, having a business, and causing users to make purchases they otherwise wouldn’t have made is a huge part of what the marketing department is there to do. Whether you spend this money on marketing materials, or absorb it as a loss on promotional items or services, you are generating custom.

So in that regard, if you are cutting potential profits on products that you otherwise wouldn’t have sold, you’re making profits you otherwise wouldn’t have made, so you’re still making more profit.

Admittedly that is confusingly worded, but the logic is sound. Marketing to new clients whilst getting them to make purchases at a discounted rate, opens you up to a whole demographic that you couldn’t grab before. Of course, making these clients return to make purchases is the key goal, but that comes down to brand loyalty and what you can offer them aside from promotional codes.

Online Promotions Make People Spend More

This sounds fairly counter intuitive to us, so we spoke to our in-house behavioural psychologist to get her thoughts on the matter.

 

“When people set out to go shopping or make a purchase they have a set budget in their minds, or at least have a vague idea of how much they are willing to spend even if they do not verbalise this figure.

If they find the product they want but at a discounted rate, rather than thinking about the amount of money that have ‘saved’ here, they are instead more likely to consider making an additional purchase which will tally up their net spend with the budget they had in mind.”

Alicja Mzyk – Behavioural Psychologist

 

So whilst you aren’t making the same profit margins on your products, according to this report, you are likely to generate the same net spend as the original price 28% of the time.

Final Thoughts?

Employed smartly and monitored closely, we have seen promotional sales generate a great deal more custom for our clients, which we are sure to further capitalise upon with reengagement and remarketing tools. However, in our experience, you must be aware of how you are portraying yourself to the marketplace – if your company or brand become too heavily associated with promotional codes you could change how customers see you and how they make purchases, which may in the long term damage your profit margins even if they do increase your conversion rate.

by:

Sebastian Paszek

Marketing manager

Controlling the chaos of the digital landscape, Sebastian is a multiplatform executive, project manager and photographer.