[MUSIC PLAYING] We've talked about lifecycle campaigns. We've gone over five top lifecycle segments and how to market to each. In this lesson, I want to give you an advanced marketing technique that is particularly suited to email. I call it the discount ladder, and it's going to save you money if you're at all being promotional in your emails. Here's the problem. Most retailers discount too much.
Think of Bed Bath and Beyond. I know I get a 20% off coupon there every week. So when it's time to get another toilet plunger or trash can, boom, I grab my coupon and head to the store. The issue here is that Bed Bath and Beyond is probably discounting when they don't have to. When I need that plunger, I need that plunger. And I don't care if it's 20% off or 20% more expensive. Really, I'm ready to buy.
But I naturally take the discount if it's sitting in front of me even though I would have paid full margin. Well, when retailers give away margin and the customer would have purchased anyway, it's called a subsidy cost. And it's very real. At Karmaloop, where the company was sending out a daily 20% off coupon to 4 million new email subscribers, the cost was in the millions per year. I'm guessing most of you carry some level of subsidy cost too.
How do you reduce them and put more money in your pocket? By using a discount ladder. A discount ladder is when you increase the magnitude of your discounts over time, so you don't give away the farm all at once. Let's take your welcome series. In your series, you introduce your brand, offer up testimonials, and really do a great job of showcasing your product. And yet a week after receiving the series, some of your subscribers still have not purchased.
They are still F0. They need a bit more incentive. Enter the discount ladder. If a week has gone by without a purchase, offer them a 10% off coupon. Still no purchase after another week? Go to 20%. No purchase after another week? Go to 30%. Again, this is targeting F0 only, those who went through your welcome series and still have not made any purchase.
If at any time that F0 becomes an F1, he or she falls off the ladder and does not see the subsequent offers. By adding this discount ladder to the end of your welcome series, you will have driven up revenue while retaining the most margin dollar as possible. On a one-to-one basis, you found the ideal offer for each and every customer. Three more points on discount ladders. Number one, you can use them throughout your lifecycle campaigns, at the end of an abandoned cart sequence, for example, in your win backs.
Whenever you want to encourage user behavior, consider a discount ladder. Number two, you don't always have to use discounts in a discount ladder. The key is to ascend the perceived offer over time, but that offer could be a discount or could be a gift with purchase or free shipping or something else that's more on brand. And number three, you can test various levels and timings of the ladder.
And once you have found the ideal for your campaigns, lock them in and run them automatically in your email software. The nuts and bolts of building out discount ladders in your email software is beyond the scope of this course. But if you go to nerdmarketing.com/shopifycourse, I have a video tearing down the implementation of the technique in [INAUDIBLE] from Karmaloop. Discount ladders, more money in your pocket and less discounting.
Learn to love them as part of any advanced marketing campaigns. In the next couple of lessons, I go deep on specific campaigns I use the Karmaloop and auto anything. [MUSIC PLAYING]