Promotions are a major component of eCommerce marketing strategy. They provide competitive edge and drive demand. It’s important to know how promotions impact KPI’s when managing advertising spend for eCommerce store fronts so you can account for changes in your eCommerce metrics like AOV, ROAS, and Margin. You can read more about eCommerce KPI’s in part one of this series.
Some promotions drive demand while cutting into average order value, while others drive average order value up while not necessarily increasing the number of transactions. Having an idea of how each promotion may impact metrics, will help you manage your account as performance fluctuates.
Let’s take a look promotions that drive average order value and demand:
Promotions That Drive AOV
Promotions geared toward driving average order value are promotions that speak directly to the size of each basket or transaction.
Examples of AOV driven promotions may be things like Buy One Get One or BOGO sales, gift with purchase promotions, and percentage or dollar off discounts and shipping offers with minimum purchase thresholds. Each of these types of promotions essentially hold the discount or sale hostage by requiring the purchase of a full price item or a certain basket size in order to qualify for the promotion.
These promotions increase the size of each transaction and often kick up additional volume. When managing ad spend during these types of promotions we expect to see a lift in AOV which leads to a lift in revenue while maintaining or widening margins.
Promotions That Drive Demand
Promotions of this sort are kicking up interest and driving transaction volume.
Examples of promotions that drive demand include percentage or dollar off sales and shipping discounts without a minimum purchase.
Promotions of this sort are driving more transactions, and could go either way when it comes to AOV. Deep discount offers without a minimum purchase may actually cause a dip in AOV while providing lift in revenue due to the lift in transactions. Shipping discounts and smaller dollar off or percentage offers often maintain AOV while providing a lift in revenue and thus an increase in margins.
Due to the impact on metrics, it’s important to strategically apply promotional offers to your accounts. For example, applying a promotion geared toward driving demand may be a perfect way to combat seasonally slow transaction months in your sales calendar or a great way to gain additional visibility of new product launches.
However you apply promotions, it’s important to have some idea of how they may impact your advertising KPI’s so you can manage accordingly.
I’d love to know more about the promotions do you offer and how they affect the performance of your accounts. Share your experiences in the comments!