$1 Offer Ad from Lay’s Potato Chips

Key Takeaways

• The biggest direct-response marketers would advise you to create an irresistible front-end offer, get it in front of as many potential buyers as possible (that may have you break-even or lose money at first) and then you make your money on back-end products & lifetime value. This is what Lay's is doing here, except they don't have any bigger back-end products, only other Pepsi-Co products.
• This is a great lesson in value perception. A whole dollar seems like a lot, especially in 1965, but when you factor in all of the scenarios & cost-reducing possibilities, it's not really a $1 cost for them.
• Breaking down the numbers...in order to get the coupon, you must spend a total of $1.18 (2*59), $1.38 (2*69) or $1.47 (3*49). Not factoring in cost, this means they make back an average amount somewhere between 18 & 47 cents after the $1 check is cashed, no matter what. There's also the possibility that Lay's cut a deal with Lay's carrying grocery stores to buy the $1 check at a cheaper price which would bump up the margins even more.
• The attractive deal will trigger people to buy who wouldn't have otherwise. Some of those people will end up buying with the intention of claiming the deal, but may not end up sending in for the deal or they may miss the deadline. Another group will get the check, but may not even use it (and the check may only be costly to Lay's if used). These are customer acquisitions that came at no cost other than the advertising spend.
• Now, here's the most important part of this: factoring in customer lifetime value. If Lay's knows that a certain percentage of trying customers convert to long-time or lifetime customers, that's a lot of long-term profit to consider for losing some margin upfront.

Analyst Spotlight

Mike Schaueris the founder of Swiped.co and the main analyst in the swipes section. After intently studying & building conversion-focused websites for 6+ years, he started Swiped to help others master marketing & copywriting through the analysis of great examples!