How to Get the Most Out of BOGO DealsTime the promo right, pick the right products — and make sure the profit margin is there.
Buy one, get one (BOGO) deals fill the marketplace, and for good reason.
BOGOs can increase store traffic, sales and average order size, turn soon-to-be-out-of-season inventory, build customer loyalty, gain adoption of new products and drive scale with vendors, leading to better purchasing rates, said Brian Phillipy, president of Afligo, a marketing solutions company based in Deerfield Beach, Florida.
But that doesn’t mean you should offer a BOGO deal willy-nilly, or without planning and adequate promotion.
Experts share tips to get the most out of this marketing and sales tool.
Does it make sense?
BOGO deals probably don’t make sense if you lose money on them. Look at your product costs and do the math to make sure you’ll make a profit, advised Kristian Rivera, digital marketing specialist at Fit Small Business in New York City.
Say the product costs $5 to produce and gets sold for $20. The profit from the sale of one item will be $15. If you offer a BOGO promotion, your profit from one sale will be $10, since each item costs $5 to produce.
“Your profit for the sale is cut by a third and your profit per item is cut by two-thirds, but you’re still profitable,” Rivera said. “If you lowered your price to $10, then you would break even on a BOGO promotion.” Lower it further and you’ll lose money.
To calculate return on investment (ROI), take the revenue from the sale and subtract the cost of investment, then divide by the cost of investment, Rivera said. What you’re left with should be expressed as a percentage. In the example of the profitable BOGO promotion, the ROI will be 100 percent.
Have a marketing plan
Some point-of-sale systems, like NCR Silver, make it easy to set up and apply BOGO promotions. But these promotions still require thorough marketing, done in store, on the website, via traditional and digital advertising (if budget allows) and on social media, said Lisa Munjack, president of
Munjack Marketing in New York City.
(NCR Silver offers options for informing customers of current promotions.)
Kim Randall, social brand strategist for KiMedia Strategies, in Tampa, Florida, recommended promoting BOGOs on Facebook. “We see friends and family tag one another, opening up our reach as well as putting us in front of potential new customers,” said Randall.
Give yourself ample lead time to promote and market your BOGO, and make the dates clear, said Munjack.
Timing is everything
The best times to run BOGO deals depends on what types of product you sell, Phillipy said. Basically, put a great deal in front of customers when they’re ready to buy.
“If you sell lawn fertilizer, you would want to run the offer in the spring when your lawn is starting to grow,” he said. “For obvious reasons, the same offer would not have the same impact if you ran it during the holiday shopping season.”
To capitalize on certain spending seasons, business owners should consider BOGO deals to combine complementary products, Phillipy said. For example, during back-to-school shopping season, feature something like, “buy a five-pack of pens and receive a notebook free.”
Munjack cautioned against offering BOGO deals on holidays and on Small Business Saturday. “The danger is there’s a lot of noise during these times, so your message might get lost.”
BOGO promotions don’t necessarily need to be tied to the calendar. If you’re looking to increase your reach, consider a referral program in which existing customers receive a BOGO for referring new customers to the business, Rivera suggested.
Of course, not all products lend themselves to BOGOs, in particular those with a short shelf life or items customers don’t typically buy in multiple quantities, Phillipy said. “When was the last time you saw a BOGO on a mattress?”
Don’t over do them
Owners shouldn’t lean too heavily on BOGOs, Munjack cautioned. Regular BOGOs can devalue the merchandise and make it seem like the business wants to clean house.
“As a consumer, I might wonder if it’s actually more of a preliminary ‘going out of business’ sale,” she said. “It’s most effective when it’s a special event, you position the sale items near regular-priced items — and not in a back room or on the sidewalk — and you offer decent items so customers spread the word about what an amazing deal they got.”