Consumers: Incentive Overview
• Facts and Figures
• Types of Consumers
• Motivational Factors
As any consumer knows, American business has a love-affair with incentives. Almost everyone has received countless offers from some of the biggest names in American business and from some of the smallest, local shops: A Burger King sweepstakes tied to a new productlaunch; your credit card’s loyalty program; your bank’s incentives to open up new accounts or credit lines; your favorite airline or hotel chain points program; that sign-up incentive you received from your favorite magazine; continuity programs at your local supermarket that save you money on name brand merchandise; the free gift for agreeing to hear a sales presentation, or sign up for an e-mailnewsletter. The variations are endless.
Industry estimates put the market for travel and merchandise incentives at about $29 billion in 2005, and that’s probably a conservative estimate. The promotional products industry alone, which has a significant overlap with the incentive industry, posted $18 billion in sales in 2005. According to the most recent Incentive Federation “Survey of Motivation andIncentive Applications,” 68 percent of the companies participating used incentives to support consumer promotions, specifically to:
• Increase sales
• Encourage pantry-loading
• Promote loyalty
• Promote permission
• Break through marketing clutter
• Target key audiences.
The use of incentives has proliferated in this new age in which businesses want to increase their use of targetmarketing and more effectively engage consumers over the long run – not only to buy more product, but to refer their friends and family.
Consumer incentive programs target not only individuals, but also target businesses and the people who buy products and services on their behalf.
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Facts and Figures
Consumer incentives rarely get the media attention dedicated to advertising orInternet marketing, but they are big business. Of the $80 billion that Promo magazine estimates U.S. businesses spend on promotion marketing yearly, almost $30 billion is spent on consumer incentives, including:
• Sweepstakes and contents
• Gift-with-purchase offers
• Door-opener or offers
• Loyalty programs
• On-pack or in-pack incentives
• Word-of-mouth and referral programs
• Web siteopt-in or subscription sign-up incentives
• Direct mail syndication
• Event-related giveaways
Incentives, rewards, or recognition, are used at one time or another to encourage almost any type of consumer behavior. Despite the prevalence of their use, surprisingly little academic research exists to fully understand the psychological or other affects of many types of incentive programs. The bulkof the available research relates primarily to the activities and business practices related to consumer incentive usage.
The automobile industry and business media have helped create a lot of confusion related to the term of incentives. They frequently use the term incentives to describe what are in effect discounts or rebates – i.e., cash offers used to spur incentives. While this usage mightbe technically correct in terms of a dictionary definition, it creates confusion because it does not encompass the use of “added-value” incentives that are intended to achieve marketing objectives without discounts. The marketing world might be better served, and confusion would be lessened, if marketers agreed on terminology that clearly distinguishes cash incentives and rebates (effectivelydiscounts) from added-value incentives.
Objectives. According to the latest Incentive Federation research of consumer marketers, incentives, rewards, and recognition, are used to achieve the following objectives:
• Increase or maintain sales
• Create new markets
• Gain a larger share of existing markets
• Acquire new customers
• Build customer loyalty or trust.
The major industries that use...