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    1 Reply Latest reply on Jan 21, 2009 7:43 AM by LUCKIEST

    Marketing Promotions / Perceived Value Is Reality

    lincolnb Newbie
      Perceived Value Is Reality

      The only way to keep up with the latest about promotions is to
      constantly stay on the lookout for new information. If you read
      everything you find about promotions, it won't take long for you to
      become an influential authority.

      Perceived Value Is Reality


      By Dennis Borsina

      Why incentives close sales and cash is trash

      Closing the sale is a delicate and at times unpredictable process.
      Consumers have varying reasons to reject or accept an offer and often some
      incentive is necessary. But what kind of incentive is most effective and
      brings the most return for the retailer? A discount? A gift? Free

      The impact and value of the word "free" shouldn't be overlooked, but
      neither should the cost of offering something for free. Especially,
      though, retailers should consider what market researchers are calling the
      "perceived value differential" or PVD for short.

      On the consumer side, it's pretty simple math and the goal is
      straightforward: get the absolute most for my hard-earned money. It's far
      more complicated for the seller, who must develop a moneymaking strategy
      via profits and loss equations or cease to do business at all.

      Marketing researcher Dr. Flint McGlaughlin labels the cash discount as the
      worst incentive one can offer. That's a general statement, and likely one
      not applicable to all situations, but it makes sense on a few levels.
      Offering $10 off is a straight cash loss to the retailer, and leaves that
      $10 out in the Wild West of commerce. Better incentives would include a
      $10 gift card, where a customer might spend more than that amount on a
      second purchase at the retailer's store, not another place.

      Perceived Value Is Reality

      It seems like new information is discovered about something every day.
      And the topic of promotions is no exception. Keep reading to get more
      fresh news about promotions.

      For online purchases, it doesn't take long for a consumer to weigh a cash
      discount against the cost of shipping. It the shipping cost is more than
      the discount, then the discount could mean very little. Free shipping, by
      the way, has been cited repeatedly as the most sought-after incentive by
      customers. It only works for the retailer, though, if shipping costs can
      be worked into the overall pricing scheme. It may only cost $4 to ship an
      item, or $20.

      An important distinction there is the perceived value of shipping the
      item. In all likelihood, the consumer is unaware of the actual cost of
      shipping without knowing the weight, distance, courier, or bulk shipping
      arrangements. But it is possible (even likely) the customer perceives the
      cost of shipping is higher than a cash discount offered elsewhere.

      Let's be honest about the ease of comparison-shopping online, while we're
      at it. The retailer's goal is to bring the total cost of the item down
      below what competitors offer. Perhaps your biggest competitor offers the
      same product you do at $40, plus $10 shipping. Perhaps that same
      competitor inflates shipping costs to make up for a steeper, heavily
      promoted discount. If you could bring that total cost somehow to $45, even
      if it means $45 price and free shipping, you win.

      Another incentive that carries perceived value is a free gift. The study looked at offering a half-pound of gourmet
      coffee with purchase versus a free steel thermos. There is very little
      difference in the cost of the two items ($2 vs. $3), but because the
      perceived value of the thermos ($15) is twice that of the coffee ($8), the
      PVD of the thermos ($12) brings back a higher return on incentive (ROIc).


      We play this game in other economies as well. This very recently-passed
      holiday season, recipients of a $25 restaurant gift certificate needn't
      know the giver paid only $2 for it during a last-minute online promotion.
      The recipient gets perceived (and real) value and gives the giver much
      (perhaps disproportionate) thanks.

      • - - - - - - - -
      If you could give away gas and groceries would that increase the number of
      subscribers, customers or sales you'd get?

      Contact me directly for additional information at (401) 433 1455 or visit
      USE: Promo Code: F7B8N to watch our 2 minute video first or to send me an email.

      Contact me from the site and I will show you how!

      Of course, it's impossible to put everything about promotions into just
      one article. But you can't deny that you've just added to your
      understanding about promotions, and that's time well spent.