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Leveraging consumer incentives to drive sales: a guide

Human beings are generally highly motivated by rewards. This often makes consumer incentives a powerful tool to boost sales and increase customer satisfaction. Understanding the different types of incentives and their benefits can help you get started on creating your own offers. In this article, we explore ten consumer-incentive strategies and the advantages they can bring to customer-facing businesses.

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What are consumer incentives?

Consumer incentives are marketing strategies that incorporate human psychology by using what motivates customers to make purchases to boost metrics like profit, brand exposure, reputation and even consumer loyalty. These strategies can take many forms – you can try out different models of consumer incentive to determine which ones work best for your business.

Ten types of consumer incentives

There are many types of consumer-incentive strategies in the world of sales. Let’s break down some of the most well-known and effective ones.

1. Discounts

Discounts may be the most prominent consumer incentive. Modern-day customers often expect semi-regular sales from retailers, particularly after the festive season and around the ‘Black Friday’ and ‘Cyber Monday’ period. Outside of product retail, discounts can also be offered by service providers. Early-bird offers are another popular initiative, especially for purchasing tickets or booking experiences. Another type of discount with a similar psychological effect is a limited-time offer. Both of these incentives can create a sense of urgency and a fear of missing out, particularly if the end date isn’t made public. You can also look at offering a reduced price to first-time customers or users.

2. Rebates/cashback and trade-ins

A rebate or cashback offer involves refunding a customer a portion their purchase, typically as an amount subtracted from future purchases. These incentives are often linked to loyalty cards. They can also take the form of points that customers accumulate for future vouchers or discounts on products or services unrelated to but affiliated with the retailer – Tesco’s Clubcard is an example of such a system. Trade-ins involve customers returning a used item and receiving a discount on new purchases. Tech company device trade-in programmes and IKEA’s furniture trade-in are examples of these. Recycling initiatives operate similarly. One example is H&M’s Garment Collecting programme, which enables customers to bring old clothing from any brand into an H&M store where it will be recycled or repurposed. Customers then receive a voucher to use in store.

Please note that none of the companies, institutions or organisations mentioned in this article are affiliated with Indeed.

3. Freebies and samples

These can include product trials (especially for non-physical products like software and services), ‘try before you buy’ offers, product activations in public spaces or a gifting programme facilitated through PR companies – for example, having your product included in goodie bags handed out at relevant events or conferences. Freebies and samples can be distributed in many other ways, including through email marketing, flyer delivery, launch events, sponsorships or as a bonus gift when customers purchase a different product.

4. Buy one, get one free/discounted and bundle deals

Although they may have a similar impact on your bottom line, a ‘buy one, get one free/discounted’ special can have the added advantage of shifting hard-to-sell or surplus stock. They also encourage shoppers to bulk-buy. Bundle deals are discounts or freebies that are activated when customers buy a combination of related products or services. This can be another effective way of reducing stock levels. Additionally, customers may take the opportunity to purchase more than they personally need and give the extra products or services to somebody else as a gift. This can have the added advantage of building brand exposure and potentially helping you acquire new customers.

5. Loyalty and membership programmes

Loyalty programmes and membership programmes reward customers who frequently purchase your products or services. These typically work by creating an online account for customers which may also be linked to a physical card. In recent years, physical cards have become increasingly supplemented or replaced by a digital card, usually accessed via an app. The psychology behind this sort of strategy is related to positive reinforcement, whereby customers are rewarded for behaviour that is beneficial to your business. It also taps into the human need to feel special and valued. Rewards can take the form of special discounts, freebies, early-bird offers or even access to products not available to the general public. Through using algorithms, you can create personalised offers to appeal to each person’s unique consumer behaviour.

6. Referral programmes

Referral programmes provide dual benefits: they reward existing customers for their loyalty, and they offer the opportunity to expand your customer base. These programmes typically give discounts or freebies to both parties in the referral process. Airbnb is an example of a company with a generous referral programme, where existing hosts can refer new hosts and earn a substantial cash reward once their referral successfully hosts their first booking. The referred host also receives a smaller cash reward.

7. Competitions

Competitions, like games of chance and gambling, tend to be popular because they play to a human need for excitement, hope and feeling special. There are two types of sweepstakes you can offer: one that’s open for anybody to enter at no charge, or one that requires a customer action. This could mean being part of your loyalty or membership programme or signing up to marketing emails. You could also host a competition where customers are required to make a purchase in order to enter. This form of sweepstake is typically attached to a very large, attention-grabbing prize.

8. Financing options

Providing financing options can help attract customers who may need your goods or services but are unable to pay for them up front. The ability to pay a purchase off over a period of time can give you an edge over competitors who require payment in full.

9. Charitable contributions

Tying charitable contributions to consumer purchases can help involve your customers in your outreach commitments. This benefits your company, the organisations you support and customers who have philanthropic values. This is typically done by donating a portion or percentage of a sale to a charity. You could also create limited-time campaigns tied to specific causes. An example of this is the haircare brand GHD. GHD regularly brings out limited-edition styling products in shades of pink during Breast Cancer Awareness Month, donating a portion of each sale to related charities worldwide.

10. Gift cards/vouchers

There are many reasons why a gift-giver may not always want to purchase a physical present and may prefer the convenience and flexibility of gift cards. Offering gift cards is an easy way to make more sales and potentially secure a new customer. While a card that ultimately goes unused may represent pure profit for your company, it’s a good idea to consider offering cards that don’t have an expiry date as a gesture of goodwill. If the recipient does ultimately redeem the card, you could still gain a future repeat customer.

Benefits of consumer incentives

Below are some of the potential benefits consumer incentives can bring to your company:

  • Boost sales and revenue: Consumer incentives can be a powerful motivator for customers. Each of the incentive types we’ve explored can potentially lead to a consumer choosing your company over a competitor. Discounts and ‘buy one get one free/discounted’ offers can also encourage customers to purchase in greater quantities. This can help you shift stock and free up cash flow.
  • Typically easy to implement: Compared to other marketing strategies, like advertising campaigns, most consumer incentives are quick, inexpensive and easy to initiate. Promoting your incentives doesn’t necessarily require external advertising; they can often be sign-posted in-store and displayed on your company’s website or online storefront.
  • Can help your business stand out: In a competitive market, original and innovative consumer incentives can set you apart from others. Large promotions and competitions or schemes that guide customers towards behaviours like recycling or charitable donations can even generate media attention.
  • Can enhance your company’s reputation: People often appreciate businesses that go the extra mile to reward their loyalty. This can make them more likely to have a positive view of your brand and become regular customers.
  • Provide customer insights: The information you gather when offering different promotions may offer useful insights into what motivates your customer base. This can help you implement more targeted marketing strategies.

Best practices for implementing offers

Here are a few points to keep in mind when launching new initiatives:

  • Define your goals clearly and communicate them to your marketing team.
  • Choose incentives that align not only with your goals but also your company ethos.
  • Know your target market – research and analytics can help you create tailored incentives.
  • Create a sense of urgency to entice customers. This could be an offer that has a deadline or products with limited availability.
  • Aim to balance the costs of incentives with the potential short-term and long-term value they can bring.
  • Track progress and results and make adjustments accordingly.
  • Be authentic and ensure you deliver on any promises you make to consumers.

Once you grasp the many forms consumer incentives can take, you can delve into further research on these methods and your target audience to establish your own practices. Even if you start small and experiment with discounts or similar offers, you could soon be reaping the rewards and growing your business.

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