Something for Nothing--Is the Price Right?
Walk up to any fragrance counter at your local department store and with a minimum purchase you’ll probably leave with an umbrella, a tote bag or some other free “gift” in addition to that fresh new scent.
That’s because fragrance companies such as Estee Lauder, Avon and Lancome learned long ago that the sweet smell of successful retailing doesn’t always come in a pretty bottle. With more than 50 new fragrance launches annually, often it takes a little added incentive to push the customer toward a specific brand.
“It’s almost like we’re not in the fragrance business anymore but more in the gift business,” says Sandra Lang, manager of marketing services for Liz Claiborne Cosmetics, a company that recently offered customers who bought a $35 bottle of Lizsport or Claiborne Sport fragrance a free cotton shirt with their purchase. “Nowadays if you don’t have a gift, the customer isn’t going to buy your brand,” adds Lang.
In an age when car dealerships feature putting greens and grocery stores offer banking services, some customers actually feel cheated if they don’t receive a bonus for their bucks.
While department stores have long used 24-hour sales or promoted deep discounts to lure shoppers, these days gifts-with-purchase--or “value-added incentives” as stores like to call them--are no longer confined to the cosmetics counter.
Robinsons-May, for instance, recently offered customers who bought two pieces of lingerie a third piece free. Macy’s shoppers who spent $100 or more in the Misses or Petite Dresses department were given a free beaded handbag with any regular-price purchase.
Betty Krogh, vice president at Macy’s, says such promotions are profitable for the store because they help sell regular-priced merchandise as opposed to sale items. What’s more, she believes there is a psychological connection with gift giving--even when the recipient has to buy something else to get the gift--that is especially appealing to consumers.
“In the past, sales promotion techniques have been one-dimensional--you open the newspaper and see the values,” says Krogh. “But these days, people need to feel special. Gift giving is an important part of our culture. As children, we are brought up to believe that “it’s not the quality but the thought that counts.” And so that exchange of a free gift, whether it’s a key chain or a cup of coffee, offers a sincere message the consumer wants.”
Sandy Richman isn’t so sure. As co-owner of Directives West, a Los Angeles-based apparel buying service that consults with specialty and department stores, she finds that consumers aren’t as interested in the “message” as they are the free merchandise. “Look, the cosmetics business has been doing this for years and I think that business has been tough lately,” says Richman. “Will it work in ready-to-wear? I suppose if the item being promoted is good and you get a free gift with it, then it helps. But if the item isn’t any good, then it probably won’t work.”
The gifts, of course, come in all shapes and sizes. They can be as inexpensive as a fragrance sample or as elaborate as a trip abroad. One store, Alfred Dunhill, is even giving away free golf lessons with world famous teacher Robert Baker, the personal swing coach for 1997 U.S. Open champion Ernie Els. Any customer who uses an American Express Platinum Card and spends $1,500 between now and the end of the year gets the bonus.
Of course, these freebies ultimately have a price. In the cosmetics business, many gifts-with-purchase are actually built into the cost of the product. But ready-to-wear giveaways are different. Most apparel gifts (free T-shirts, sweatshirts, neckties) are given to retailers by manufacturers who pay for them out of their promotional budgets. In cases where stores actually buy the products they give away, the cost is often tagged onto the store’s advertising budget. “It’s public relations,” says Krogh. “You [the consumer] do something and you get something back [from the store].” The goodwill can earn the store a customer for life.
Why all the value-added incentives now? Because most retailers have lost business as a result of an increase in discounters and outlet malls. What’s more, bonus gifts have been a boon to the cosmetics industry in the past and many store owners feel this is a new way to increase sales of slow-moving merchandise.
Men’s tailored clothing, for example, has been a soft market ever since sportswear companies started touting the benefits of casual Friday dressing. Two-day trunk shows at the beginning of each season have measurably improved sales on higher priced designer suits. As an incentive to buy during these special previews, many stores waive the typical 10% service charge for made-to-measure clothing. And some stores, such as Sami Dinar in Beverly Hills, hand out a complimentary tie (a $95 to $125 value) with every suit or sport coat bought during those events.
Around the corner at Carroll & Co., store owner John Carroll found yet another way to boost suit sales. The Beverly Hills merchant recently mailed out 500 letters to out-of-town customers offering them a free night’s stay in a $350 deluxe room at the Peninsula Hotel if they visit the store and purchase $2,500 worth of merchandise.
“We have a lot of regular customers who live out of the Los Angeles area and don’t get into town more than once or twice a year, so we felt this was a nice way to give them the impetus to come into our store and shop,” says Carroll, who has already received calls on the promotion and expects about 125 out-of-town shoppers to respond before the January expiration date. “We benefit because we have the opportunity to sell that many more suits. And the Peninsula benefits because they have a chance to attract a new customer who might normally stay elsewhere when they are visiting Los Angeles.”
Bonus points and free airline miles are other ways retail stores are serving up customer bonuses. At both Neiman Marcus and Saks Fifth Avenue, customers who spend $3,000 at Neiman’s and $2,000 at Saks in a single year are automatically registered in Neiman’s In Circle club and the SaksFirst club. “In Circle customers receive a whole series of perks, from $150 gift certificates (5,000 points) to trips to Nevis, France, (300,000 points),” says Kirk Gerou, a spokesman for Neiman Marcus. “If you’re at the million-dollar level, we’ll let you throw a dart at the globe and we’ll take you there.”
“We had a promotion where for every $200 a person spent on men’s dress clothing, there would be an award of 1,000 free miles on American Airlines’ mileage program,” says Sears spokeswoman Mary Ann O’Roarke. “That was extremely popular and we were able to drive a lot of customer traffic because of it.”
On Rodeo Drive, merchants and First USA credit services recently launched the Rodeo Drive Visa card, which rewards platinum cardholders with one frequent flier mile on the airline of their choice for every dollar charged to the card. Other Rodeo Drive Visa cardholders receive free two-hour valet parking, fashion previews, free engraving and shipping services.
“The initial benefit is the free valet parking [a $16 value] if customers leave their cars all afternoon,” says Ron Michaels, who heads the Rodeo Drive Committee. “When all the surface lots disappeared a couple of years ago, a lot of customers refrained from shopping in Beverly Hills because they didn’t want to park in a structure or in the bowels of some building.”
According to Directives West’s Richman, “The bottom line is everyone likes something for nothing. And as we begin the holidays, you’re going to see a lot more of this type of promoting.”
