Marketing Offer: How To Actually Price Products And Services To Get Better Results
Table of Contents
A marketing offer is the hook that gets prospects and customers to buy.
It extends beyond the price of a product or service.
Why?
The total marketing offer takes into consideration your marketing goals as they relate to your target market to maximize your business effectiveness.
As a result, your marketing yields the maximum number of buyers to optimize your profitability.
To help you develop your marketing offering to yield the best results, use this checklist and related actionable marketing tips. This work should be done as part of developing your overall marketing strategy and plans. To keep it up-to-date, review it when you do your annual business and budget planning.
What Is The Definition Of A Marketing Offer?
► Marketing Offer Definition
A marketing offer is defined as the combination of elements associated with your products and services to deliver the best value to prospects and customers to fulfill their needs and satisfy their wants. Together these factors set your business’s offering apart from your competitors and near substitutes in the mind of your potential buyer.
Since your total marketing offer is part of your business investment in acquiring profitable sales, where possible your offer should enhance the customer experience and start to build a relationship with each customer over time.
Therefore your marketing offer consists of more than the price.
► How Marketing Offer Is Defined In Academic Thought Leadership?
Originating in traditional direct marketing, the concept of the marketing offer aimed to:
- Make the products and services sold outside of traditional retail establishments more alluring to potential buyers; and
- Provide additional reasons for purchasing from these businesses.
- Product proposition that fully describing the offering in detail focusing on benefits to the buyer;
- Motivating offer consisting of the related financial terms to make the buyer more attractive to the buyer; and
- Call-to-action encouraging the buyer to act as soon as possible.
“The Offer is the terms under which a specific product or service is promoted (ie: promise of the transaction.)” … “An effective offer will capture a consumer’s attention, stimulate their imagination, and hook into their most basic impulses. It creates an urgent desire to reply now.” Stone and Jacobs (8th Edition page 91)
While grounded in direct marketing, the marketing offer applies to current forms of marketing such as digital, social media and omnichannel.
Why?
Because while the platforms, technologies and communications channels have evolved over time, you must still provide your potential buyers with concrete reasons to buy from them rather than their competitors and close substitutes.
BTW: When teaching marketing, I include marketing offering since it’s key to understanding all of the elements marketers must consider when setting prices.
How Do I Create A Marketing Offer To Maximize My Results?
To develop an offer that attracts the most potential buyers and maximizes profitable sales, we’ll expand on and update Stone and Jacobs 11 elements of an offer to meet your current marketing needs across content formats, platforms and devices.
► Unit of Sale (aka: Product and/or Service)
The unit of sale defines the combination of products and/or services you’re offering at a specific price. In this context, your content marketing is part of your offering.
Further, the unit of sale of a product or service defines the size and/or number of items customers receive. For example, you may sell your product in quart bottles or offer additional support lasting up to 3 hours.
Keys to success:
- Understand how your offering stands out from your competitors and close substitutes.
- Assess how your different combinations of products and services stand out from each other.
To determine which products and services to package together, use Philip Kotler’s 5 Product Levels.
- Core product fulfills a prospect’s basic need or want.
- Generic product provides the actual product including other tangible qualities.
- Expected product offers the generic product along with other benefits customers want.
- Augmented product gives customers more than the expected product that competitors may offer. By adding to the offering, the product stands out from other options.
- Potential product provides a combination of additional features to delight consumers. Both tangible and intangible, these features have an emotional impact on customers.
Actionable Marketing Tips
- List all of the products and services you offer. Include the different product sizes and types or length of services.
- Do competitive shopping to determine how your products and services stack up. Use a combination of online and offline research. Also assess close substitutes.
- Create a list of different ways that you can package your products and services. Determine where you can bundle products or services to encourage booking purchasing.
- Assess whether you have related products and services that can be offered as upsells post-purchase to increase your order and sales.
► Optional Features
Optional features provide another way to create augmented products in a way that enables you to increase revenues. Depending on your products and services, they can be part of the initial purchase or added later.
Optional offerings for initial purchases include add-ons that help the buyer immediately. For example, adding monogramming to certain products like men’s dress shirts.
For online retailers, these options are easy to add to your checkout process. Options include:
- Gift wrapping,
- Extended warranties,
- Related training, and
- Special on-boarding or service.
Additional offers you can make post-purchase, often via post-sales email include:
- Private communities either via social media and/or IRL.
- Special services and perks, often referred to as the Velvet Rope Treatment,
- Addition training and education, and/or
- Service support.
Actionable Marketing Tips
- Brainstorm ways to add optional features to your products and services. For example, VietJet, a budget airline, offered an inflight catalog to purchase food and product.
- Assess how you can reformat existing content to benefit buyers.
► Price
Price is the amount charged for your product or service. It has to be consistent across platforms and customer segments or you risk legal problems.
While pricing is a major topic on its own and consists of a variety of elements and different business dynamics, here are 3 ways to set prices:
- Cost-based pricing. Calculate your fully loaded costs and add a profit margin. At a minimum, you must cover your variable costs in the short-term. In the long-term, you must cover all of your costs or you’ll go out of business.
