Planning Online Promotions in 15 Easy Steps

I have been involved with the planning, execution and measurement of hundreds of online promotions for brands of all shapes and sizes. When done properly, these promotions go off without a hitch.

But what about when a promotion is not properly planned? There is a lot of scrambling for answers, budgets are quickly depleted and both consumers and brands are left angry with how the promotion played out.  The idea for this blog post came after I experienced a major failure by American Express in a promotion they ran to reward consumers for paying with a Twitter hashtag.

In that poorly planned promotion, American Express violated many of the rules that I am going to outline below and alienated many customers in the process. Had they established a transparent redemption limit, known their target audience and had a kill switch? Customers like me would be much happier!

How can Brands get better at planning online promotions? By using these 15 steps as a guide for planning their next online promotion.

Planning Online Promotions in 15 Easy Steps

1) Define Your Objectives

Objective Definition

Definition of Objective Courtesy of Dictionary.com

This may seem obvious to many of us, but you would be surprised how many marketers plan to run a promotion without even once considering the objective of their campaign.

Awareness and Trial is the stated goal of many offline and online promotions, but that is not a measurable objective. An objective is the purpose, goal or target we set out to accomplish. They need to be measurable!

Examples of measurable objectives:

  • To increase trial of our product by distributing up to 20,000 free trial coupons to our defined audience
  • Raise the total unaided awareness of our product from XX to YY by facilitating an online sweepstakes aimed at [Audience Segment]. The sweepstakes will be open to all participants and the total value of prizes will be $100,000.

An example of an objective that is not easily measurable:

  • To make people aware of our product by giving away a coupon and having it go viral

Without assigning a measurable outcome to what it means to be “aware” or “viral”, it will be very difficult to measure the success of your promotion.

2) Decide on What You Can Afford to Spend

Promotion Budgets

Image Courtesy of Inkcinct

Marketing professionals are no stranger to budgets, and budgets generally dictate the type of marketing programs that we can run. This is no different for planning online promotions, where we must work within our budget in order to predict both the cost of running the promotion (both redemption costs, media buying and agency fees) and the results we expect to see.

While there is no hard and fast rule to budgeting for a promotion, the following numbers will likely factor into your online promotion planning:

  • Size of Target Audience – How big is your target?
  • Audience Participation Rate – What percentage of the audience will actually engage with your promotion?
  • Promotion Redemption Rate – How many will actually redeem your promotion or coupon in a store? Use your traditional redemption rates as a baseline
  • Audience Distribution and Media Costs – While distribution costs of digital promotions are relatively inexpensive, if you do purchase online or offline media for the promotion, there will be a cost associated
  • Agency Fees – How much will it cost for creative elements of your promotion, landing pages, third party distribution and redemption services, etc.?
Now fit all of these fees into your budget to determine what you can afford with your online promotion.

3) Know Your Target Audience

Target audiences are another obvious element of advertising and marketing that can be completely overlooked when planning a promotion. If your target audience is single mothers with teenage sons, then do your homework to understand how many mothers are in this segment. What are their demographics? Where do they live? What car do they drive?

The more information you can gain on your audience, the better your chances of having a successful promotion. Utilize your existing market research or conduct a new study before launching your promotion.

4) Understand Your Potential Promotion Audience

Target Audience Promotional Audience

Target Audience vs. Promotional Audience

In example #3, we mention a very specific target audience that represents a small segment of the overall population. That does not mean that these are the only people who would participate in your online promotion. In fact, you may find that your potential promotion audience is much larger than you think – often 10x to 1000x larger than your niche segment.

What happens if your promotion happens to appeal to an unintended audience? This will eat away at your budget and prevent you from fully reaching your potential audience.

You can prevent this by establishing clear messaging to your intended audience, verifying attributes about your audience prior to redemption and establishing guidelines for what makes someone eligible to participate in the promotion. While you will never be able to enforce this 100%, you can limit your risk by being very clear with who you are intending to target and verifying attributes about the audience.

A non-offensive way to do this is to ask a set of questions in the submission form and then filtering eligibility based on how they answer these questions. For example, you may find your target audience by simply asking 2 questions on the entry form:

Qualification Questions

Qualify your Audience by Asking Questions

5) Plan your ROI

While a promotion may not have the objective of attaining an immediate return on investment (ROI), at some point your organization will need to know if the promotions you run make money in the long run. Plan your ROI by finding the following numbers:

  • Promotion Cost – How much will the promotion cost per person who signs up?
  • Short Term Revenue – How much money do we make off the promotion? i.e. revenue from Promotion items sold
  • Long Term Customer % – How many of these people will become long term customers?
  • Customer LTV – What is the life time value (LTV) for a long term customer?
With these numbers, you can establish an expected ROI of your promotion fairly easily by using the formula of:
ROI = ((Short Term Revenue – Promotion Cost) + (Long Term Customer % * Customer LTV)) / Promotion Cost
Let’s say that Promotion Cost is $5, short term revenue is $8, 20% of customers become long term buyers and Customer LTV is $30. Putting these numbers into the equation, we get:
ROI = (($8 – $5) + (20% * $30)) / $5 = 180%
In this case, we received a 180% ROI for running this promotion.

6) Establish a Limit of Redemptions

Establishing a limit to how many people can redeem your promotion is paramount to the perceived value of your promotion. Part math, part science, part estimation, your redemption limit will be a key indicator to how long your promotion can run and when you will run out of inventory available.

