When businesses use cash discounts, buy-one-get-one-free (BOGOF) and free accessories as incentives the value to the consumer is obvious. This in turn makes the offer easy to compare and easy to replicate. It can also lead to an over-reliance on price based promotions which ultimately devalue the product or brand.
The costs and the perceived value of an incentive used to be very much aligned. Today however, we are seeing a shift towards incentives which offer a high perceived value compared with the price of the product purchased. Why has this happened and how can you offer an incentive with a higher perceived value for your next promotion?
Times have changed and we now see incentives offered that often outweigh the cost of the product being purchased such as a free $5,000 holiday on a $2 confectionery item. This is usually made possible by limiting the amount of ‘prizes’ that are on offer. Whilst these types of promotions do work, they leave a large majority of customers with no reward and potentially disenfranchised from the brand or product. As consumers have become more sophisticated they look for products that offer the ability for everyone to receive a reward based on the purchase rather than just a chance to win.
Everyone’s a winner promotions are now becoming more common place. These types of promotions can also be combined with high value hero prizes. This gives consumers the best of both worlds. On one hand they have the opportunity to win a great prize and on the other they are guaranteed to receive something of value.
The cost of a promotion will always be assessed based on the returns it brings. Ultimately, it does not matter if you spend $1 or $5m on a promotion if you see an upturn in revenues in line with your promotion objective. There are a few different ways to try and ensure returns are achieved. It should however be noted that independent research has shown that the increase in response to a promotion does not rise proportionally with an equal increase in spend (IMI International, 2007). It is therefore important to understand the point at which you should cap your expenditure to avoid wastage, which is where professional advice can help.
The effort required to manage a promotion is also an element that is often overlooked. The time invested in building, delivering and managing a promotion can be huge. Using dedicated agencies can help as the delivery and ongoing management is often provided at a fixed price, helping to combat the financial risk of the promotion.
Some of the most popular and successful promotions use travel, leisure and lifestyle rewards. These work well as they are the incentives that are best remembered, offer the longest satisfaction of psychological needs, social acceptance and self-realisation and are therefore desired more.
Having said all of the above, it is recognised that nearly all promotions need to follow a set structure to be successful. The key elements are as follows:
• Set specific objectives
• Develop a clear plan, covering how you will meet your objectives
• Ensure the incentive is appealing to your target market
• Ensure the incentive provides synergy with your brand
• Implementation
• Review
Only by setting realistic objectives and then measuring the effect of the promotion will businesses realise their true value. This model will allow promotions to be fine tuned throughout a promotional time table leading to better and more consistent performance. Spending money on a promotion does not guarantee results, but going into a promotion knowing what your costs are and what your returns need to be makes it much easier to manage.