Revise Your Need to Incentivise

By Sarah Ripley, Wizard of Ads Partner

It’s the oldest trick in the book… which many businesses have used in an attempt to attract new customers into the market, or poach existing from competitors. Incentive schemes.

It also seems to be the ‘go-to’ marketing option when money is tight and things are getting a little desperate so you want some kind of insurance of an activity that will work. It’s like asking the plain Jane girl at school to the dance as a back-up, just in case the hot popular girl turns you down…

Only pay another $1 to upgrade to a larger size, 10% off your first ten visits when you join today, free night’s stay with every booking, 0.9% interest on balances you transfer from other credit cards….

We are exposed to hundreds of incentive-type schemes every day from businesses trying to vie for our attention through numerous offers that are seemingly ludicrous for us as consumers to pass up. But what kind of customers are these incentives attracting and will these customers be fruitful long-term for the business?

There are two general types of customers – transactional and relational.

“Transactional shoppers are focused only on today’s transaction and give little thought to the possibility of future transactions. Their only fear is paying more than they had to pay. Transactional shoppers are looking for price and value”. (Page 10, Making Ads Work).

In contrast, “Relational shoppers consider today’s transaction to be one in a long series of many future transactions”. (Page 10, Making Ads Work).

When a business employs an incentive scheme (which is usually price/value driven in some way) – they are attracting a transactional customer.

A Harvard University Study of “Switchable for Reasons of Price Alone” customers (i.e. transactional customers) strongly discourages businesses from going after these kinds of customers. “If you appeal to these customers, you will enjoy initial success, but your position will never be a strong one, as these customers will switch from you just as quickly as they switched to you for precisely the same reason”. (Page 17, Making Ads Work).

Furthermore, when you incentivise something, you are indirectly cheapening the value of the product/service and therefore casting doubt on quality and the integrity of your business.

Take the case study of Townsville-based internet provider Rawnet, which executed an incentive scheme to James Cook University students (that myself and fellow students were invited to take part in), which eventually aided in Rawnet’s “execution”.

We were approached by Rawnet with the attraction of free alcoholic beverages at the popular “Uni Club” the following Thursday night, (which was THE night to attend). The only condition was – we had to take a Rawnet modem home, and someone would contact us at a later date to see if we were interested in signing up.

Sounds great! Sign me up! We all echoed… however I among others were rather sceptical at this offer which seemed “too good to be true”.

Alas – we arrived the following Thursday night to a bustling crowd of jealous onlookers as we received our arm bands which entitled us to our complimentary beverages. We were asked to provide our details at some point during the night – however after a few sarsaparillas it was difficult to remember one’s name, let along record it. We were given Rawnet modems as we stumbled out, and told we would be contacted in the following few days for sign up.

None of us ever heard from Rawnet, and shortly after it made news around town that the company had gone broke.

So why did this not work? Rawnet handed over the incentive BEFORE a commitment was made, therefore we received free drinks, and they received a bill.

The general idea wasn’t a bad one – as they had easily identified that alcohol would no doubt encourage Uni students to almost anything, however this plan was flawed from the get-go by three main points:

1. Primitive planning process that didn’t ensure details were taken, and then followed up for sign up.
2. Targeting uni students for this kind of business was a risky venture, as most have limited means and therefore funds to keep within an internet contract.
3. The incentive had NOTHING to do with the business itself, so was rather confusing.

Basically – this incentive scheme was a big nail in the coffin of Rawnet.

So what can we learn from this example?

When you incentivise something, you are attracting the customer for the wrong reasons, (and the wrong customer as mentioned above). Attracting customers to do business with you should be through formulation of a strategy and persuasive MESSAGE on how your business can fill a customer’s needs, not because of something gimmicky.

So next time you think of creating an incentive scheme to attract new customers… think of the long-term affect this will have on your business in terms of how current customers will feel, the sustainability of the scheme, what kind of customers it will attract and their future value to a business.

“…there’s nothing in this world that someone can’t make worse or sell a little bit cheaper” - Roy H. Williams

The Editor. Ready to grow your business? Contact Sarah.