Developing Breakthrough Offers

One of the most important considerations that must be addressed when you experiment with offers is how committed or qualified you want your responders to be. In other words, do you want responders to make a full commitment to you by paying a full price when they send in their order, or are you willing to offer someone the opportunity to receive your product before they pay anything. Chances are, you’re somewhere in the middle and I like to think of this middle ground as a huge playground where the marketer can test many different offer configurations. But first I must make one point very clear:

Future buying behavior or the lifetime value of your new customer is greatly affected by their original offer. It’s imperative to have the ability to track all future response and buying behavior back to a customer’s original offer to fully evaluate its impact on your business.

If a new customer is acquired through a free offer or a premium-driven offer, chances are you’ll need to continue to make similar offers to get this customer to buy again. Several years ago, magazines such as Sports Illustrated started offering premiums like telephones and videos. I knew then, that there would be no turning back once prospects expect they are entitled to premiums. Today, as you probably know, new subscribers to SI often receive four premiums, and even those who renew expect to be showered with freebies.

This may sound like a bad situation--but not necessarily. The use of premiums has been a critical factor in allowing most direct marketers to successfully bring in new customers. Premiums have simply become a strategic tool, and as long as you’ve accounted for their full cost, are willing to keep them in your offers and are still making an acceptable profit—great!

One way you can use premiums and still keep customers focused on the basic end result or solution you’re providing them, is by developing premiums that are closely aligned with or related to your product or service. Here are a few examples:

If you’re selling continuity-type products, you can develop a premium that will reinforce the desire to continue. Premiums like ring binders, slipcases, jewelry boxes, etc. appeal to the collecting instinct in all of us and contribute to a desire for more of your product.

Subscription marketers, especially in the newsletter arena, develop special reports to offer to prospects. These print-related or information premiums clearly reinforce the product’s promised end result.

Donors to non-profits love to show off their convictions and generosity, so tee shirts, decals and bumper stickers have always done well.

Whether you use gadgets or premiums related to your product or service, it’s important to create excitement for your offers, and premiums are a great way to do it. Remember that you’re using a premium to sell, so you must sell the premium! Don’t hide it in the copy—make it a major focus of your promotion along with your product’s solution. And if one premium works, try two or three. You will never develop breakthrough offers unless you are willing to take some risks in your testing.

I have developed hundreds of premium offers and have seen response rates increase 40% to 50%, and the fact is, that the risk in testing is very small, as long as you are able to limit your investment in premium development. I work with one premium vendor that is happy to donate premiums for testing, as long as they get the rollout order.

Another great way to create exciting offers is through special pricing or discounts on your product. This is very elementary, but I’ve seen some companies avoid this because they think it cheapens their product. For many years Time Life offered their book series at the full price for every book, including the first one. I’m sure the continuation rate for the responders was great, but as competition increased, their response rates declined. Now Time Life offers a special introductory price for all their books and videos, but because they require payment of this special price with the order, I’m sure their back end performance is still very strong.

Now for the details of the breakthrough offer I promised to share with you that I developed for a subscription marketer. This company uses only hard offers (cash with order) and charges $39 a year or $78 for a two-year subscription to its publications. Recognizing that $39 is simply an amount that’s too large for some people to afford, or are willing to pay before they see the product, I simply suggested that they test a six-month option at $19.95.

The results were even beyond my expectations. The response tripled and the total cash received doubled compared to the control! But keep in mind, fulfillment costs will go up with more subscribers in total and you will be challenged to get the six-month subscribers to renew. After all, you’ll need to begin your renewal series very early in the term before most have experienced the value of their subscription. But when you take into account the increase in your total lifetime revenue, i.e. ancillary product sales, list rental revenue and advertising dollars from a larger subscriber base, this type of offer may be worth testing.

Another way to achieve a good response rate is through soft offers (send no money now) or lead generation. If you believe in your ability to convert leads and the strength of your product or service, then this may be the best type of offer for your situation. When using soft offers, you’ll need to decide just how much, if any, of your product you are willing to give away before you see any money. Many companies avoid soft offers because they view the effort to collect as a hassle and too risky. But as with so many direct marketing decisions, it comes down to numbers. That’s why I encourage you to test a soft offer approach to learn what to expect. You may easily be able to increase your response rates by three or four times, and there are many techniques available to cut down risk associated with premium hunters and bad debtors. Here are just a few:

Target your promotion to qualified prospects by:

• Performing careful list selections.

• Utilizing individual or zip models designed to predict back-end performance or bad debt.

• Pass your mailing through a service who will identify chronic bad debtors.

In your promotion:

• Clearly state the eventual price.

• Clearly describe or provide an actual sample of your product if possible.

• Ask one or two qualifying questions on your order form.

Plus, there are several techniques to help you determine how much product (if any) to send to your new customers (credit extension) after they’ve responded.

I’ve spent a significant portion of my career managing continuity and subscription products, where soft offers, conversion efforts, modeling, credit extension and collection techniques were critical to success. Please give me a call if you’d like to tap into my deep knowledge in these areas.
 

Proceed to Chapter 8...