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Secrets for choosing the right incentive

Posted by Chris Gallaher on January 21, 2014

Marketers are continually challenged with finding ways to motivate audiences. In an ideal world, we’d have limitless budgets and the task of delivering eye-popping offers would be relatively easy. We could forgo accountability and wildly incentivize audiences to the point where they would flock to shopping carts. But alas, without considering incentive costs, it’s a virtual certainty our profits would evaporate and we wouldn’t be operating successful businesses.

 

 

The reality is marketers are tasked with making every dollar count. We’re not only responsible for developing compelling offers; we’re accountable for ensuring our programs deliver a profitable return. We are keenly aware that choosing the right incentive is often the difference between success and failure.

The following aims to demystify the secrets for choosing the right incentive. This includes sharing techniques for establishing offers that provide a profitable return. We’ll examine how to develop an effective offer strategy and campaign test. We’ll also explore how email is the linchpin for determining optimal offers and incentive hurdles.

 

 

Developing the offer strategy and campaign test

An effective offer strategy always starts with the business objective. Knowing what needs to be accomplished is paramount. First, marketers need to answer a number of fundamental questions, including:

  • Who is the target?
  • How can the target be effectively motivated?
  • What is the budget?
  • How long is the product available (e.g., how long will the campaign be in market)?
  • Can the target be effectively reached via email?

Once these questions are answered, marketers can begin structuring an email campaign test. When properly designed, the test can help define the right incentive for the right audience.

In a recent test, we were able to figure out the best way to motivate customers to adopt an online service. One of the biggest obstacles was determining the investment threshold. Before we could get started, we needed to establish customer lifetime value.

This was a critical step for developing realistic offer recommendations. Once customer lifetime value was established, we were able to align offers that were appropriate for each segment without over- or under-incentivizing any of the targeted audience groups.

Be sure to check out our blog article, Attributes that define a good or bad offer, to learn more on best practices and the roles offers play in successful email marketing.

 

 

Establishing the value of the offer

One of the most challenging aspects of structuring an incentive is determining the value of the offer. Many times marketers are unsure about what it will take to motivate their target audiences. The challenge becomes increasingly more difficult when facing budget constraints.

In keeping with this, it’s a successful email marketing best practice to test what works. A properly structured email campaign test can help optimize the offer investment.

In a recent email campaign test, we needed to determine how much to incentivize the target audience. Because this was a monetary incentive, it was imperative we hit the mark. Therefore, it was critical that each segment had a sizable enough universe to yield statistically valid results. In our particular case, we needed at least 100 respondents per segment to ensure accuracy.

In executing the test, everything started with the offer matrix. Each email segment corresponded with tiered monetary offers. As the campaign was deployed, responses were seamlessly tracked within the matrix, making it easy to determine which monetary incentives performed best within each segment. What was surprising was that the richest offer didn’t significantly outperform the second-place finisher. While there isn’t conclusive evidence as to why the richest offer didn’t perform significantly better, we theorize customers were sufficiently satisfied with a lower incentive amount. As a result, we were able to significantly reduce the offer investment and increase the campaign’s overall return.

 

 

Determining the optimal incentive hurdle

Another often overlooked aspect of choosing the right offer is the incentive hurdle. Put simply, incentive hurdles are actions customers need to take before they qualify for an offer.

Marketers often shortchange what customers will do in exchange for an offer. In the case above, we tested a number of different transaction hurdles. Specifically, we required customers to complete a certain number of online transactions before they could qualify. We structured the program so that each transaction hurdle aligned with a different monetary amount. Designing the test this way helped determine the optimal number of transactions for each offer investment. What became clear during the test is that segments featuring offers with incentive hurdles were more than twice as effective as those without offers. A key to a successful email marketing campaign is to leverage incentive hurdles that help drive incremental engagement.

 

 

Including an offer expiration date

Successful email marketing campaigns almost always feature offer expiration dates. They are a proven best practice based on the simple fact that consumers tend to put off making decisions. As a critical element in response marketing, offer expiration dates ensure recipients know what’s at stake for not taking immediate action. In recent testing, we’ve seen spikes in performance across all segments that include time-sensitive offers.

 

 

 

 

To learn more on offer expiration dates, check out our blog article, Is email marketing worth doing if you aren’t doing email right?

 

Topics: Email Marketing

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