- Competitive pricing. Examine what others in your market are charging and price your offering to compete. Understand that pricing based on being the lowest priced supplier is a one way street. Ultimately, you’ll wind up losing money or worse go out of business.
- Value-based pricing. This is when you charge what you believe your potential customers will pay for your offering. Beyond being difficult to assess, it often involves providing a high level of individual service that adds to your costs.
Before pricing products and services, examine the costs involved across your business.
- Understand the costs involved to create your products and services. Some organizations have financial departments that handle this type of analysis.
- Beyond the cost of your offering, include your marketing costs to raise awareness for your business and to get prospects to purchase. This is known as your marketing investment.
- Lastly, include a factor for overhead, this includes the cost of rent, employees, and other expenses that can’t be broken out or assigned to a specific product or offing.
Actionable Marketing Tips
- Determine the need for different pricing based on your key marketing strategies. Often, marketers offer lower prices to attract new customers and to build their housefile. When using this approach, label it as an “Introductory Offer”.
- Make targeted offers at checkout to encourage buyers to increase the size of their purchase. This requires checkout systems that can handle these offers. As an alternative, offer a product that most customers need but often forget to buy, such as batteries.
- Add offers to your receipt and/or bill. Relate these offers to the product purchased.
► Guarantees
A guarantee is a commitment that you make to your customers to build trust.
In today’s low trust environment where customer privacy and security are at an all time low, explicitly stating your guarantees helps to reassure prospects and buyers.
As this chart shows, trust in all forms of information and media have hit record lows. So you must reassure your prospect that she can trust your organization.
Further, people are 3X more concerned with your organization’s ethics than your competence. (Source: Edelman Trust Barometer)
The most popular guarantee:
Your satisfaction guaranteed or your money back.
Why?
So customers know you will be there for them if they have problems with your product.
Actionable Marketing Tip
- Place your guarantee on all of your product related information, on the product and your marketing materials.
► Incentives
Incentives are special offers to get prospects to purchase when they wouldn’t do so otherwise. Most frequently, incentives are used to attract new customers or to get existing customers who haven’t purchased recently to buy.
For example, airlines have used point systems based on purchases for years. Understand that these programs resulted in creating another organization to handle the points and redemption.
The most popular incentives are:
- Buy One, Get One (aka: BOGO).
- Free Shipping and Handling for a given level of purchase.
Actionable Marketing Tips
- Test a variety of incentives to determine which ones work best for your customer base. Remember not all incentives are created equal.
- Assess the full cost of your incentive. For example, many loyalty and point systems require additional technology, customer service and other costs.
► Time Limits
When your marketing offer is only valid for a specific time period, this is referred to as time limits. Most commonly this refers to sales where the actual dates are specified. The goal of time limits is to encourage prospects to buy now due to a specific deadline rather than wait.
Realize that regardless of how you sell, either online or offline:
Customers will check their smartphones for better offers or prices.
For example, Ebay makes good use of time limits on the product that involves bidding.
Actionable Marketing Tips
- Use time limits for special sales such as “One Day Only Sales”
- Offer time limits to get prospects to buy early. Many conferences offer a variety of price options based on when you purchase your ticket.
► Quantity limits
Entice consumers to buy when the number of items is limited. So buy now or miss your opportunity when supplies run out. Often customers purchase because they want to avoid remorse over missing what they perceive to be a great opportunity.
Assess the amount of product you have in stock versus the size of your potential audience. Because you don’t want consumers to think that you tricked them when you have a lot of product on hand.
Marketing Insight:
There is a range around your product forecast where the quantity you buy is either above or below actual sales since it’s not a perfect science. I recommend overbuying since not having enough stock can lose a customer. While overstock can be sold at a discount.
Actionable Marketing Tips
- Use a counter to show the number of remaining items.
- Add a special limited quantities category to your online retail site to get rid of excess stock.
► Response Channels
Always provide a choice of response channels so customers can purchase via the method they prefer. Today response options continue to increase across content formats, platforms and devices including voice-first.
The main response channels remain:
- Website including email and other owned online entities,
- Phone, and
- Retail.
The key to marketing success:
- Provide customers with limited options or you risk that they can’t decide and leave without buying.
While you may limit where you place response channels, remember customers choose to contact you based on their context and timing. Translation: When they’re ready to buy and wherever you have a presence.
To capture these potential buyers, provide off-ramps in the form of connected content to take them to your website. The top forms of connected content are:
- Related content links such as curated content;
- Landing pages, microsites and Thank You pages;
- About Us pages;
- Landing pages, microsites and Thank You pages;
- Contact Us pages
- Web chat, which is a form of voice marketing.
Actionable Marketing Tips
- Maximize results by limiting response channels to 3. This is the optimal number based on research.
- Allow customer service to complete sales transactions. Since prospects will use whatever channel they prefer or find. Don’t risk losing a sale because the customer doesn’t follow your business defined process.
- Monitor social media channels to answer customer questions and handle potential sales. Create processes to help employees respond.
► Shipping and Handling
Regardless of how you position it, consumers view shipping and handling as onerous. Beyond being a cost that has no association with their purchase, it feels like a gotcha expense.
