Customer Incentives: Tired Tactics or Strategic Tool

Anyone in business today, knows that the business climate has changed significantly over the last 5 years.  Everyone is looking for a deal, no one wants to pay full price.  Customers are looking for incentives to purchase products and spend on services.  Gary Yost spent 30 years is sales and marketing with consumer products companies Bristol-Myers, Reckitt Benckiser and media giant Valassis.  At Valassis, he served as VP, Marketing, CMO and General Manager of one to one products, and finally as President, International Media Properties.  His experience with those companies centered on motivating customers to make purchases and part with their money. 

Yost began by describing the current business climate as the “new frugality.”  He said, “Incentives are the way of the world.”  Yost explained that customers want and demand incentives.  Product based businesses grow through attracting new customers, current and new customer product usage and customers stocking up (pantry load).  He pointed out, that incentives attract new customers and encourage pantry load, but there is a cost to the producer through reduced selling price. 

Yost spelled out the four types of incentives, their advantages and disadvantages.  He first spoke about sale prices which he described as passive.  Sale prices attract some buyers, but not everyone that shops is aware of the pricing he explained.  Sales prices reward all customers with immediate gratification, but the potential liability is 100% or everyone who shops in the store. 

Cash back rebates work best for big ticket items said Yost.   Rebates require active participation by a customer and don’t offer an immediate reward he pointed out.  Yost said rebates are good tie breakers when making a large purchase, but don’t work well as a sole means of motivating buying behavior.  He described loyalty cards as both passive and active incentive tools.  Yost said loyalty cards are effective at re-enforcing a current customer base but involve a significant cost in data base maintenance. 

Yost regards cents off coupons as requiring very active participation on the part of the customer.  He said there is a high degree of involvement, it offers the customer immediate gratification and provides the store and producer good short term ROI.  He said couponing works well at attracting new customers.  Yost commented that contrary to common assumption, frequent cents off coupon users tend to be affluent households.  Redemption rates are now as high as 12% he remarked.  Yost said the ad component of coupons is effective at driving sales even without coupon redemption. 

Yost explained a coupon marketing campaign is most effective when it is founded in basic marketing principles.  Yost said an advertiser must consider objectives, target audience, geography, competition and customer media consumption.  Yost emphasized the importance of tracking results, considering the impact on margin and offering an effective value proposition.  He noted that clarity of design can impact redemption rates.  He suggested that incentive marketing could be effective in both B2C and B2B.  Yost can be contacted at gary.yost09@gmail.com.