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It's true. Studies show that adding an attractive sales incentive is far more cost effective than a discount. Consumers view a discount as something they should have gotten or deserve so it is very easy to walk away from a deal that offers only a discount. Their experience is that the discount will still be there in a few weeks or even a few months later if they decide to go through with the purchase at a later time. Rebates are similar. In fact, rebates and discount tend to work against you in the long run because if the customer returns to find the discount is no longer offered, they may feel they are being ripped off. At the very least they are not nearly as excited about making the purchase from you any longer and that’s definitely not a good thing. I think the biggest problem with offering discounts is they de-value your products or services. Let’s say you see a nice flat screen TV offered at a local retailer for $500. You listen to the sales person tell about what a great product it is and when you get back home you read up on the product reviews of purchasers who rave about this wonderful TV. You are now convinced this TV is a good value at $500 and you decide to go back to the store in a couple days and buy it. But then, you pick up the Sunday paper and you see it offered at a competing retailer for $398. How much is this TV worth to you now? What will you expect to pay when you return to your local retailer? Or, will you even go back there? After all, they tried to sell it to you for over a hundred dollars more! See what I mean? None of these things happen with a well thought out sales incentive promotion. Instead, Sales Incentives add value because consumers see them as something they receive at no additional cost yet when comparing prices, consumers factor in the perceived value of the incentive so a competitor who only offers a lower price is actually still at a disadvantage. In addition, consumers understand that it is a limited time opportunity. They are comfortable knowing that when the incentives are gone, the opportunity is gone. Therefore Sales Incentives not only protect the value of your product but they also add a sense of urgency because consumers assume they will not get the same offer if they wait. Sales incentives typically have a much higher perceived value than what they cost which brings me back to my title of this post. What do incentives really cost you? Well, let’s take this $500 TV I was talking about. What if the retailer held their price at $500 but offered a Sales Incentive with a perceived value of $200 with every purchase? Better deal isn’t it? Now, this retailer will receive as much as $100 more than his competitor and I can provide dozens of powerful incentive ideas for only a fraction of that amount. All in all, when compared to offering a discount or a rebate, Sales Incentives produce more sales with happier customers and leave more money on the table. Hence, they cost you nothing.
Tags: incentives, motivation, pricing, product pricing, profitability, sales incentives
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