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Incentives: 5 Cardinal Rules, 10 Great Ideas

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When the economy gets tight, customers can take forever to make a buying decision. So, managers start spending conference room time trying to think up incentives that will encourage the customer to buy.

Any incentive will cost the company something, so make sure that whatever incentive you use actually causes prospective customers to take the next step in their buying process.

I interviewed Mac McIntosh (sales-lead-experts.com) for this article, because I knew he'd have some great ideas on this subject. As we talked, it was obvious that we agreed on the "cardinal rules," and he also had some great incentive ideas.

Note also that very few of these ideas incorporate an actual discount—a slippery slope you'll want to leave for your less-imaginative competitors.

The 5 Cardinal Rules of Incentives


1. Offer incentives that relate to your product or service

Any clueless executive can order a bunch of iPods and instruct salespeople to give them away in an attempt to get the customer to buy. What happens most of the time in those situations is that a lot of teenagers whose parents were given the iPods will end up with an iPod, and the parents' buying decisions won't be affected.

It takes hard work and a lot of thinking to come up with an incentive that somehow relates to your product or service. Map out the customer's buying process, and identify all of the barriers to the sale. Think about what you can do at each stage to make it easier for the customer to get to the next step.

Besides, imagine the buyer talking to his boss about the incentive. "If we buy this, I get an iPod!" will not go over as well as "If we buy this, we'll get three months of free maintenance."

2. Offer incentives that make it easier for the buyer to sell the purchase to his managers

It's quite common for one "champion" to be excited about a product or service, but he has trouble convincing others. He may hear: "It looks great, but it's not in the budget." Incentives that may work in this situation include the following:

  • "The vendor will finance the deal"
  • "The vendor will throw in the education for free."
  • "The vendor will cover all travel expenses for the team getting trained."

3. The incentive needs to be appropriate for the stage of the buying cycle

A buyer who is still at the early stages of his buying cycle—just gathering information about solutions, for example—will pay no attention to any incentives trying to get him to "buy now." What he wants at the early stages is proof that you understand his situation and concerns and are able to educate him in a helpful way. When he's closer to making his buying decision, he'll be more likely to be motivated by an incentive to "buy it now, get this stuff free."

4. The incentive needs to be really simple to articulate and understand

It's easy to get too clever with an incentive so that only a lawyer could figure out how it really works. Customers will completely ignore a too-complex incentive, and your resellers or business partners will, as well.

The most successful incentives can be explained in one simple sentence: "Buy one, get one free," "Buy now, pay later." "Buy now, get X." "Buy 50, get this." If there is a time limit, make it part of the short description.

Your business partners and customers, especially in a tight economy, are being bombarded with dozens of offers. The one they are most likely to remember—and act on—is the one that can be described in one short sentence.

5. Offer an incentive that gets to the heart of their biggest concern

People who buy software—especially large, complex software systems—have been burned repeatedly by companies who promise the stars... and then deliver defective flashlights. Consider creating an incentive that faces this reality head on: "If we can't get this running by July 15, your first year of maintenance is free."

Obviously, don't make the promise if you aren't sure you can keep it, but realize that this type of promise removes the biggest barrier of all—"can they be trusted to deliver?"

* * *

People hesitate when they are buying something because every purchase is a risk. In each case, you're giving up something that you know is valuable (money/budget) for something that may turn out to be valuable—or a liability. Anything you can do to reduce the risk will increase the chances of making the sale.

And isn't that what incentives are really all about? You're not in the business of giving away your product or service... or iPods, for that matter. You're in the business of selling your product or service for a profit. Incentives should support that activity, not detract from it.

10 Great Incentive Ideas

1. Offer financing or leasing

Finance the purchase, with low interest. This changes the budget impact, and helps make it possible for the champion to justify the expenditure to Finance and management.

2. Throw in additional services or products if they buy by a certain date

This type of incentive is working well right now. Additional services or products are anything they would normally pay for that "goes with" your product or service.

3. Make a promise related to after-the-sale activity

As I mentioned before, you can guarantee that the company will be "up and running" by a certain date, or they will get a special deal as compensation. Make sure that you and the customer agree on what "up and running" really means. Or, offer VIP, 24/7 service, and priority support.

4. Use free trials or pilots to help them absorb the product or service in small bites

If the "whole thing at once" is too much for them to bite off, break it down into smaller pieces. This is another incentive that eases the budget burden.

5. Offer services for a reduced price or for free, during the times when your people aren't fully utilized

If your sales tend to drop off during a particular time of year, rather than having your service people trying to look busy, encourage the customer to buy during the slower period—and give him a nice discount on those services.

6. Pre-stock the "supply cabinet" when they buy the first time, but only charge them for your products when they use them

You sell 100 laser printers to a company. They will also need cartridges. Offer to sell them a year's supply, at a set discount price, but don't actually bill them for each new cartridge until it is taken from your "supply cabinet."

It doesn't matter if you have a real supply cabinet on site, if your rep refills a supply cabinet each week at their site, or if you get them dropped shipped from another vendor—the point is, they are going to get cartridges from you for the next year, and you won't charge them until they actually place an order for a new cartridge. This helps them get the volume discount without paying in advance for inventory and ensures that you will get their cartridge business for the next year.

7. Quantity discounts

This seems obvious if you're selling a product, but you might want to consider it when selling services as well.

8. Lock the price

Let's say you're selling something that is prone to price increases, because the costs you have to pay keeps going up (such as fuel costs, material costs, etc.). Offer to lock in the price for a given period of time if they make the initial purchase now.

9. Offer to pay for an associated product

"Buy this car now, we'll pay for the next three years of your gas."

10. Create a rewards or points program

Keep it as simple as possible, with as few conditions as possible. "Fly 16 times, get one flight free," is more compelling than "Earn a certain number of miles with each trip, apply those miles to other trips, depending on where those trips are going to or from, and except during blackout dates."

Figure out how to get your resellers involved, too. They could get points for all the products they've sold for you, and apply those points to other products and services you sell—effectively earning more profit on subsequent sales. This encourages them to sell your products and services in the first place, and to sell more of them as they earn points. They could also exchange their points for marketing or telemarketing services that you provide.

* * *

One more thing. The best source of incentive ideas will come from the minds of your customers and business partners. Ask them what would make it easier for them to say yes. Ask them what others have done to encourage them to take the next step—in related or even non-related businesses.

Not only will you get great ideas, but they will be ideas that are a good match for your situation. You won't be wasting money on ideas that simply won't work. Instead, you'll know exactly what you should do.

The customers and partners who gave you those ideas—and everyone else you sell to, or who sells for you—will think, "Great, they understand what I really want, and they've figured out how to give it to me."

That alone is a very compelling incentive to do business with your company.


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Kristin Zhivago is president of Zhivago Marketing Partners (www.zhivago.com) and author of the book Roadmap to Revenue: How to Sell the Way Your Customers Want to Buy (www.roadmaptorevenue.com) and the Revenue Journal blog (www.revenuejournal.com).

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