What makes premiums tick?

Did you ever notice that premiums and incentives almost never have anything to do with the advertiser's core business?The prospect is going to get something for nothing, as long as he buys something else, but only if he acts now: the...

Did you ever notice that premiums and incentives almost never have anything to do with the advertiser’s core business?

The prospect is going to get something for nothing, as long as he buys something else, but only if he acts now: the pen from the Christmas card company, the opportunity to win a zillion dollars from Publishers’ Clearing House (PCH), the tote bag from Chatelaine magazine, the 35mm camera from Time.

You could probably switch premiums from company to company and nobody would mind much, if they even noticed.

Part of the thinking seems to be that we’re running some kind of con game: you can deflect people into buying something they don’t especially want in order to get something they do want, which isn’t even related to what they are paying for.

Sounds silly, doesn’t it? But it works. That’s the beauty of direct marketing: we learn what works.

Why premiums work has always been a mystery to me and I’m a sucker for the things.

If we lived in a logical world, you could wonder why an enhanced offer wouldn’t work better than a premium.

If the winning proposition for a magazine goes like this: 12 issues for $19.95 plus an am/fm radio with detachable speakers, then why wouldn’t the same 12 issues for $15.95 work even better?

It’s not like people need a tinny radio. It’s not like they think the radio is actually any good. It’s not like logic has anything to do with any of this.

There’s something else at work here, something illogical, and it seems to be based in perception.

The odds of winning a PCH sweepstakes are phenomenal. Probably worse than winning the Lotto 6/49. (New York satirist Fran Lebowitz figures she has just as much chance of winning, whether or not she buys a ticket).

But people still subscribe to Tennis Elbow Monthly in order to enter the sweeps without feeling guilty.

‘Someone has to win the $10 million and it might as well be me and I don’t really believe that you can win if you don’t order something,’ they say.

Why do we, as consumers, do it?

We’re grown ups. We know there’s no such thing as a free lunch and yet we keep buying things or telling a salesperson to call in order to get something for (apparently) nothing.

Why?

And even though our target audiences keep responding to our offers in order to get premiums, I wonder why direct marketers keep offering premiums.

Premiums work, but are they working properly? Do premiums bring in the right kind of customer, and if they do, are we starting off our relationship with that customer on the right foot?

Premiums can cover up a multitude of direct marketing sins, not the least of which is the failure to look for an original idea.

A premium that works can dominate a direct marketing program so much that no alternate approaches are even considered. That goes double for sweepstakes.

And I think we have to start thinking about alternate approaches because direct marketing is changing very quickly. We know how to mail smart – mail less to get more.

We’re building very sophisticated databases and using them (not often enough, but that’s another story).

Our customers and prospects are getting smarter. They are looking for value, not glitz.

Information

They want information, not bull. And sweeps and little radios just aren’t going to do it any more.

I wonder if there’s any profit in building a long-term relationship with someone who came aboard because of a premium.

And I wonder if there’s much profit in direct marketing unless you are going to build long-term relationships.

All solid relationships are built on mutual respect and, in direct marketing, giving genuine value and service to your customers.

You might be able to start the right kind of relationship with a very expensive premium, but you wouldn’t be able to make any money for a long time.

A cheap premium might let you make money now, but I doubt that you would ever be able to convince people that you are offering value. And then you wouldn’t make money for long.

Premiums can be a good idea, but I have a sneaking suspicion that, in many cases, an improved offer is a better idea – an improved offer to the right kind of prospect.

Mike McCormick is president of Toronto-based V&B Direct.