From encouraging new purchases to motivating your customers to make more referrals — incentive marketing is a powerful way to help you reach your marketing goals and grow your business. When you use incentive marketing, you offer your current or potential customers something desirable to help you achieve a marketing objective.
In this post, we explore incentive marketing and its potential benefits for your business in more depth.
Incentive marketing taps into this simple formula: ability + motivation = results. In this instance, ability refers to how easy it is for your customer or prospect to do what you’re asking of them, while motivation refers to how compelled they are to do so.
Take this example — a company creates a referral program, offering 35% off their packages for every customer who successfully refers a friend or family member. The large discount encourages sign ups. They also make the program easily accessible to everyone — it’s free and they offer clear instructions on how to refer. Customers have the ability to join easily and they’re motivated to do so — helping your company drive referrals and ultimately grow your business.
Now let’s take a look at how incentive marketing can be a powerful addition to your marketing mix and can help grow your business. Read on for some of the top benefits to your company.
In an oversaturated market, with a range of high-quality products and services to choose from — what you can do for your customers becomes more important than what you can sell to generate more revenue. For example, you can reduce costs and purchase the risks involved with a purchase, such as providing a refund in cases where your customer isn’t satisfied, or tailor offerings based on customer needs.
Key to this approach is also positively shaping customer perceptions by utilizing your competitive advantage and building trust. Incentive marketing is a great way to do this in a cost-effective manner. Enticing incentives help you stand out from the competition. By offering desirable rewards that reflect the interests and wants of your customers, you’ll help define yourself as the more attractive company to give their repeat business to.
Marketing messages can create friction for prospects. Friction is the psychological resistance to saying yes to you — such as agreeing to signing up to your newsletter or making a purchase. Incentives can help move people past this resistance — motivating them to take action.
Incentive marketing can therefore help to decrease this state of friction and makes the action you are asking your customers to do more enticing. As such, it’s an effective way to increase your conversion rates and improve lead generation. Referred leads have a 30% higher conversion rate than those acquired by other marketing means.
In fact, research shows that referral marketing generates conversion rates 3-5x higher than any other marketing channel. While conversion rates for referral-based businesses are far higher – B2B companies with referrals achieve 70% higher conversion rates.
Every year, over $136 billion a year is lost as a result of customer churn. Marketing strategies that can help address customer churn and improve customer retention rates should be a key part of any business growth plan.
One of the main reasons for high churn rates is poor fit between new customers and your product or service. Through referrals, you can use your best customers to attract more customers just like them, who will consequently be more inclined to make a purchase.
Your most engaged, ideal-fit customers are typically the customers most likely to refer your product or services to their friends and family members. From interests to personality and personal values, research shows that friendships and strong family ties are typically built on similarities — which means that some of your best customers are likely to attract similar customers through referrals. More ideal-fit customers result in increased customer loyalty and lower churn rates.
This may be one reason why referred customers have an 18% lower churn than customers acquired through other marketing means. Moreover, after 33 months, referred customers had an 82% probability of still being active customers.
Reward programs are a great way to drive engagement – 81% of consumers are more likely to engage with brands that have reward programs.
Engaged customers tend to interact with your business more, buy more from you, and recommend you more to other customers. Engaged customers represent a 23% premium in profitability, share of wallet, and revenue in comparison to your average customer.
Incentives are a great way to increase engagement by helping your customers feel appreciated. Customers who like a company’s reward program are more than 80% likely to shop more with them.
Loyal customers are the most valuable assets you have. By rewarding your loyal customers for referring their friends or family members, you are rewarding their brand advocacy. You are therefore not only extending their lifetime value, but opening the door to many more returning customers that also have healthy lifetime values.
It is well known that referrals can help you acquire new customers – but many marketers overlook their effectiveness at bringing new customers with high lifetime value. Referred customers are far more likely to make a purchase, to buy again, and to have a higher average order value than consumers obtained in other ways. This is tied to the fact that referred customers are much more likely to fit your ideal customer profile, decreasing the chances that they’ll be a one-off purchase.
Research shows that referred customers:
2. Are 54% more likely to make another purchase
3. Are 25% more likely to spend more with a company
4. Have a 34% higher average order value than those obtained through other media
While many companies focus on acquiring new customers, much of your revenue is determined by your customer retention rates. Just a 5% increase in customer retention can increase company revenue by 25-95%.
In the current downturn, many companies are trying to reduce their spending. But too many are missing their biggest opportunity to keep costs down: building loyal relationships with customers and other stakeholders.
Incentives marketing can create excellent customer experiences and increase loyalty — in which customers feel highly valued by your company and compelled to engage with you more.
Research shows that 57% of consumers spend more on brands they are loyal to. In addition, referrals are a powerful way to improve customer retention rates — when referred by other customers, people have a 37% higher retention rate.
From increasing your conversions to helping you gain a competitive advantage, incentive marketing offers you a host of benefits for growing your business and your revenue.
Curious to find out more about how to get started with a referral program? Get in touch with us here.
May 20, 2022
May 17, 2022