Historically, direct marketers added shipping and handling to cover fulfillment and delivery costs in addition to the actual postage expense. In addition, it was an easy place to increase costs since many customers didn’t see it upfront.
Without understanding how shipping and handling worked, early online retailers offered “Free Shipping and Handling” to get customers to purchase via the Internet. They soon learned that it added significant costs and reduced their profitability.
Over time, research consistently shows that free or affordable delivery is the biggest driver of online purchases.
Online shoe retail Zappos notably offered free shipping and handling to overcome the challenge of selling a difficult-to-fit product online. In addition, they paid for the return of unwanted product. To support this policy, CEO Tony Hsieh actively responded to prospects and customers on Twitter building a loyal following. (Zappos was sold to Amazon in 2009.)
Amazon’s Prime Membership took the challenge of shipping and handling a step further. They offered unlimited free shipping and handling for 1 year for a fixed annual fee. As a result, they’ve locked customers into shopping there first because they’ve overcome this hurdle. Prime customers purchase from Amazon at a higher rate than all US online shoppers.
Actionable Marketing Tips
- Offer premium delivery options for people who need your products fast.
- Set a minimum order size to qualify for free shipping and handling. Make this amount higher than your average online sale.
► Credit Options/Payment Terms
Since most people rarely carry cash these days, you must offer buyers a variety of payment options. Also, they’re known as credit options and payment terms.
Processed via magnetic stripes, chips or near field communication (NFC), the major forms of payment are:
- Credit and debit cards, most notably Visa, Mastercard, American Express and Discover.
- Mobile options including PayPal, Square, and others.
- Third party retail platforms such as Amazon or iTunes.
Bear in mind:
Retailers pay a percentage of the sale in fees to credit card companies including fees for canceled or returned transactions. Credit adds to your variable costs of sales, often 2% to 5% in the US).
Some firms, most notably Home Depot, offer lay-away plans to allow buyers to purchase an expensive item and pay it off over time.
Actionable Marketing Tip
- Assess which payment options your customers prefer as well as the fully loaded costs of offering them.
► Future Obligations
Future obligations refer to purchases or payments customers must make in the future. A prime example is Buy Now, Pay Later (aka: BNPL).
BNPL has continued to grow since the pandemic since consumers view it as an alternative to high interest credit cards. About half of Americans have used BNPL services and about a third of these buyers have made a late payment or incurred a late fee. (Source: Fool 2022)
Usually consumers who use BNPL options tend to be more down market and cash-strapped.
Actionable Marketing Tips
- Do your homework to make sure your BNPL supplier is trustworthy and ethical. Otherwise their poor behavior will reflect badly on your business.
- Understand the costs associated with BNPL. Since they reduce your profitability.
How Does Your Marketing Offer Stack Up?
From a business perspective, your marketing offer involves more than slapping a price on a product or adding a special deal to your promotional calendar.
Why?
Because your organization must be able to process and track your marketing offer to determine the customer’s lifetime value.
The key buying activities that your business must handle during your relationship with your prospect and later customer include:
- Initial marketing and/or advertising;
- Connected content including landing pages, chatbots, IVRs, retail and/or other prospect or lead engagement;
- Order fulfillment processing;
- Shipping and delivery including tracking;
- New customer on-boarding;
- Additional purchases; and
- Long-term customer loyalty.
From a marketing cost perspective, your biggest investment is in finding and attracting a potential lead. This is known as your marketing investment and plays a big role in your ROI.
Since promoting to existing customers, often referred to as retention marketing, uses owned media channels. As a result, your house file of email, mobile phone numbers and/or postal addresses contributes to the value of your company.
Actionable Marketing Questions To Ask
Beyond the marketing process to acquire a customer, your business must consider these marketing-offer related questions:
- Do you have the technical, analytical and financial support to track acquisition through sales. If you’ve got legacy systems, this may not be as easy as it appears.
- How will you track your offer from advertising through additional purchases?
- Do you have related marketing in place to support prospects through to purchase?
- What plans are in place to meet your promotional timing? Think beyond your marketing team to the rest of your organization..
- Have you associated your offer to your budget? What other promotional assessment and tests are in place?
Marketing Offer Conclusion
Your marketing offer consists of the full value you give your prospects and customers to fulfill their needs and wants.
By following this checklist of 11 elements of an offer, you ensure that you build trust with your buying audience. At the same time, you create an internal process to maximize your marketing and business resources to acquire profitable customers.
Use of the marketing offer approach grounds your organization in Peter Drucker’s approach that states that fulfilling a customer’s needs is at the heart of your business.
This list of offer components ensures that you extend your reach while closing sales sooner.
Understand that we live in a dynamic environment so review your marketing offer at least seasonally to ensure that you’re using the appropriate content formats, platforms and devices based on your audience’s desires.
Editor’s Note: This article was originally published with the title “11 Point Marketing Offer Checklist” on September 13, 2020. It has been extensively revised and expanded.
Happy Marketing,
Heidi Cohen
VOICE22
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Join me to learn ways to transform the user experience.
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