Today I received an attempt to get me to buy again by being given time-limited money off vouchers off my next purchase.
The desire to encourage repeat business is very sensible. How this offer was handled cost the business an extra sale and the profit on the sale.
The Three Ways To Grow
- Increase the number of customers
- Increase the number of times those customers buy
- Increase the average amount of money the customers spend when they do buy.
All good solid advice and a wonderful model to help you to brainstorm ideas for ways that you can increase your sales.
So as a business coach I always look around me at the ways that businesses I come into contact with as a customer try to do any of those three things.
Money Off Vouchers For Repeat Purchases
Today it was WH Smith, a big newsagent, book, home entertainment and stationery store in the UK as I braved the rain to go Christmas shopping.
Normally I get to the checkout and they offer me a special offer big bar of chocolate and although I usually say No, I mentally applaud their effort for trying to increase the average transaction value.
It may only be an extra 15p profit but if one in ten customers take up the offer that adds up to a lot of extra profit they wouldn't have had without testing the deliberate tactic to get more of my money.
Today I wasn't so impressed.
How To Use Money Off Vouchers To Cause Customer Irritation
We are about to go through a story of unintended consequences.
I bought some franchising magazines today because I want to help people find the right franchise. When I paid, I was proudly told that I had a book voucher entitling me to a £5 discount (if I bought £20 of books).
Great I thought and headed upstairs to the books to start browsing.
Then I looked more closely at the voucher.
The valid time period doesn't start until Monday 10th December while I'm standing in their store wanting to buy on Saturday 8th December.
It seems that they are trying to apply strategy 2 - increasing the number of transactions which is commendable but they have totally ignored the customer's viewpoint from this promotion.
They are trying to encourage me to change my behaviour.
They hope that some time between Monday 10th December and Sunday 16th December I will venture out again for Christmas shopping, pay a fortune in parking, carry the voucher around in my wallet for up to a week and remember to visit WH Smith and exchange my voucher for some of their books.
It's not going to happen.
For a start, if I had found some books I wanted to buy, I generally want to buy at that moment. I like instant gratification!
But now I know that it will cost £5 less to buy next week...or to put it another way, it will cost £5 more to buy this week.
And that hurts so WH Smith have just given me a disincentive to buy any books from them today.
Second I now have a week to do price comparison shopping.
If I have got to spend the mental energy to remember about the voucher and remember the books I want, then I'm probably going to just have a little look at the prices on Amazon and their resellers.
So unintended consequence number two, is that now I have a week to see if I can get a better deal.
Third the voucher has introduced doubt in my mind.
In one week's time, we will be one week nearer to Christmas so that makes stock-outs more serious.
To lose a present I am relying on is bad news. What if WH Smith sell their one copy before I turn up next week clutching the voucher. I'm in trouble - the voucher has expired, I've lost my £5 saving and have one week less to find it from anyone else.
Fourth I have taken a closer look at the conditions and there are some exclusions for airports, railway stations, motorway service stations. No idea why as none are known for their aggressive pricing and the profit on the book sale will be the same or better.
But even worse, the terms have now introduced uncertainty. The £20 spend applies to the total transaction after all discounts have been applied. Does this means that I actually have to find at least £25 worth of books?
Will there be long queues of people next week clutching their £20.35 of books and having a huge row with the embattled shop assistants? That's certainly not a mental image to look forward to and encourage me to shop there.
Fifth, the terms say the voucher is non-transferable. Why? Their aim should be to get more people to buy more. Where is teh harm in passing it on? There's no identification on the voucher anyway so why have the term?
Sixth, only one voucher can be used per transaction and because I bought something else I now have two vouchers.
So if I find £60 of books I want next week I have to pay for them in two transactions. But that's crazy. It's not good for me, it's not good for their sales staff and it's not good for the other customers queueing behind me.
But on a point of principle, that's exactly what I would do.
Improving the Money Off Voucher For Repeat Purchases
WH Smith could have improved their voucher in one simple way and a way to guarantee that they had some more of my money in their tills.
No start date.
Just "this voucher is valid until Sunday 16 December 2007".
It's easy and simple.
I would then have a chance to buy my books and gain my £5 saving at my convenience when I am already in their store.
Tips For Using Money Off Vouchers To Increase Your Sales
- Make the saving worthwhile. If you are trying to change behaviour, then make sure the saving is enough to motivate your prospective customers into action.
- Look for ways to protect your existing sales. You don't want to discount items, people would have bought anyway. Perhaps this is what WH Smith were trying to do but they disincentivised me to buy today. If you have customer records, offer money vouchers on products that people will want but don't usually buy from you.
- Look closely at the transaction from your customer's perspective and make sure that you see your intended and unintended consequences.
- Make it simple to use and all the terms clear and fair.
- Check your margins. Make sure that you have done your sums and that the transactions are profitable.
Vouchers are a great way to increase average transaction values and to tempt customers into future transactions but do be careful how you use them.
Done badly, you will reap only a proportion of the profits that you could have had and cause all kinds of customer service issues.
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