You’ve probably heard that targeted offers can make a significant impact on a store’s ROI.
But how do targeted offers work? What offers should you make? Who do you make those offers to?These questions are challenging for many retailers. According to Gartner, less than 10% of Tier 1 retailers believe they are highly effective at this kind of personalization.
The rewards for doing it right, however, appear to be huge. Some of these statistics can be seen in Kahuna’s The Struggle for Smart Segmentation Infographic, including:
- 86% of consumers say personalization plays a role in their purchase decisions
- 62% of consumers have chosen, recommended, or paid more for a brand that provides a personalized service or experience
- Personalization can deliver 5x to 8x the ROI on marketing spend
With potential rewards like these, it’s no wonder why retailers want to fire up the targeted offer machine. In a new webinar, DecisionPoint and Cozumo partnered up to explain how to use targeted offers to connect with customers and drive a store’s ROI.
There are many criteria you can use to segment customers. Some B2B schemes, for instance, grow quite elaborate, differentiating minor details between prospects for the benefits of an internal sales force.
But for retail, Cozumo suggests starting simple.
That means focusing on just two major factors to segment your customer base: frequency of visits and average spend.
These two factors will be keys to improving your store’s ROI with targeted offers.
Choosing the Right Offer
Once you’ve identified your customer segments, it’s time to match them up with the right kind of offers.
For customers who visit infrequently – usually the largest of your segments – the goal is to get them back into the store. To do this, you need a time-based offer that entices customers to visit during a specified date range.
For example, “Today Only” or “Fourth of July Weekend” offers are designed to provide incentives for your infrequent visitors. Any sales from these customers, no matter how large or small the basket, are considered incremental revenues from this kind of marketing.
On the other hand, frequent customers are already in your stores and don’t need incentives to visit. For them, you want to raise the dollar value of their baskets instead. This can be achieved with “Save X When You Spend Y” offers, rewarding them for spending more.
By also segmenting these frequent customers by average spend, you can provide more relevant offers. Offering a “Save $10 when you spend $30” to a segment whose average spend is $50 per visit, for instance, is only going to hurt your bottom line. But encouraging them to spend $75-$100 instead would be far more worthwhile.
Timing the Offer
Timing is everything, they say. This is certainly true when it comes to retail marketing. You want the timing of your targeted offers to perform one of two important tasks:
- Boost the revenue potential of a customer’s current visit
- Boost revenues on a specific date or range of dates
Either of these can be achieved with a retail mobile app.
The moment a customer enters your store is the perfect time to send a targeted offer. Here you’ll want to focus more on the “basket value” kind of offer, since the customer is already there and doesn’t need an invite. Geolocation and push notification features in today’s smartphones enable this capability through mobile apps.
The other type of timing is to draw in more customers during the dates of a promotion. You can use this to boost the results of an important sales event, to smooth over low sales trends, or to take advantage of special event and holiday traffic.
You should use market research to help identify how far in advance to send the offer, when (and how many) reminders are needed, and even the best time of day to send them. All of these timing factors will play crucial roles in the effectiveness of your targeted campaigns.
Quantify What’s Working
One of the most important outputs of running a targeted offer campaign is collecting the right data. If you send three different offers to three different segments, but don’t have any way to track their redemption, then you’re missing the whole point.
You could see your overall revenue climb 15% over a target weekend and proclaim your offer campaign a success. But what if 90% of that boost came from offer A, while offers B and C provided only 10%? Your next campaign would likely run all three offers again, when what you should be doing is expanding A while revising B and C.
Cozumo recommends tracking the redemption rates of each offer, the basket value of each sale, and then comparing the total revenue adds. This will give you the data you need to plan your next round of targeted offers.
You can also start collecting more advanced segmentation data by matching sales to individual offers. 2D barcode technologies enable this because each barcode received can be made unique to that particular customer. So when a coupon code is scanned, you can start matching customer data and demographics with purchase data. Better knowledge of your customers will lead to the identification of more precise segments and finely tuned offers.
Start Targeting Your Segments Now
Many retailers still think that targeted offers are too complicated or difficult to implement. But you shouldn’t be one of them – the rewards targeted offers could bring is simply too high. Start simple by creating a few basic segments, running some offers, and collecting some data.