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Is an Offer the Best Motivator?

A strong offer is always the best customer motivator. Or, is it?

There is an old formula that states that the return on a 1:1 investment is based on target, offer and then, message. Target is the strongest driver, as it should be, since not everyone is receptive to every tactic. But, after you have the right target, do you really need to include an offer to drive response?

A few colleagues tested this question in the retail space. These tests involved splitting a direct mail target market into two groups: one group receiving an average to slightly above average discount on their next purchase and a second group receiving a personalized message, such as a thank you letter from the CEO or a tailored product message, without an offer. In almost all of the tests, the personalized message beat the offer in response, ROI and customer retention. And, when the message was wrapped within enhanced creative, the impact increased.

While these tests were limited, additional research has highlighted a few points regarding offer usage:

Offers can create dependency and, over time, they may weaken the customer relationship;

Offers can skew best customer profiles and reduce best customer profitability;

Offers can steer attention away from product and brand issues, skewing the overall loyalty index;

But, offers wrapped in creative or relational messages, such as a birthday mailing, drive response without enhancing the "coupon effect."

As one retailer said, "Why should we stand in front of our store and hand out $20 bills when a creative thank you will suffice?"