November 26th, 2008 by admin
As any consumer knows, American business has a love-affair with incentives. Almost everyone has received countless offers from some of the biggest names in American business and from some of the smallest, local shops: A Burger King sweepstakes tied to a new product launch; your credit card’s loyalty program; your bank’s incentives to open up new accounts or credit lines; your favorite airline or hotel chain points program; that sign-up incentive you received from your favorite magazine; continuity programs at your local supermarket that save you money on name brand merchandise; the free gift for agreeing to hear a sales presentation, or sign up for an e-mail newsletter. The variations are endless.
Industry estimates put the market for travel and merchandise incentives at about $29 billion in 2005, and that’s probably a conservative estimate. The promotional products industry alone, which has a significant overlap with the incentive industry, posted $18 billion in sales in 2005. According to the most recent Incentive Federation “Survey of Motivation and Incentive Applications,” 68 percent of the companies participating used incentives to support consumer promotions, specifically to:
- Increase sales
- Encourage pantry-loading
- Promote loyalty
- Promote permission
- Break through marketing clutter
- Target key audiences.
The use of incentives has proliferated in this new age in which businesses want to increase their use of target marketing and more effectively engage consumers over the long run – not only to buy more product, but to refer their friends and family.
Consumer incentive programs target not only individuals, but also target businesses and the people who buy products and services on their behalf.
Clear, attainable goals and measurable objectives
What do you want to accomplish? Consumer incentive programs can include the following objectives:
- Increase sales
- Foster pantry-loading to thwart a competitor
- Increase repeat purchases
- Promote loyalty
- Foster word-of-mouth referrals
- Promote sign-ups to opt-in communications
- Improve receptivity to a sales call
- Promote test drives or trials
- Boost sales of specific products
Check to determine if whatever goal you have set has ever been met before and under what circumstances. Nothing diminishes your chances for success faster than setting unrealistic expectations.
Who’s in charge?
As with any other business strategy, someone should be accountable for that program. But, like any effective leadership, the program will benefit if you get input from all parts of the marketing, operational, or human resources team that could have an impact on outcomes. Many a promotion has failed because the manufacturing or service department could meet not the demand, or because employees or retail partners were unaware of the offer and unable to fulfill it. Consider using an outside expert if you intend to spend six figures or more on your program. Not only are the stakes higher, but you will likely find that the logistics involved with launching a major program rival those of any other type of advertising campaign for which organizations generally hire outside help.
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What consumer behaviors will yield the desired result?
Don’t just answer: “Buy our product or service.” That’s too obvious. The answer you’re looking for breaks down the process even further: What specifically will the consumer have to do in terms of an action, time, or money spent to behave in the way you want them to? In other words, how much of a behavior change are you requiring? The greater the behavior change you require, the more incentive you will need to get attention.
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What audience you are targeting?
This seems like an obvious question, and of course it’s critical to know the size, demographics, pyschographics, and methods of identifying your target audience. But many organizations overlook the other people that could affect the outcome of their program, including retailers, resellers, agents, and other channel partners, or the employees that will interface directly with the target audience. You will need to identify the behaviors you need from these other audiences and how you will engage them to deliver.
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What is the appropriate incentive, reward, or recognition?
This includes an understanding of the economics of your offer—i.e., the economic value of the desired business outcome and the investment you are willing to make to get it. It also includes an honest evaluation of the amount of impact that will be needed to change behavior or even to get the attention of your audience. Beyond price and appeal, considerations include: The ability to customize, availability at the time redemption, shipping costs, safety issues, etc. Also, make sure you consider any ethical considerations, especially when related to gifts for businesses or children.
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Logistics
How will the incentive, reward, or recognition device be delivered and when? Will the promised product be available when your winners want to redeem it? If there are regulatory or compliance issues, how will they be addressed? If there are shipping, warehousing, or packaging issues, have the appropriate compliance and logistical issues been addressed?
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What’s your permission and engagement plan?
Your program will work far better if you explicitly get the permission of your target audience to communicate, either by e-mail or some other means. Then, once you have that permission, how will you engage that audience? This could involve any number of tactics, including offering useful information, privileges, added-value promotions, entertainment, or whatever will cause your target audience to pay attention. The permission plan is also beneficial, because it provides a unique opportunity to track the results of your program in terms of response, sell-through, and level of engagement.
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How will you communicate and promote your offer?
Whether you’re communicating to a national audience or a small community, the challenges of breaking through the clutter to get attention are equally real and confounding. Because marketers often use incentives to draw attention to their marketing, these offers often get incorporated into print, television, radio, or Internet advertising. Don’t forget the other audiences that are often critical to success, including your own retail or other reseller partners, sales employees, and customer-facing and customer-service employees.
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What are the rules of the game?
No matter what your program, it will invariably include some kind of rules of participation. To be effective, the rules should be clear, fair, and upfront—and absent of any deceptive fine print. Nothing can more rapidly damage an otherwise successful concept than unclear, deceptive, or illegal rules. Special attention applies to any promotion involving minors or in the areas of tobacco, firearms, financial services (especially banking, investments, and insurance) pharmaceuticals, food, and sweepstakes and contests, mail in offers, children, and the elderly. (See Legal Issues.)
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Tracking and administration
One of the great benefits of a consumer incentive plan is the ability to track results against consumer response. Aided increasingly by the Internet and permission-marketing strategies that encourage respondents to opt-in to something, consumer incentives often provide relatively precise data related to:
- Who responded, by individual and by demographic?
- How many people and who opted-in or otherwise engaged?
- How many people bought directly as a result (this is usually possible to determine in the case of Internet promotions or promotions requiring some kind of coupon or redemption form)?
- How did the sales made to these people compare to sales made to other customers?
- What was the repeat customer sale rate (for those companies that can directly track a customer purchase)?
- In what demographic group or region, or through what sales outlet, were sales the highest?
- What was the actual redemption rate for the offer? What did people redeem?
Organizations that do business primarily on the Internet or those equipped with Customer Relationship Management systems have the best chances of tracking the above information.
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Return on Investment measurement and feedback
Using the tracking and administration tools, your organization can measure the return on investment more effectively than most marketing tools. Due to their precisely targeted focus on driving specific behaviors and outcomes, and due to the increasing use of databases to track individual responses and actions, incentive programs provide the potential to provide the following key Return-on-Investment and feedback mechanisms:
- Incremental profits versus cost of the incentive program and related communications.
- Profitability of consumers who responded to the incentive versus usual consumers.
- Likeliness of a consumer to make a repeat purchase.
- Likeliness of a consumer to recommend a friend or colleague.
- Any complaints, and the nature of those complaints, whether from external or internal customers.
- Any logistics issues that hampered timely fulfillment of offers.
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