Incentive Marketing: A delicate balance
By now it has become commonplace for online marketers to tie incentives to their direct marketing efforts. It’s obvious that rewards in the form of gifts, sweepstakes, points, and other creative iterations are a highly effective marketing tool. Incentives extract incremental revenue from a sale that might otherwise have not occurred, a premium subscription that may not have been taken, or greater consumer value derived from repeat purchases. What’s not so obvious is how to balance the use of incentives between the advertiser and the consumer.
There are a multitude of ingenious incentive sites on the web today, many seeming almost too good to be true. The concept of “breakage” is the norm and is an effective tool to maximize revenue by promoting a high value incentive. Can the consumer really earn a free DVD player just for joining a membership club? Yes, if they follow the required steps. For the uninitiated, the best example of breakage is a software rebate. How many steps do you have to take to get that $10 rebate offer printed on the box? That’s breakage! The successful incentive marketer wants to maximize profits while not making the reward process unfair to the consumer. To that end one must find a good rewards program that is sustainable by providing value to the consumer.
When managing a rewards program on behalf of the advertiser and working with publishers who promote the program, it’s imperative to keep the advertiser one degree removed from the associated customer service issues that arise. Consumers want their reward and they tend to associate that reward with the marketing offer they signed up for, not the publisher who promoted the reward program. It’s a good idea to have an in-house customer service department to manage these concerns and ensure that consumers do not harass the advertiser, as the advertiser typically knows little about the incentive involved. If you don’t want to spend the money or effort to have in-house customer service, outsourcing is another option. Customer service is a costly business and any added stress to an advertiser’s CS mechanism will likely result in their unwillingness to work with your channel.
Finally, with any incentive program one runs the risk of providing poorer member quality to the advertiser. Accepting the reality that member quality may suffer when incentives are involved, it’s a good idea to work closely with the advertiser by giving them as much visibility as possible, and find an acceptable fee structure that is profitable for both parties. More importantly, optimize the channel to ensure that the consumer- who may be motivated by the particular incentive – is also equally motivated to participate in the promotion. A simple example is a free DVD giveaway. A consumer interested in a free DVD is more likely to be an active consumer of a DVD membership club than a consumer interested in a $5 cash incentive. By optimizing for revenue as well as member quality, you can maximize your profit and provide the advertiser with the highest member quality possible.
The effective marketer recognizes that the customer is first, and that customer has two faces – the consumer who generates the revenue that allows the advertiser to pay your bills! For years the auto industry has attempted to teach car dealers that the value of a lifetime customer is significantly better than the value of a one-time sale. The same applies to incentive marketing. By attempting to maximize value for the advertiser and the consumer, one can create a sustainable business model that works for both parties.
Kelly Huffman works in business development for MetaReward, an Experian Company specializing in performance-based marketing and loyalty programs for publishers. ([email protected])
