Consumer Shopping Behaviour: Building Effective Christmas ...ecx.images-amazon.com/images/I/B26vaHS++qS.pdf · redeemed six voucher codes or more in the last 12 months, spent an average

An Amazon Webstore Guide

Every year retailers spend time and money promoting vouchers, discounts, contests and many other promotional strategies in an effort to capitalise on the spending frenzy that takes place in the run up to Christmas. Implementing sales promotions has the potential to increase sales, attract new customers and even retain loyal customers. Although sales promotions have a major impact on the behaviour of shoppers, the process by which consumers respond to these offers is not always clear. Understanding how consumers interact and engage with promotions helps online retailers effectively design and track promotions and communications. To build effective Christmas sales promotions that convert site visitors to shoppers during the festive period it is essential to target your customer, define and track your goals, and plan the promotion.

Consumer Shopping Behaviour:

Building Effective Christmas Sales Promotions

An Amazon Services Europe Product

Webstore.amazon.co.ukAn Amazon Services Europe Product

2

TARGET YOUR CUSTOMER

The cornerstone of building any sales promotion is defining the target consumer. Identifying the specific audience can help you narrow your promotions effort. Whether you are trying to attract new customers or retain consumers that have used the brand in the past, exploring the strategies your target consumers use to make purchases can help determine the success of a holiday sales promotion.

First, it’s important to remember that consumers’ sensitivity to sales promotions and perceptions vary by their online retail experiences. While some shoppers associate price-cuts with the phrase “sales promotions,” others gauge the value of the gain, monetary or otherwise, by evaluating the lengths they must go to, to attain it.

In either case, both adaptation-level theory and cognitive psychology studies have found that shoppers compare prices or other attributes to a personal reference price for each level of quality.1 Consumers have both internal and external reference prices. The current, future and past prices coupled with the frequency of sales promotions can impact these reference prices.

The time spent processing promotional messaging is another aspect of consumer purchasing behaviour. High-need-for-cognition shoppers spend time processing all promotional messaging and do not simply react to promotional signals such as displays that are not accompanied


3

by a price cut. Low-need-for-cognition shoppers are primarily influenced by the mere announcement of a sale. This means that they buy the product without checking the price. In consumer goods, most shoppers make buying decisions very rapidly with little processing.2

Brand Loyal Customers

• Customers often use multiple purchasing strategies when they encounter sales promotions on their preferred brands. They tend to be most receptive to sales promotions on their preferred brands and are generally not tempted to switch allegiances on the back of a particular promotion.

• Brand loyal customers tend to primarily use internal reference prices, whereas, brand switchers often rely on external reference prices.

Frequent Users of Sales Promotions

• Perceived risk theory, economic theory, and psychographics have painted a relatively complete picture of frequent users of sales promotions. These shoppers are sensitive to prices, receptive to price and product information, brand switchers, and frequent shoppers of the category.1


4

DEFINE AND TRACK YOUR GOAL

Determining your desired outcome of a promotion is another key component to building an effective sales promotion. Setting specific goals for sales, lead generation, and customer buying patterns can help you track the success of a promotion. Creating goals and aim ahead of a promotion strategy will help you align all communication messaging around the promotion.

Most importantly, identifying and tracking your promotional goals will help you outline a potential, financial bottom-line impact. Coming up with realistic goals and then analysing and tracking promotion progress is essential for business growth. Adding a timeline to the promotion allows you to analyse your data and compare it with previous discounts and identical time periods without promotions to determine if it was successful.

By tracking profit growth you can determine whether promotions are driving enough additional gross margin from selling additional units at lower prices to offset the lost gross margin from not selling at the higher, original prices. Similarly, tracking baseline sales will show you the strength of your brand by measuring sales made without promotions. Lastly, monitoring the percentage of sales at regular price, promotional price and clearance price can help you gauge the success of your promotion.

Quick Hits: Key Metrics to Track

• Profit growth and gross margin• Baseline Sales• Frequency of promotions• Percentage of sales at various points of the pricing cycle


5

PLAN THE PROMOTION

A properly targeted Christmas sales promotion prompts customers to take action, such as signing up to mailing lists or making purchases, by offering incentives. These may include price savings, samples or even brand experiences. When considering which incentive to use for your sales promotion, remember:

Price Discounts

• Although price discounts should be strong enough to compel shoppers to buy, it is essential to evaluate the discounts and ensure they are reasonable for your business and its bottom line.

