Wednesday 28 March 2007

Is a gift voucher better than a gift as a promotional or DM offer?

There are at least two things in favour of gift vouchers (‘coupons’, if you like):
1. It leaves the choosing to the customer
2. It allows you to stretch your budget because everyone won’t redeem. Let’s say your budget is Rs 500 per conversion, and experience or testing tells you that only half of coupons will get redeemed. That means you can offer gift vouchers of Rs 1,000 face value (not Rs 500), yet stay within budget. For every two conversions you’d have a single redemption, so the fulfilment cost per conversion will be Rs 1000 ¸ 2 = Rs 500.

Had you offered a gift, you’d have to fulfil for everyone, and restrict yourself to something that cost Rs 500 – actually less, because the fulfilment cost would have to come from the same budget. Besides you’d have to take on the fulfilment headache.

This cannot, of course, be a ‘rule of the thumb’. Any comments?

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