Last updateWed, 13 Jun 2018 12am

Applied Marketing 101: Using value and price to drive traffic (Part 2)


Last month, we examined the current state of the art in retail pricing strategies from a conceptual standpoint. Now, let’s take a pragmatic look at the question of how to use price and value to drive traffic in the jewelry retailing environment.

In order to understand how best to drive traffic, it’s useful to reconsider the classic definition of “marketing.” Increasingly, marketing needs to be seen as the act of paying the consumer to shop in your store. How much you’re willing to pay is important, but even more critical is the question of how you’re going to position your payment offer so that it sounds like a really good deal.

Since discounts have been rendered fairly impotent in today’s environment (unless you’re at 50-70% off in a GOB), what exactly does a consumer require in order to react to your offer? If you study the offers that are currently being used in retail in a general sense, there are basically two popular ways of driving traffic: BOGO (buy one get one free), and GWP (gift-with-purchase). Unfortunately, BOGO doesn’t really lend itself well to jewelry, since purchasers typically aren’t interested in buying two items, are they? But GWP, used properly, can have a significant beneficial impact on both revenues and profits.

 As just one example, this is precisely what we did recently at D Geller and Sons in Atlanta. We took a $500 discount on a 2500 dollar purchase (yes, a maximum 20 percent discount), and turned it into a free-rifle-with-purchase offer. The results were extraordinary. They not only sold over $250,000 in engagement rings in a single weekend. They also gained national media attention, creating brand awareness for the company that will probably resonate for years.

Of course, it’s terribly important to guess right about which gifts will produce the highest response. The rifle represented a surprising, seductive GWP offer for the male consumer. The act of holding the brand new weapon (toy?) could easily be visualized, especially in the context of meeting with the boys on the first day of deer season, and I suspect that this incentivized buying behavior by introducing strong neurophysiological effects in the form of stimulation of both the reward center (a special set of circuits located in the prefrontal cortex), as well as regions of the brain where feelings of self-esteem occur.

Similarly, this year for Black Friday we produced over 5 million Black Friday flyers for over 150 stores that feature a variety of gift-with-purchase offers. This is going to allow us to analyze a tremendous amount of response data that should yield terrific insights into future promotions.

The key to having a successful Gift-With-Purchase promotion is to take relatively modest discounts and turn them into powerful high-perceived value giveaways. For example, it would probably not be motivational to consumers if you offered a $200 discount on any purchase of $1499 or more. That represents, at best, a 13.3 percent discount. Presented in this manner, your offer would almost certainly fail to stimulate a measurable result. However, our data from prior years promoting Black Friday clearly indicate that by packaging these special discounts as electronics gift-with-purchase offers (for example, an iPhone 5) we have demonstrated that we can achieve remarkable results.

Last Christmas, we also obtained excellent results from a variable data postcard featuring a detachable gift card with an offer of 25, 50, 75, or 100 dollars off a single item. Since redemption required a scan of the gift card, we were able to obtain wonderfully precise outcome measurements: an overall 6.5 percent response rate for the cards in a test group of 30 retailers, with several retailers achieving response rates of nearly 20 percent. I was particularly interested to see that the bottom six performers had all changed the offer in a significant way, something I learned after the promotion was over when I was trying to understand why their results were so very different from the rest of the test group.

We were also able to separate the results from postcards sent to existing customers versus those sent to bought lists where we were mirroring the demographic profiles of existing customer databases. Amazingly, the bought lists produced results at about 40 percent the rate of the existing customer lists. We’ve now modified the variable data scancard program to include a 12-page catalog, and we have nearly 100 retailers participating for Christmas, so we should get some pretty interesting data that I look forward to sharing with you next year.

The Variable data program includes electronic GWPs at higher purchase thresholds than we required for Black Friday. We’re also doing some pretty interesting customized GWPs at much higher purchase levels. Several of our customers are featuring tickets to special events (for example, the SEC basketball tournament) paired to items in the four to seven thousand dollar range, and a few are even packaging car leases with twenty thousand dollar plus items.

Will this prompt hyper-affluent consumers to make purchases? It will be interesting to see. The effect that we’re really looking for is to create a buzz in our customers’ local markets, and I’m pretty sure that these high end offers will accomplish that objective.

Finally, for the past three years we’ve been using an innovative gift with purchase offer of flowers, plus candy, plus dinner out to incentivize male gift givers at Valentine’s Day. The actual cost of the GWP offer is extremely small - less than 8 percent of sales (I told you it was innovative!) - but the results have been huge. In most cases, our retailers are attracting hundreds, and in some cases thousands, of new clients in just a week, with dramatic increases in engagement ring sales during the subsequent 12 months. Remember, there’s no better way to start a dialogue with a pre-bridal couple than to intercept them at Valentine’s Day.

So, if you’re interested in driving traffic, construct an offer that maximizes the perceived value of a modest margin hit, in the form of a gift with purchase that really resonates.

Best wishes for a successful Holiday Season!

Class dismissed!

George Prout is Vice President of Sales and Marketing for Gems One Corporation, and can be reached via e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it., or at Gems One’s office at 800-436-7787.