The nature of the beast

Desperate bribes or just rewards?'What about using a premium or incentive to get our customers to respond?' How many times have we heard that knee-jerk cry from some brand manager who is so insecure about the appeal of his product or...

Desperate bribes or just rewards?

‘What about using a premium or incentive to get our customers to respond?’

How many times have we heard that knee-jerk cry from some brand manager who is so insecure about the appeal of his product or service, that he’s willing to bribe the customer to try it?

I’ve lost count.

Here to stay

Needless to say, premiums and incentives are here to stay, and they certainly have their place in direct response marketing.

After all, the offer is often the most important element in any direct marketing communication.

But knowing what to offer, and when and how to offer it, is just as critical to a direct marketer’s success as choosing to make an offer in the first place.

Let’s start by distinguishing a premium from an incentive.

Two different animals

In my mind, they are two different animals.

At FCB/Direct, we consider a premium to be a gift item offered to a consumer in exchange for some desired action, such as returning a survey, requesting more information or trying a product.

An incentive, on the other hand, is more closely tied to an actual purchase. ‘Get-two-for-one’ and ’25% off’ are typical incentives used to entice someone to buy.

Appropriate

I personally like premiums and incentives…as long as they’re appropriate.

They’re particularly effective when promoting new brands or resurrecting old ones.

They can help mature products attract consumers who have previously refused to try or buy those products.

If used properly, premiums and incentives can break through the clutter of competing messages, capture the consumer’s attention, sustain brand image, and foster long-term customer loyalties.

Loyalty declining

I remember one client, a major animal feed producer, who was losing market share to several new ‘mom and pop’ operations in the agri-feed business. Although this client’s product was superior, customer loyalty was rapidly declining.

So we decided to offer financial incentives to both existing and former customers. In doing so, we managed to lure back many who strayed away, while holding on to the ones we still had.

Reward customers

In situations like this, it pays to reward your customers for sticking with you.

It also helps to confirm, in the customer’s mind, that he or she has made the right decision in choosing your product.

When using premiums and incentives, it’s important that they fit a customer profile or the brand itself.

In the agri-feed business, steep discounts are always more popular than trinkets.

In the personal computer industry, discounted software with every pc purchase is well-received.

Discounts

In the mortgage arena, banks can gain a competitive edge by offering discounts on filing fees.

We see this in the overcrowded credit card industry, where lower fees, no fees or lower interest rates are the only perceptible difference between one card and all the others.

Another ideal environment for premiums and incentives is the tough-to-crack executive market-place.

As long as the incentive or premium is sufficiently unique, you have a better shot at reaching that big decision-maker in the corner office.

After all, if you’re selling a high-ticket item, such as a huge loan, a heavy-duty leasing contract or a major piece of equipment, then you had better offer that busy executive something special for noticing your message.

So when is a premium or incentive inappropriate?

If you’re proud of your product or service, don’t choose an offer that demeans its image or forces you to get down in the mud with your competition.

It’s all right for travel agents to offer discount airfares if the seats are empty. But someone who markets fine china may find that discounts merely detract from the product’s true quality.

It would also be inappropriate to offer a premium or incentive that isn’t valuable enough to elicit a response.

Too costly

Nor would it be proper to offer something that’s just too costly to fulfill.

That’s why we don’t give away ballpoint pens if we’re selling cars. And we don’t give away cars if we’re hawking ballpoint pens.

Rather, we should follow the example set by Sports Illustrated, which gives away a free sports video with every subscription.

It’s an offer that not only complements the product, but one that’s very cost-effective as well.

In any event, the decision to use premiums or incentives all depends on your product or service, its cost and brand image, and your overall marketing objectives.

With the right offer, you can lower your cost-per-sale over the long run, while increasing the lifetime value of your customers.

Paul R. Nelson is senior vice-president and managing director of Toronto-based FCB/Direct.