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Feb 23, 2010
How To

Appeal to Cost-Conscious Customers: 4 Tactics to Expand Lower-Price Offerings Without Hurting Your Brand

SUMMARY: When your customersí buying habits shift, you have to respond or risk losing those customers for good. But itís vital to adapt without compromising your brand.

Read how a healthy-living retailer responded to growing price sensitivity among its customer base by increasing the number of low-cost products they offered. We outline the four tactics they used to make the change, which helped boost their site conversion rate 11%.
After the rocky 2008 holiday season, Gary McEldowney, Director, Marketing, Boston Green Goods Inc., realized his team needed to adapt to a changing market.

"The economy was getting price sensitive," McEldowney says. "We saw that we needed to add some more products with lower price points, especially in certain categories."

The healthy living retailer focused on their flagship site, AllergyBuyersClub.com, to offer lower-priced products in several categories. Their goal was to keep customers shopping even as their wallets lightened, but expanding product offerings during the down economy was risky. They faced the possibility of increasing overhead costs while rolling out unproven sellers.

Instead, the strategy paid off. New products accounted for more than 8% of total sales in 2009, beating the teamís expectations. Also, their website conversion rate increased 11% year-over-year.

Take a look at four tactics McEldowneyís team used to ensure they were adding the right products to their site at the right time.

Tactic #1. Identify best areas to add products

The team scoured their product catalog to find categories that were dominated by high-cost items. For example, their dust mite comforter encasements featured these brands:
o CottonFresh for $189 and up
o Solus for $169 and up

They also looked at key indicators, such as conversion rates, to see which categories were slipping in performance.

In addition to adding lower-cost options to some categories, the team expanded into new product areas, such as affordable, non-toxic cleaners. These were products that customers could easily add to a larger order.

-> Tip: Donít confuse customers

The team avoided adding products to categories that already had a bevy of choices. They didnít want products to have too many overlapping features, as this might confuse shoppers and pull down conversion rates.

Tactic #2. Find the right products and distributors

AllergyBuyersClub.com is well-known for their rigorous product review process, McEldowney says. All products are evaluated by team members, who compare their experiences to the manufacturerís claims. Then, they rate each product and post reviews on the site.

Keeping with this strategy, the team needed to find quality products that were priced far enough below their current offerings to have an impact on conversion rates.

For example, they added:
o Dust mite comforter encasements for $79
o Steam mops for $89 and up (compared to $1,500 steam cleaners)
o Air filters for $599 (compared to $750 or more)

-> Tip: Avoid adding inventory

The team found products from manufacturers and distributors that could ship directly to customers, rather than requiring the team to keep an inventory.

This allowed them to avoid the risk of stocking items before they knew whether they would sell. If a product proved popular, the team purchased a stock, McEldowney says.

Tactic #3. Add products according to seasonality and catalog calendar

The team sends three seasonal print catalogs to customers. When they formulated this plan in January, they had about three and a half months to prepare products for the spring catalog.

In that time, they needed to test products, write reviews, and add items to their website and catalog.

"The catalog helps drive the urgency of it, which is good, because you need deadlines to make this thing work," McEldowney says.

To prioritize products in the review process, the team used factors such as seasonality and potential for impact. For example, it was important to review new dehumidifiers before the spring catalog, because summer is typically the most humid season.

Also, products in categories that already featured a good representation of lower-priced options were of lower priority for reviews than products in categories lacking in low-price options.

-> Tip: Set customer expectations

When writing product descriptions and reviews, the team emphasized that lower-priced products often translated to fewer features. They wanted to avoid customer backlash that might tarnish their reputation for honest product reviews and quality goods.

Tactic #4. Build email campaigns around new products

By the holidays, the team had most of the new products added to their website and catalogs. They decided to feature the products in two email campaigns "that did really well for us," McEldowney says.

They sent the first email on Dec. 2 with the subject line "Our Top Picks for Green Holiday Gifts Under $100!"

The graphic-heavy email featured descriptions, prices and images for 13 products under $100 (see creative samples below). When clicked, the images sent recipients to the productís landing page.

Next, the team sent a similar email about two weeks later, this time featuring 12 products and the subject line "Our Presidentís Top Holiday Gift Picks for Under $100." The teamís president often writes for their email newsletter and is well-known to subscribers.

This email achieved the following results:
o 10% + open rate
o About 2% CTR
o About 5% conversion rate

The team also featured similar promotions on their website, through comparison shopping sites, and through their affiliates, McEldowney says. These promotions helped lift the teamís 2009 fourth-quarter sales 17% higher than in Q4 2008.

Useful links related to this article

Creative Samples from AllergyBuyersClub.comís low-price product promotions
http://www.marketingsherpa.com/cs/allergybuyersclub/ind
x.htm


Adding Inexpensive Shipping Lifts Conversions, Lowers Costs: 5 Steps
http://www.marketingsherpa.com/article.php?ident=31274


AllergyBuyersClub.com
http://allergybuyersclub.com/


Boston Green Goods, Inc.
http://www.bostongreengoods.com/


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