Lessons on using the right e-retail incentives at the right time
'Should we use discount codes in a our abandonment emails?' is a question we’re often asked by retailers at Triggered Messaging. On the surface, incentives look like a great idea because you can recover more carts and gain more sales you wouldn't have otherwise. Most of our data supports that point.
HOWEVER, when considering profitability, cart abandonment programs can be dangerous. You can give discounts when you didn’t need to.
In this article we share this case study of one retailer we worked with who discovered that they were needlessly giving away discounts costing over $3,000 a month.
What’s more, we’ll show how it appeared to be a success, even though it damaged profitability. Then we’ll tell you how you can make your abandonment incentive programs more intelligent and strategic to increase customer acquisition and lifetime value.
Here is the analysis we performed and that we recommend for these types of activities.
The overall headline suggested that the incentive was successful by comparing to no incentives, but this was misleading.
Comparing the two options showed that the sales uplift from abandoned cart emails dropped from 34% to 6% without the incentive... What a failure (or so it seemed)! : You might think that eliminating the incentive program was a complete failure. The sales uplift was significantly lower without the incentive program.
But you need to look at the bigger picture, total sales hardly changed: The value of goods purchased between the two months changed from $79,620 to $80,184. Not a lot of change at all.
Incentives can be dangerous
Most people will think it’s great news that cart recovery software is recovering so many sales. They’d quote the statistic that it led to an uplift of sales of 34%. They’d say that the incentive program was so strong… that they couldn’t live without it.
But all that these incentives did, was make customers game the system. Customers would deliberately delay their purchase to take advantage of the discount code.
Sales barely changed and it meant that the retailer was allocating $3,000/month towards an incentive that cannibalised their business.
Should you include a discount code?
This gaming of the system is not surprising. In August Lifehacker shared the secrets of cart recovery to savvy consumers. Consumers are smart, and if they notice how a system works they’ll take advantage of it. So does that mean you shouldn’t use incentives at all?
But not so fast, this is just one example. Your mileage may vary and these incentives may help you with other marketing goals.
How to be smarter with cart abandonment discounts?
We think the way forward is to think of your abandonment incentives holistically. Cart abandonment incentives might not be a good idea on a grand scale. But they can help you reach other goals.
- If you only offered the abandonment incentives to potential new customers, you could increase customer acquisition.
- If you only offered abandonment incentives to high-value customers who have been inactive, you can tempt them back, and increase their lifetime value (LTV)
With the powerful segmentation tools within many behavioural email platforms like ours, you can ensure that your cart recovery campaign only targets the people you want. It also includes anti-gaming features that let you stop sending discounts to shoppers who persistently abandon their cart.
At the end of the day, think twice about bulk cart recovery incentive programs. It could be harming your business even if it looks like a success.