• Loss leaders are generally overstocked products with steep discounts used to draw in new customers while generating high-margin sales. Consider running loss leader campaigns to reduce overstock inventory, increase traffic and build brand awareness.

• Consumers’ perceptions of savings from a promotional offer do not differ significantly between 30%, 40% and 50% discount levels. However, there is a significant difference between 10% and 30-50% levels.3 To ensure the success of your holiday sales promotion, consider implementing reasonable discount levels.

• Consider promoting products randomly to prevent competitors from anticipating your promotions and following them.


6

Vouchers

• Offering vouchers can increase consumer spend. Research revealed shoppers who redeemed six voucher codes or more in the last 12 months, spent an average of £835 online. This is 71 per cent higher than the £488 spent on average by light users (who used less than six codes over the past 12 months).4 This indicates the importance of engaging with consumers through vouchers.

• Consumers using vouchers focus on price and features and use them to pay less than other shoppers. The likelihood of using these offers comes from the pleasure of paying less than the reference price. Offering vouchers can give customers the little nudge they need to try a new brand or product.

Additional Promotional Strategies

• Samples and Free Trials – Offering free samples or trials for high ticket items tends to entice hesitant shoppers to make purchases. A Nielsen study5 found incentives are a good way to entice consumers to try a new brand and change their brand allegiances. UK consumers with internet access are more willing to consider switching to a new brand than consumers globally, ranking a free sample as the third most likely reason to switch.

• Experiences – Providing brand experiences such as product launches and special appearances can be a big undertaking but generally draws a lot of attention and large audiences.

• Extended Holiday Promotions – Running promotions for a longer period and extending return policies are a great way to ensure customer satisfaction.


7

1 “Consumer Research on Sales Promotions: A State-of-the-Art Literature Review,” Journal of Marketing

Management, accessed September 9, 2013, http://faculty.insead.edu/chandon/personal_page/Documents/Article-

Consumer%20research%20on%20sales%20promotions.pdf.

2 “Consumer Decision Making: Fact or Fiction?” Journal of Consumer Research, accessed September 23,

2013, http://www.jstor.org/discover/10.2307/2488867?uid=3739256&uid=2129&uid=2&uid=70&uid=4&s

id=21102654193241.

3 “Consumer Price and Promotion Expectations: An Experimental Study,” Journal of Marketing Research, accessed

September 9, 2013, http://www.jstor.org/discover/10.2307/3172495?uid=3739256&uid=2129&uid=2&uid=70&uid=

4&sid=21102653643481.

4 “The Impact of Online Voucher codes ,”Forrester and Voucher Codes, accessed October 1, 2013,

http://hosted.vouchercodes.co.uk/forrester/VoucherCodesCoUK-Forrester-Report.pdf

5 “UK consumers are less brand loyal when trying new products ,”Nielsen, accessed October 1, 2013,

http://www.nielsen.com/uk/en/insights/press-room/2013/uk-consumers-are-less-brand-loyal-when-trying-new-

products.html

SUMMARY

The lead up to Christmas is one of the most competitive periods of the year. The options are endless for shoppers in this period and retailers need to work hard to draw in consumers with great promotions and discounts. The three strategies mentioned can be used to build effective Christmas sales promotions.

• Target your audience. Rather than a one-size-fits-all approach to promotions, define and target the audience for the promotion.

• �Define�and�Track�your�Goal. Set specific, realistic goals for the promotion, forecast promotion financial impact and track customers’ shopping behaviour.

• Plan the Promotion. There are several different promotion strategies, find the one that best aligns with your business goals and the target audience.


8

An Amazon Services Europe Product

Amazon Webstore is a complete commerce platform that enables companies to leverage Amazon technology and expertise in building and managing their direct-to-consumer business.

Commerce sites built on the Amazon Webstore platform utilize Amazon’s powerful cloud infrastructure and payment processing technology to deliver a scalable, secure online shopping experience to customers. Amazon Webstore also integrates seamlessly with selling on the Amazon Marketplace and using Fulfillment by Amazon, Amazon Prime, and other Amazon Services.

To get started with Amazon Webstore, visit the website at webstore.amazon.co.uk or contact the Amazon Webstore team directly.