Incentive Marketing: A delicate balance
By Kelly Huffman
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. (kelly@metareward.com)
