November 4th, 2007

Marketing digital services within the ‘Buy One Get One’ paradigm

By Dr. Shuki Idan

The Buy/Get or BOGO (Buy One Get One) offering is a common retail promotion practice. The BOGO model encourages the customer to buy one or a few items and get special terms on other items, e.g. discounted or free other items, loyalty points, eligibility for preferential terms in other promotions, etc. This model is also applied in digital marketing scenarios such as: download a song and get a ringtone for free, buy this Madonna song and get another song for half price, or sign up for VOD service and get 100 minutes of international calls for free. In this post we will be looking at the use of the Buy/Get model in the marketing of content and digital services.

The use of Buy/Get promotions is popular for achieving business objectives, such as:

Influence users to consume more of the product they are using

Introduce customers to new products and product categories

Increase loyalty with future pending benefits or other loyalty related benefits

The following matrix describes common use of the BOGO paradigm with our rating of its likelihood.

The BOGO objectives’ likelihood matrix

Before exploring the most effective ways to use BOGO in online marketing, let’s start by discussing the differences for using BOGO in the bricks-and-mortar world to BOGO in the online marketing world:

In contrast to advertisement on a supermarket shelf, in many scenarios of online shopping, we can gather and use the purchasing profile of the potential customer. This means that in the online shopping world we can personalize and optimize the BOGO offer. For example, a customer that typically buys one song during an online shop visit can be offered a “Buy 2 Get 1″ offer, while a customer that typically buys two songs should be offered “Buy 3 Get 1″.

The effort for fetching the Get benefit is an important aspect of whether or not it will be consumed. In most online scenarios the user is responsible for fetching the benefit items via selection. This seems to be an easy task for supermarket shoppers (assuming that the Get items are close at hand) and less evident for portal shoppers. Our experience with digital content BOGO promotions shows that as much as 50%-70% do not take the benefit.

We rarely encourage digital services shoppers to buy more of the exact same product. While in a supermarket shoppers can be encouraged to buy 2+1 same tuna cans, a music shopper will never buy the same song 3 times. This introduces the challenge of understanding preferences and proper recommendations. The alternative to recommendations is giving the user a broad choice domain, such as “Buy a song and Get another song from category X”, not limiting him to a recommended other song(s). This is extremely relevant for converting new users, where “taste” is unknown and a recommendation, other than “Top X”, may be unfeasible.

Some of the “stock clearance” cases for using BOGO in the bricks-and-mortar world are not possible in the digital world. Changing prices in the digital world is beyond the local decision of a supermarket manager. The pricing liberty of a digital marketer is restricted by other players in the value chain, mainly media companies and content aggregators. Having self owned products can alleviate this constraint.

So in a nutshell, digital marketers need to leverage everything they have to make online sales work for them. Since they know who they are talking to they need to deploy personalized offers that are more sophisticated than your average supermarket deal that treats all customers the same. In the next post I will provide guidelines for using BOGO in an effective way for the marketing of digital services and will present a case study showing how well it works.