Promotion’s New Paradigm

I know how the saying goes: “If it’s not broken, don’t fix it.” While I often subscribe to this theory, I don’t think it pertains to the traditional, yet antiquated marketing practices that retailers still insist on using.

The economic slowdown is teaching chains that tried-and-true advertising models are not going to work in the future, especially in a era where every dollar counts and chains need to maximize their return on all investments. The time is ripe for electronic marketing tools to make their bones in retail.

This may be easier said than done, as too many chains still believe they can best deliver promotions through newspaper ads or in-store circulars. While such well-established tools have been used for decades, “overall, these ads do not create any significant marketing savings,” said Gary Hawkins, president of  consulting firm Hawkins Strategic, Syracuse, N.Y.

Hawkins, along with many other experts, is urging retailers to transition to digital direct-marketing tools such as e-mail, online coupons and Web-based promotions. I agree. Besides being cheaper than printed mass mailings, these media provide an opportunity to make communications and promotions relevant to each shopper.

While chains may be attracted to the lower-cost solutions, many still struggle with how to embrace the new digital world. Many fear the unknown; others don’t believe their shoppers are ready for — or want — electronic communications. 

The truth is, chains often don’t understand that consumers are willing to make use of use digital channels — and I’m not just referring to the Gen Y customer segment.

Don’t believe me? How is this for a wake-up call: According to a survey of more than 1,500 consumers, compiled by Dallas-based marketing services firm Epsilon, 91% of shoppers recently downloaded or printed an online coupon. And 62% of shoppers said any “permission-based” e-mails they receive from CPG companies have a direct impact on their shopping and purchase habits.

And the ideas are endless. Chains just need a little ingenuity. For example, Gap Inc.’s Banana Republic brand recently enabled private-label credit-card holders to receive 10% off any purchases made with the card during a 90-day time frame. No paper coupons necessary.

Starbucks Coffee stepped up the game even further when it launched a mobile promotion program in its Starbucks Mexico division. Patrons at its Guadalajara and San Luis Potosi cafes now receive promotions via text messages that are redeemable at checkout.

So how can retailers learn which customers are ready? The answer is simple: by leveraging customer databases and business-intelligence tools. These solutions provide insight into the value of a customer and store information on past promotions and how shoppers responded.

Chains embracing electronic marketing will be able to create and distribute their promotions at a fraction of the cost of a traditional program. With fliers no longer being printed, messages can be targeted, pages can be increased or reduced on the fly and distribution can be streamlined — all factors that save the retailer money.

The biggest benefit to transitioning to electronic marketing, however, could be that all campaigns are now measurable.

A depleted inventory of paper fliers and an increase in crossed fingers will no longer equate to a jump in sales. This is the digital era. It only takes a little creativity and the support of hard consumer data to make new promotions successful — even on a small budget.