What is incentive marketing?

Definition of incentive marketing

Incentive marketing (or consumer incentive) is a method used in marketing to achieve an objective.
An incentive is a gift (promotional code, discount rate, gift card, digital gift, physical gift) or money a brand offers to a target or a customer to encourage a specific behavior.

It can be:
· Download an app
· Subscribe to a newsletter
· Take part in a survey
· Share your opinion
· Rate a product
· Make a first or second purchase
· Make a purchase during a given period
· …

The goal: to promote the brand and its products
Depending on the nature of the incentive and its value, the incentive will be more or less efficient, and will attract different consumers.

Why does incentive marketing work?

Incentive marketing or consumer incentive works with a psychological bias. When someone takes part in something where they can win a prize, they are stimulated. There is a challenge.

Winning a prize induces a state of joy and excitement in the consumer, even if the value of the prize is not high. This process releases dopamine, the joy hormone, into the brain. We all like situations that bring joy and we want to experience more of them. This is why we tend to participate in a marketing incentive campaign launched by a brand.

Benefits of incentive marketing for brands

There are three benefits to using incentive marketing:

• Customer acquisition: 69% of consumers are willing to try a brand and discover its universe, if rewarded.
• Increased awareness: an incentive campaign is a very good reason for a brand but also for consumers to talk and share about it. Some incentive marketing campaigns have even gone viral.
• Boost the relationship with the existing customer base: incentives can target only customers. This is a great way to rekindle interest in the brand in an age where loyalty is fragile. At least 60% of consumers are sensitive to this.

Incentive marketing examples

Contests are the best-known incentive. They fulfill the objectives of brand awareness, acquisition and loyalty. For example: McDonalds’ Monopoly campaign increases awareness for Monopoly and acquisition/loyalty for McDonalds.

With a brand gift card as a reward, it allows potential or existing customers to redeem it on the brand’s website.

Free samples, to acquire new customers, if the test is successful.

Free shipping reduces the barriers and encourages a first purchase.

BOGO or offer a gift for a first purchase, helps to acquire new customers. It can be a brand product or a gift card. Once again, the benefit of the gift card is to ensure a second purchase.

A loyalty program based on points stimulates a brand’s community. Managing the points earned induces several behaviors (number of purchases, values, etc.). Provided that the rewards are relevant and the value seems higher than the effort made. The gift card is one of them and Starbucks is already using it very well.

A gift for customer retention. Marketing incentives improve customer retention by 5% on average, with revenue increases up to 25%.

A reward for specific actions over a given period. Perfect for getting customers to sign up for a new app or to leave reviews/ratings or sign up for a newsletter.

A free gift card for inactive customers. On a database, we have inactive customers (who haven’t ordered since a specific date). Launching an email campaign with a gift card for X amount is an invitation to come back and enjoy a new shopping experience.

A gift card offered to generate traffic in points of sale during a slow period. Offering a gift card of a predefined amount to its customer base, by changing the expiry date, will help manage traffic in points of sale.

Joining a premium program, such as Amazon or Zalando, allows you to leverage the benefits of belonging to a social group. The entry cost must be perceived as lower than the benefits gained.

Why are gift cards a powerful marketing incentive tool?

Gift cards are a great marketing incentive tool because of their simplicity, flexibility and convenience. Overall, the brand controls all the different aspects of this tool.

A gift card’s digital or paperless version can be created in a few seconds. Sending them is also done instantly. This means that we can create incentive campaigns in a few clicks.

It costs almost nothing to create and send; the amount can be adjusted to fit a specific amount. This is important for the profitability of an incentive marketing campaign.

The gift card has an expiration date. The brand can play on the campaign’s urgency and manage the traffic effects of the marketing incentive to level out the sales over the year.

The gift card is a reward since consumers also give it to their loved ones. Bonus: Personalizing a gift card in bulk is quick and easy. After all, receiving a gift card with your name and a personalized message is always better than an anonymous promotional code.

As the gift card is a branded currency, that can only be redeemed in selected points of sale, the brand fully benefits from the impact of the incentive campaign. It ensures that the winner(s) come back to use the card.

When the gift card is spent, information is collected on the buyer: when, where and on what did they spend the card? Did they make an additional payment (spend more than the gift card)? With this data, the brand can calculate the ROI of its campaign.