Offers and discounts are a proven method of successfully introducing new products, gaining new customers, engaging existing customers, and clearing inventory. One study showed that 96% of shoppers use coupons in one form or another, with coupon users spending an average of 46% more than other shoppers. However, the key to making a digital offer a profitable part of an overall retail marketing strategy is determining the correct offer value: what discount will create the optimal reaction to achieve your marketing goal while staying in your budget?

A more massive discount is not necessarily better – for example, if your goal is to increase sales, a large discount may not create a relatively larger impact. Every offer eventually reaches a point of diminishing returns, when the benefit that it generates is less than the increased investment. You could create a similar reaction with a smaller investment of your marketing budget, in the form of a lower, but ideal offer value.

After this point, offering a higher discount means that you are using your budget to unnecessarily subsidize consumer behavior.

Follow these steps to calculate your ideal offer value:

1. SET A CLEAR GOAL.

Digital offers can help marketing professionals in different ways: reaching a new audience of potential customers, engaging existing customers, introducing a new product, and more.

2. CONDUCT TESTING.

Once the marketing goal is clarified, testing can begin. New innovations like trackable offer codes allow marketers to launch campaigns at scale while testing different variables to gain insights. a marketer can use a small audience sample and conduct testing on different offers. For instance, if your company is considering an offer to boost sales, will you receive the highest return by providing a $5 or $3 coupon?

Most marketers assume the highest offer value will return the greatest ROI, but the highest offer value usually means wasting valuable promotional dollars. If most customers would purchase your product with a $3 off coupon, why over-subsidize with a $5 coupon? Data science solutions like Offer-Value Testing provide insights that marketers can’t get anywhere else.

And taking the time to set up a system for tracking and testing means that the marketing department is making data-based decisions, using data analytics that you can apply to both current and future marketing efforts.

3. PERSONALIZATION. 

Personalization is one of the key instruments in a modern marketer’s toolkit. A study by FunMobility found that personalized coupons have an average 45% conversion rate, as opposed to a 10% conversion for non-personalized offers.

Consumers are more likely to respond to an offer that has elements of personalization, which improves redemption rates and campaign ROI. But a truly personalized offer, where the offer value itself is personalized to become the ideal offer for that particular shopper, benefits the company as well. By placing the ideal offer value in the hands of a shopper, your company can meet marketing goals while eliminating the waste of unnecessary and ineffective offer subsidies.

4. TRACKING RESULTS.

There will be no way to measure whether or not the marketing effort was successful without a way to track redemption and associated key metrics. Hard data, obtained from a trackable offer, is the best way to gain a deep understanding of the consumer journey and to apply that understanding to future strategies.

New technology allows marketers to gain data and analyze results without running manual multivariate tests. Unique, serialized barcodes track many details of the smart offer, including the offer value, creative, and marketing channel, all the way through to redemption and in-store purchase. This enables smart decision-making using data science and machine learning.

Offer-Value Testing, data analytics, and individually personalized offers are time-consuming and nearly impossible without the correct tools. However, an advanced promotions platform can enable testing, analytics and personalization so you can determine the ideal offer for your customer. Increase ROI and provide a measurable source of data that you can analyze for current and future campaigns.

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The highest offer value does not always deliver the most optimal results. Download the case study to start optimizing your promotions for greater ROI.