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Join Our Research Team at DMA 2014
Feb 20, 2010
Case Study

Offer Test: Discount Tied to Minimum Order Size Boosts Sales 25%

SUMMARY: Are your email promotions proven to be effective, or do you fall back on the same offers because itís the way youíve always done things?

Read how a marketing team answered this question for themselves by changing their approach to discount offers. Rather than offering a straight percentage discount, they set a new, low price for minimum orders and watched sales jump 25% for a crucial shopping event.
CHALLENGE

When Amy Lewandowski, Marketing Manager, joined PepWear in 2008, her first task was to get a handle on the companyís email marketing strategy. Email was the primary way the team promoted their custom screen-printed and embroidered apparel to customers in the education sector, but no one was actively tracking the results of specific campaigns.

After implementing new tracking and reporting processes, Lewandowski began asking, "What else can we test? What else can we change?" she says. "We have really focused on trying to improve."

The team saw a chance for improvement in spring 2009 with a campaign to promote custom t-shirts for an annual school tradition -- "Field Day."

CAMPAIGN

In previous years, the team hadnít sent a dedicated Field Day t-shirt promotion. Instead, they promoted Field Day and other spring events, such as band trips, in the same spring-themed campaign.

For 2009, they created a unique Field Day email campaign and tested two key elements:
o The timing of the promotion
o A new discount offer based on minimum order size, rather than a straight percentage

Here are the three main steps they took:

Step #1. Discuss campaign timing with sales team

Early in 2009, Lewandowskiís team met with the sales team to discuss when to send specific promotions.

The sales team knew when customers typically ordered products for certain events, such as spring Field Days. From there, they worked backwards to establish a launch date for the email campaign to encourage orders.

Because most Field Day orders occurred in April and May, the team decided to launch their promotion in March.

"We wanted people start thinking and ordering early and earlier," says Lewandowski. "We didnít want people to go somewhere else."

Step #2. Develop new offer

The teamís typical promotion strategy offered a percentage discount on custom printing orders. But Lewandowski wasnít sure if this offer maximized revenue.

Instead, she wanted to test offering a discount price tied to a minimum order size -- something she had seen other companies use.

- The team researched past Field Day t-shirt sales and realized that most orders came from school districts, rather than individual schools. "We knew could get away with a high minimum on that," she says.

- They set the discounted price at $4.95 per shirt, with a minimum order of 400. Customers typically paid $5.50 per shirt for an order of 400.

- They set a deadline for orders on March 31 -- a relatively short time frame compared to some of the teamís other promotions.

Step #3. Segment list and send email

Better list segmentation was another goal for Lewandowski and her team in 2009. Although their biggest customer segments are in the education sector, they also maintain a customer base within businesses and churches.

Because a school Field Day program could involve many different groups within a school, the team sent the promotion to all school-related subscribers on their list.

They sent the email on March 10. It featured:
o "Save on Field Day Shirts" subject line
o Description of the discount offer and minimum order size
o Sample designs for custom t-shirts
o Phone number to place order (standard process for custom printing orders)


RESULTS


The dedicated Field Day promotion was a huge success:
o Sales in April and May increased 25% over the previous year
o The Field Day promotion generated more revenue than any other email campaign in 2009

"We sent the right thing at the right time," says Lewandowski. "Thatís our big goal -- one of the things weíre focused on this year."

They achieved these results despite the email only generating an average open rate and a slightly below average CTR. The result reiterated to Lewandowski the importance of measuring the long-term impact of a campaign, right through to generated revenue.

Because schools have different Field Day schedules, customers were placing orders throughout a two-month period. Focusing on immediate email metrics or even one month's worth of results wouldnít have shown the true impact of the campaign.

Other big lessons:

- The campaign's success convinced the team to adopt minimum-order discounts as their standard promotion tactic, rather than just offering a straight percentage discount on all orders.

- They demonstrated the benefits of creating additional, dedicated promotions for specific events and segmenting their list accordingly, rather than trying to bundle multiple offers into a catch-all monthly promotion. For example, theyíre creating separate spring-season promotions around Field Day, spring band trips, spring sports, summer camps, etc.

"We break everything up as much as we can to really make people think about it," says Lewandowski.

Useful links related to this article

Creative Sample from PepWearís Field Day email campaign
http://www.marketingsherpa.com/cs/pepwear/1.htm


Pricing Psychology Test: Shopping Guide Lifts Order Value 35% http://www.marketingsherpa.com/article.php?ident=31501

Constant Contact -- the teamís email service provider:
http://www.constantcontact.com/index.jsp


PepWear
http://www.pepwear.com/


See Also:

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