The coupon offered a “free coffee beverage” from, oh, let’s call ’em “Comfort Brothers Gas Station and Convenience Store.” I thanked her and slipped it in my pocket.
Does a lower price boost sales?
Will the availability of a discount, or a membership card, or a “get one free after purchasing ten” punched card appeal to everyone? Of course not. Some shoppers enjoy clipping, collecting, and organizing coupons to take advantage of reduced prices on household goods. Others see the time required by that process to be part of the price they pay for your service (or product), and will happily agree to full rate not to be bothered with it.
If you offer a discount to shoppers who would have paid full price, you lower profitability. On the other hand, not discounting for the undecided leaves some inventory unsold. That reduces potential gross sales.
Full-Price Customers and Discount-Seekers: Which Is Which?
How do you distinguish customers who are willing to pay full price from the undecided ones who need a coupon to nudge them to buy? The answer is to let them select themselves.
Make multiple offers at different price points to maximize sales. Those who wish to pay full price may do so, and those who won’t will find a subsequent price/value ratio which works for them.
Here’s how to make it work:
Let’s imagine you have purchased a mailing list of high probability prospects for your new service. Send a letter, or post card, or other mailing piece to the entire list. Offer to sell them your service. Explain why you offer a good value. Some will purchase. Move their names from your “general” list to the “paid full price” list. Guard this new list. The names are golden.
A couple of weeks after your first mailing, send a twenty percent off coupon to everyone who remains on your “general” list. Segregate the names of those who respond to your second mailing into a “twenty percent discount” list.
In ten more days, send the remaining names on your “general” list a thirty percent off coupon. See how this works?
You’re accomplishing two things through this process.
First, you’re maximizing sales at every price point. Second, you’re segmenting your general list into groups of people who have now revealed the price at which they’re likely to find your future offerings appealing.
The percentage who bought from your very first mailing, divided by the total number of pieces mailed, is your base conversion rate. Over the next few months you might get as much as ten percent more than your base conversion rate, by offering these incremental increases in discounts. Expect the biggest response to be to your first coupon mailing. Each successive offer will produce a smaller number of buyers who will decide the price is finally right.