To establish this limit, it is best to start with your previous history of running online promotions to understand what percentage of the impressions you generate result in action. Use this number to determine where this fits into your budget.

7) Be Transparent With Your Limit

Once a limit is established, be very clear that of that limit within the terms and conditions of your contest. Make the limit well known in advance to prevent confusion. Not only does this create a positive psychological effect on your buyer through scarcity, it also has legal implications. In fact, it is illegal for a promotion to have a deceptive premise and not being transparent with the availability of the promotion is an easy way to violate the law.

It is my understanding that when American Express denied my ability to redeem their promotion they broke the law, and it turns out that this is an extremely common occurrence that often goes unnoticed.

8) Budget 20% for Overages 

If your promotion is going successfully, you may find it is going so well that you don’t want to turn off the promotion at your pre-set limit and that you would like to capture any customer interested in the promotion. For this reason (and for many other unforeseen circumstances) I recommend that you hold out 20% of your budget and reserve it for program overages and unforeseen circumstances. This can also help prevent claims of unfair business practices if a promotion needs to be terminated early.

9) Establish an End Date

End Date

Be Like the Mayans and Establish an End Date (Image from thepsychologicalblog.blogspot.com)

All good things must come to an end, so establish an end date to your promotion and be clear with your audience on when it will end.

When a promotion goes viral  Often the redemption limit on a promotion will be reached within a matter of hours or days. In these cases, the planned end date looks foolish when compared to how long the promotion actually ran.

To account for this potential, think of your promotion end date in a matter of weeks and not months. You can always extend the promotion into the future, but cutting off a monthlong promotion after 1 day is a sign of poor planning.

10) Make Sure you Can Fulfill Your Obligations

If your promotion involves product purchased for distribution, make sure that you have enough product available to fulfill these purchases. If you are sending customers to retail stores, make sure that your retailer partners have what they need in order to keep up with demand.

You could run the best promotion in the world, but if your product is unavailable in stores, a positive promotion will quickly become a black-eye for your organization.

11) Check with Legal

Make sure that your legal department has done a full review of the terms and conditions of your promotion and looked over your website and promotional materials as well.

But don’t stop there. Make sure that your legal team ensures that you are not conducting a deceptive practice with your promotion. While any legal department can change the language of your terms and conditions, it takes a great legal department to investigate the parameters of your promotion and eliminate risk. Make your legal department great by providing them with these steps as well.

12) Plan for Viral

Assume that every person on the Internet will participate in your online promotion. When that happens, will your company be able to handle the traffic, customer service needs and any backlash that may come out of your promotion?

It may be worthwhile to do a simulation of your promotion during the planning process to make sure that you have policies in place for how to deal with a much larger audience than you intended. Who are the key players and decision makers? How will you respond to customer complaints? What if the website goes down or doesn’t shut off users after you reach your redemption limits?

13) Make them put Skin in the Game

Buy 1 Get One Free

Buy One Get One Free = Skin in the Game for Consumers

Which is more appealing, a Free Hamburger or Buy one Hamburger and get one free?

For some people, the offer is the exact same, but for the majority of consumers, the Free Hamburger is much more appealing. How could that be? Because the out of pocket cost for a Free Hamburger is $0. The consumer has no skin in the game when redeeming a free Hamburger and they see no guilt in receiving a free product. They probably won’t see a problem feeding their entire family with free Hamburgers either.

If you must pay your own money before receiving a free product? Many consumers will still take you up on the offer, but they are now constrained by their own resources.

14) De-Duplicate Your List and Enforce Integrity Constraints

Make sure that you have measures in place to de-duplicate your consumers by a variety of authentication methods. For example, limit the number of times that an email address can enter into the promotion. But don’t stop there, because email addresses are very easy to spoof. Advanced marketers will also de-duplicate by household address, national change of address forms, data hygiene bureaus and more.

While these methods may add more complexity and up front cost to the promotion, they will represent an overall cost savings in the long run.

15) Have a Kill Switch

Make sure that when your promotion has reached its limit that you have a “kill switch” in place in order to shut down the program immediately. The Internet is with us 24 hours a day and 7 days a week. You may reach your redemption limit the minute you leave work on Friday night and by the time you return on Monday morning the promotion may have caused an international incident for your company.

This happens all of the time!

Make sure that before your promotion launches that you have a method for shutting down your promotion website with a few clicks of a button or a streamlined process from your web developers. Even better, program the website to stop accepting inputs once your limit is reached.

Also be certain that neither your desired redemption limit nor your kill switch conflict with the published promotion dates.

Planning Online Promotions is Easy!

Plan for the worst case scenario and be pleasantly surprised when your promotion runs smoothly. Online Promotions are one of the best ways to create awareness of your brand and encourage trial of new products, but they can also be a nightmare if done wrong. If you follow these steps, you can turn your worst nightmare into sweet dreams.

A special thanks to Hal Stinchfield from Promotional Marketing Insights for his invaluable input into the writing of this article. Hal has overseen the management of more than 50,000 consumer promotions during his career, and is considered an expert in predicting how consumers will respond to any type of marketing initiative.

About the Author

Jeff Sauer is an independent Digital Marketing Consultant, Speaker and Teacher based out of a suitcase somewhere in the world. Formerly of Minneapolis, MN and San Francisco, CA.