And why it’s effective as a sales strategy.
Who doesn’t like being given a free gift? Very few people - and that stands true when the giver is a brand just as when it’s a friend or loved one. Gifts with purchase are one of the most popular promotions retailers can run when done well, and are used frequently by fashion and homeware retailers as well as beauty brands, such as Clinique and Lancome.
But it’s not just big, global brands that succeed with free gifts with purchase (GWP).
A recent survey by Afterpay Australia found that shoppers love gift with purchase promotions, and that a huge majority (85%) are especially interested in gift with purchase promotions held by small businesses.
The survey found shoppers are willing to spend up to $USD180 to secure a gift.
Retail strategy consultant Catherine Erdly, who has more than two decades’ industry experience and runs Resilient Retail Club, says that offering a gift with purchase is a premium offer from a brand, especially compared to discounts.
“Free shipping, free gift wrapping, spending $50 and getting a $5 gift voucher and gifts with purchase are all premium promotions,” she explains. “Gift with purchase is especially effective because it feels nice for the customer and can appear to be a reward for their loyalty.”
By comparison, deep discounting can cheapen a brand, particularly if discounts are run too frequently.
Some businesses choose to offer gift with purchase promotions several times a year. Others – especially some skincare and beauty brands – offer them almost constantly.
Whatever approach you take, ensure that gift with purchase promotions are planned out and included in your 12-month marketing strategy.
Keely Parsons, founder of wax melt brand Sassy Shop Wax, which offers Clearpay (the British arm of Afterpay) as a method of payment to customers, usually has a gift promotion running. “One of our main points of difference is our wide range, so by giving away two free wax melts with every purchase, people get to try more variety,” she explains. “The promotion also improves our conversion rate.”
Remember that gift with purchase promotions can work particularly well on key gifting occasions such as Mother’s Day, Father’s Day or Christmas, as shoppers can buy a present for their loved one and receive a small treat for themselves.
When it comes to planning your gift with purchase strategy, start by looking at your average order value.
“If your average order is $50, then running a promotion where you give a gift with every $50 spent is a mistake,” Erdly explains. “It doesn’t nudge up the average purchase, or basket size, at all.”
She suggests setting the minimum spend for a gift with purchase at 10 to 20 per cent higher than your average order value.
Not all gifts with purchase work positively for brands. Erdly says: “The key thing is that you make sure that the value of what you’re giving away isn’t too great - you don’t want to make less money.”
The vacuum cleaner company Hoover ran a promotion in the nineties that serves as a cautionary tale to all retail brands.
In 1992, the UK branch of the company offered two free round-trip flights to the US to any customer who spent over £100 ($USD120). The promotion was intended to boost dwindling sales. Instead, it was a deal far too sweet, with the flights worth £600 ($USD720) – which was six times the price of the minimum spend to qualify.
Hoover made two assumptions: firstly, the brand hoped that customers would far exceed the minimum spend, offsetting the price of the flights. And secondly, it believed that only a small proportion of customers would redeem the offer post purchase.
Neither was correct. The clamor for £119.99 ($USD145) Hoover vacuum cleaners from department stores led The Observer to write: “If left uncontrolled, Britain could soon be knee-deep in Hoover Turbomaster Uprights.” Though the company generated around £30m ($USD36m) in gross sales from the promotion, the cost of flights was - at a conservative estimate - more than £100m ($USD120m).
Quite simply, the more desirable gift, the better impact the promotion will have, Erdly explains.
“Make sure consumers appreciate the gift,” she says. “One of the big clothing retailers I worked with would offer a free necklace if a customer spent over £100. It felt like a treat for the shopper. Sometimes, they would take a slow seller, and instead of discounting it they would give them away. If you know you want to clear stock anyway, this can be effective, but beware, if it’s something that no one wanted anyway it’s not going to be most exciting gift.”
Sassy Shop Wax’s Keely Parsons says: “Try to craft an offer that not only is attractive for your customers but supports your brand’s unique selling point, or positioning.” So, for example, it’s common to see brands that offer a signature scent across different products, from perfume to body lotion, bath oil and candles, choosing a gift that is likely to extend a perfume customers’ use of the range.
Once you’ve decided on your gift with purchase, start planning how you will promote it. “Market the promotion as a real bonus for customers,” Erdly advises. “Make sure you tell everyone about it: use social media; write to your email list; create a banner or pop up on your website.”
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