The Anatomy of an Offer | March 2011

< Back

photo for anatomy of offer

by: Ernest Corder

What makes a great advertising offer? Why do some offers work while others do not? Why is the blame for unsuccessful advertisements often placed upon the media or creative even when an offer is not a good one?

Every type of media you buy has readers, viewers, or listeners. Most often the key to successful advertising is the content of the offer. You could run a radio ad one time on any station with copy offering $50 cash free to the first caller and you will see results. Likewise, you could run an ad with a poor offer a thousand times with no inquiries. There are three key elements that have to be included in any successful offer. Put your offer to the test – if you miss any of the three following factors, your offer will likely fail.

Three factors need to be included in every advertised offer:

Number One: Make a Valid Offer

A valid offer is not what you want to sell, it’s what your potential customer actually wants to buy. Just because you wish you had more business at your restaurant from 2pm to 5pm Mondays and Tuesdays does not mean that you should offer a mid-afternoon lunch deal. People don’t want to eat lunch at that time, so the offer is not valid and will not work regardless of the price. You have to offer something that people actually want to buy to be successful. A trap clients often fall into regarding valid offers is that they make a strong offer on their first run in a media (i.e. half price lunch special) and have huge results. So the next time they run a special, the client wants to do something that fits their own needs rather than their customers' needs (i.e. the 2pm-5pm late lunch special) and the offer fails. Don’t blame failure on the media or creative. A valid offer has to be a “win-win” for both the business and the consumer.

The “New Customers Only” Trap

A valid offer should not be designated “for new customers only.” You should not penalize your loyal, long-term customers for buying from you at your regular prices. A discount for a loyal customer is a reward to that customer for his/her continued business, so if you’re wanting to make an offer, make it to everyone. Again, a “new customer only” offer is not valid because you are limiting your audience and putting your current customers at risk of being alienated.

Number Two: Price It

You have to price any offer, but the pricing cannot be confusing. You should usually promote a percentage off when promoting high-ticket items. There are a few examples, as in pricing for automobiles in which you can use a “take $5,000 off” statement, but that is for a high-ticket item in which the consumer already knows a ballpark figure of what it will cost. But if you are promoting a high-ticket item like plastic surgery, the consumer likely does not know how much it will cost. If you advertise your price as “$1,000 off,” the consumer’s likely reaction will be, “off what!” If the price of that surgery is $4,000, then a better offer would be 25% off.

Use specific dollar discounts on less expensive items (i.e. $1.00 off admission). This creates a quantifiable savings on items for which the price is already known or for which a consumer can easily guess a ballpark figure. Let that consumer picture the extra cash still in her wallet.

Keep in mind that with all the couponing going on the past few years, the new target percentage to make consumers move is 50% off. When pushing this high of a discount on lower priced items, promote it as 2-for-1 pricing to push up the total revenue generated.

Number Three: Time It

Give a consumer the chance to procrastinate and they will. The shorter the time period of an offer the more likely you are to achieve results. You may end up with more merchandise sold in one day than you would in a month by creating immediacy and demand with a "one-week" or “one day only” sale. If you are concerned that one day might not be enough time to take care of the number of customers you are expecting, then promote the special as “call now to reserve these prices,” allowing consumers to pre-buy your special. When the sale is over, it’s over. This will train consumers to act quickly the next time you hold a sale.

 

Daily Deals Know What They’re Doing

Groupon and other daily-deal web sites are doing offers right. They are usually a bit too consumer-biased, in our opinion, thus, creating huge response and social media buzz. But they are on-target by following the strategic principles found in strong offers. We are not endorsing daily deal programs, and we usually recommend clients do not participate in these offers. Daily deals cheapen the average price of your product and fill up your business with customers paying you as little as 25% the normal cost. We only recommend these deals for new businesses, desperate businesses, or ones that can come up with a limited special that will not affect their regular transactions. We find it amazing that businesses will allow Groupon to offer their products for sale at 75% off but don’t want to do more than 20% off on their regular advertising. Why does Groupon work? Because their model requires you to apply the three golden rules of effective offers, and they maximize the level of those three factors.

Number One: They Make Valid Offers

Groupon directs their customers to make very broad offers. They push to promote a special valid during all hours of operation and on a variety of services or products, or at least on something with very broad appeal. They direct restaurants to make offers that are good for any meal and on any day. The tighter the offer (i.e. valid only on breakfast items), the less they will sell. It is in Groupon’s best interest to sell as many “deals” as they can, so they try to make the offer as valid as it can be to the most people possible. Groupon and other daily deal services wouldn’t sell a late lunch-only deal. Why? Because it won’t work. As a business, you should not think your offer will work on Groupon or through traditional media if it is not valid. Groupon knows what a valid offer is. If it isn’t valid, it will not sell. It's not the fault of the media or daily deal service if you make an invalid offer and it does not sell. It is your fault for picking a bad offer.

Number Two: They Price It

Most Groupon deals are for low-ticket items. They always promote at least 50% off and very often quantify the deals as “get $20 worth for just $10.” This pricing strategy works, and businesses seem to be comfortable offering what is essentially a 75% off sale (i.e. 50% off the item, give half the remaining revenue to Groupon). But it seems to be difficult for businesses to run traditional advertising at anywhere close to this pricing strategy. Groupon knows that if you want to sell a lot of something in a short amount of time, the price has to be right. The daily deal model works because the price is a little too right – too skewed in the consumer’s favor. But it sells because of the pricing. Make your offer to the ridiculous and expect ridiculously strong results. Agree to stronger offers in your traditional marketing and you will see better results there as well.

Number Three: They Time It

An offer needs to be for a limited time to make it work. Daily deal coupon offers rely on immediacy, offering deals that don’t happen until a critical mass is purchased, then expire after one day or after a certain threshold is reached. This creates immediacy with a “buy now or miss out” philosophy. The shorter the time frame for taking advantage of an offer, the more likely a consumer is to buy it now. Groupon does it, why don't you?

Summary

Take a look at your offers. If you are missing any of these three key factors, then redo your offer as it likely will not work. Follow Groupon’s lead. Create an offer that is valid for the largest target market possible, price it to sell, and time it to sell now. Then say it in a fun or clever way, and say it a lot. Drop us a note if you are interested in having Redroc create your next offer.

 

 

 

  • Browse Newsletters...

    austinadagency

    Case Study for Web Proliferation

    August 2011

    Web Proliferation is making sure internet searchers find you on the web, wherever it might... Read more

  • photo for anatomy of offer

    The Anatomy of an Offer

    March 2011

    What makes a great advertising offer? Why do some offers work while others do not? Why is ... Read more