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When Frank Fundaro, e-commerce affiliate manager of New York-based premium health food products retailer Vitalicious Foods, wanted to upsell to existing customers and increase online sales, he turned to Campaigner, an e-mail services provider in Montreal, for advice. Its answer? A spending step ladder. Vitalicious wanted to increase its customers’ average order spend, which had been hovering around $42. By segmenting Vitalicious Foods’ list based on previous purchase behavior and then e-mailing special offers (such as discounts and free shipping) to each purchase segment, the company increased its average order value by 20 percent. According to Fundaro, “By understanding the purchasing patterns of your customers, you can optimize their potential.”
Step No. 1—Segment based on spending.
Vitalicious Foods segmented consumers based on average order amounts: Customers were identified by spending range as low spenders (less than $35), medium spenders ($35 to $55), high spenders ($55 to $75) and very high spenders (more than $75). For each spending level, discounts were offered that would entice customers to increase their average purchase amounts. This approach, according to Fundaro, “gets the most out of the customers you have now because in the industry, there is always a push to acquire new customers and to acquire new revenue.”
Step No. 2—Encourage larger spending moves.
To drive customers to step up their spending to the next value segment, Vitalicious Foods sent two coupons at different levels of spend. The marketer presented customers with a 5 percent savings if they made the first hurdle and a 10 percent savings if they made the second hurdle. For example, spenders below $35 received offers for 5 percent off a $50 order and 10 percent off a $100 order. And customers who had an average order value between $35 and $55 received offers for 5 percent off a $65 order and 10 percent off a $120 order. The result was a new overall average order value of $52.
What did Fundaro learn from implementing this segmentation and offer strategy? “Keep putting the hanging fruit in front of [customers] to see how high you can get them to jump up their average order,” he advises.
Step No. 1—Segment based on spending.
Vitalicious Foods segmented consumers based on average order amounts: Customers were identified by spending range as low spenders (less than $35), medium spenders ($35 to $55), high spenders ($55 to $75) and very high spenders (more than $75). For each spending level, discounts were offered that would entice customers to increase their average purchase amounts. This approach, according to Fundaro, “gets the most out of the customers you have now because in the industry, there is always a push to acquire new customers and to acquire new revenue.”
Step No. 2—Encourage larger spending moves.
To drive customers to step up their spending to the next value segment, Vitalicious Foods sent two coupons at different levels of spend. The marketer presented customers with a 5 percent savings if they made the first hurdle and a 10 percent savings if they made the second hurdle. For example, spenders below $35 received offers for 5 percent off a $50 order and 10 percent off a $100 order. And customers who had an average order value between $35 and $55 received offers for 5 percent off a $65 order and 10 percent off a $120 order. The result was a new overall average order value of $52.
What did Fundaro learn from implementing this segmentation and offer strategy? “Keep putting the hanging fruit in front of [customers] to see how high you can get them to jump up their average order,” he advises.
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