The housing market may be unsteady with varying predictions for the year ahead, but the home improvement market remains strong with reports suggesting that Brits currently prefer improving over moving.

Inspired by DIY and property television shows, those who choose home improvement over the traumas of the treacherous housing market are likely to improve and upgrade their homes and gardens habitually, following interior and exterior design trends.

As Australian retailer Bunnings, part of the Wesfarmers conglomerate, begins to transform Homebase stores across stores to match its own vision of the ideal home improvement store, it is evident that the UK home improvement sector’s strength has a strong draw, even for retailers from way down under.

Bunning’s own brand of customer engagement may include the “sausage sizzles” that the retailer is famed for in Australia, drawing customers in with the promise of a free hot dog barbequed right in store, but competing retailers can go beyond the offer of a burnt banger to increase footfall.

Discounts are the go-to solution for so many retailers.

But with DIY consumers more likely to seek out a high quality product from a trusted brand rather than a cheaper item that is likely to need replacing sooner rather than later, how can home improvement & DIY retailers differentiate themselves without applying discounts to guarantee sales of high-grade products during this period, which could ultimately damage profit margins?

The danger in discounting products to drive sales lays in the fact that consumers are only likely to buy said products while they are on offer, and when prices are reverted back to the usual RRP, customers will wait until the next discount promotion to make their purchase.

This ‘boom-and-bust’ cycle is one of the major pitfalls in promoting premium goods.

Cashback promotions are proven to drive sales.

In other markets, most notably consumer electronics, cashback promotions are proven to drive sales by increasing footfall and inspiring consumers to make impulse purchases.

Brands can yield a healthy return through the use of smart promotional mechanics such as cashback, increasing sales by promoting a benefit near-enough identical to a price drop, without the risk of falling into the ‘boom-and-bust’ cycle.

How do cashback promotions yield a better return?

So how exactly does a cashback promotion yield a better return for the retailer, yet appear as attractive as a discount promotion to the consumer?

The answer lays in implementing a  risk-managed promotion executed by Opia, a global creative sales promotion consultancy. Opia has the expertise to create, build and manage end to end the promotion, with the retailer or brand safely in the knowledge that their profit and loss is protected from exposure by paying a small fixed fee for every product sold out.

Creating and executing the sales promotion end to end, Opia manages the risk for the brand or retailer by charging a small fixed fee for every product sold during the promotion.

Through predictive analytics and insurance placed through specialist brokers, the risk to exposure is capped. For the brand or retailer, this guarantees an uplift in sales and additional margin through the lower cost of cashback and reduced downward price pressure.

The shoppers that claim the cashback reward can expect an often-sizable amount of the purchase price being returned to them, inspiring future purchases from those customers and increasing brand loyalty.

Such promotions have proved successful in the automotive, consumer electronics and software sectors, so there’s no reason why the DIY sector can’t benefit too.

 

By Martin Bailey, Account Director, Opia