The ultimate goal of any marketer is to generate revenue, either directly or indirectly. In pursuit of that overarching goal, a marketer may decide to launch a targeted promotion.
Some of these strategies may be designed to:
- Drive an increase in online or in-store traffic
- Spur customer demand for specific products and services
- Introduce a new product or service
- Respond to a similar promotion launched by a rival brand
- Reduce excess inventory and/or minimize loss due to product spoilage
- Boost customer loyalty to generate repeat spend.
As a provider of rebates and incentives, Hawk Incentives regularly conducts research that will help us guide our clients and partners toward making smart decisions about where to spend their promotional dollars. This year, we decided to devote one of our studies marketing strategy. Specifically, we wanted to know:
- What motivates a marketer to choose a particular promotional strategy over another? Lots of promotions will get customers to buy, so how do they decide which route to take?
- What kinds of results are they looking for?
- And what metrics do they use to evaluate a promotion’s performance?
Rebates versus discounts
In January 2018, we worked with the Aberdeen Group to develop a survey that would uncover the business strategy behind certain types of promotions. In February and March, Aberdeen executed the survey, gathering data from 212 businesses regarding their promotions strategies, and what they look for in terms of ROI.
In the survey, we classified promotions as belonging to one of two categories:
1. Reward-based promotions (this includes promotions that require validation, such as rebates, and those that don’t)
2. Discount-based promotions
The first thing we discovered in looking at year-over-year results was that companies realized a benefit from using reward-based promotions versus discounts, and specifically, rebates versus discounts. The average profit margin per customer was 6.1% higher when reward-based promotions were used, as opposed to discount-based promotions.
Another interesting finding in our quest for data on the effectiveness of rebates was in the criteria used to select what type of promotion to run. We discovered that, in evaluating rebates versus discounts, marketers most often looked at how well the promotion would foster customer engagement. To make this determination, marketers will look to their Customer Experience (CX) data.
Right behind customer engagement, marketers most often look at minimizing lost revenue. It makes sense, when you think about it: If minimizing lost revenue is a consideration, then rebates have to be in the running, because by definition, discounts reduce revenue.
Next, we asked marketers how their goals drive the selection of reward-based promotions versus discounts. The number-one response here was about driving sales lift and/or purchase frequency.
Among our participants who indicated they used rebates, the top reason they gave for incorporating the required customer touch points for reward validation was the data-gathering benefits. Thirty-nine percent of respondents told us that requiring a reward validation process gave them the ability to enrich their customer database. With this data, marketers can further personalize future promotions and/or flesh out buyer personas.
Choosing the right reward type
Reward-based promotions require a reward, of course. Staying mindful of the need to monitor the growing trend toward digital rewards (which includes options like egift cards and ecodes), we asked respondents what makes them decide to offer a digital reward versus a traditional reward. The top response, given by 50% of participants, was “Customers prefer a digital reward over a price discount.”
When the promotion is over, how does the marketer gauge its success? According to our survey participants, they look for an increase in customer retention (or loyalty), as well as an increase in total sales. The order of these two preferences, however, is dictated by the type of promotion:
How does your rebates and promotions strategy measure up?
To look at your own promotional strategy with fresh eyes, compare some of your recent efforts to the results illustrated above. Are you seeing similar results? If not, do you
- tend to favor one type of promotional strategy over the other?
- follow a strategy that predates some current marketing technology, like digital rewards and egift cards?
If so, it may be time to try something different. Find out more about the strategies marketers like you are using (and how well they’re performing) by downloading the full report.