February 2, 2010

Premium Incentives Create Sales

By max, jr. leach

Television infomercials sell everything from auto care products to financial how-to courses. And they all have one thing in common: They don’t just sell the product by itself. They load the offer down with premium upon premium upon premium. Ever heard the phrase, “…and that’s not all!”? Then you know what I mean.

Consumers today are used to getting more than just the product from direct sales offers. They like to see the pot sweetened. And that’s why around nine billion dollars was spent last year on premiums and incentives designed solely to achieve one goal: to get the consumer to buy the main product/service advertised.

So if you’re still trying to sell just a product on its own merit, or get an appointment without offering some kind of legal inducement, you are way behind the times, and your call to appointment ratio and your close ratio may be suffering on account of it.

Many professional salespersons have some legal constraints which have to be considered if they desire to induce a person to buy a product/service with some kind of premium or consumer incentive. For example, some states regulate the cost of a gift which may be used to induce a prospective insurance client to grant an appointment. In California and some other states, an automobile dealer may use an incentive to get individuals to take a test drive, so long as they are all treated indiscriminately. But that state will not allow the dealer to advertise that a major incentive completely separate and apart from the automobile and its parts will be granted to purchasers of an automobile.

Taken together, dealers, distributors, salespeople, and manufacturers last year spent around three billion dollars on self-liquidating premiums to get consumers to buy their products; over one billion on sweepstakes, contests, and games; around two billion on trading stamp gift programs, frequent “whatever” and other continuity programs; another billion on premiums directly related to the package offered; one-half billion on free gifts for mailing in proof-of-purchase, and one-third of a billion on other premiums!

So what are you offering or going to offer to get your unfair share of your market? Think about premiums and incentives aimed squarely at the emotions of the consumer.

For starters, consider the most popular “hard” premiums used to get a bigger piece of the consumer-spending pie (roughly in order of popularity): pens (novelty), watches/clocks/calculators, pens/desk sets, luggage/leather goods, apparel (novelty), TVs, jewelry, small appliances, tailored apparel, food/beverages, cameras/photo equipment, VCRs, books/art, sporting goods/camping, stereo/compact discs, personal care appliances, toys/games, tableware (glass, etc.), office equipment, tools, camcorders, home computers, and autos/boats.

Obviously there is a big difference in price, and so a good procedure for you to follow in zeroing in on a premium incentive to use is to approach it in a logical manner:

1 – What are my present ratios of calls to appointments to sales (or of contacts to responses to orders)?

2 – If I were to increase my ratio of contacts to appointments by “X” percent, how many extra dollars would I make if my closing ratio were the same?

3 – How much of this extra income would I be willing to pay for an appointment/response premium incentive which would give me that kind of increase?

4 – If I were to increase my closing/order ratio by “Y” percent, how many extra dollars would I make if everything else remained the same?

5 – How much of this extra income would I be willing to pay for a premium incentive which would give me that kind of increase in my order ratio?

If you do this short exercise, you then have to use your best judgment to determine if this number of extra dollars spent on premium incentives would actually provide you with this increase in your sales ratios. Usually the key is one of “perceived value” on the part of the consumer.

Let’s look at an example. You determine that you can invest $10 in a premium incentive, and you find one with a $15 “perceived value,” such as a quality atlas. You believe this should do the job for you in increasing your number of appointments to calls. The next step is to test out your thesis in actual practice, and see if you get the results you need to get in order to make the premium worthwhile for you.

If it doesn’t do the job, perhaps you need to explore how you can invest the same amount of money in a different premium, and see if you can obtain a higher “perceived value,” as the consumer would view it, for the same number of dollars.

There are other consumer incentives besides the “hard” premium. One of the newest premium incentives to get consumer action is a travel incentive premium. There are now travel incentive companies which specialize in consumer vacation premium incentives. Don’t confuse this with using a vacation package to motivate the dealer or salesperson to sell the product/service – this use of travel as a salesperson or dealer incentive has been around for a long time. Taking these different uses together, however, vacation travel is the number one overall incentive in the United States today. Incentive travel spending topped over $5 billion in 1990, with the top 10 incentive spenders using over one third of their total premium/incentive budget for the purchase and administration of incentive travel programs. Incentive travel crosses all demographic and psychographic barriers. Everyone – all sexes, all ages, all incomes – can visualize themselves on an exotic sun-drenched beach.

Can you get a vacation premium incentive that will work with your company, your product, your service – that will help to increase your sales ratios, giving you greater appointment/response percentages, giving you greater closing ratios? You bet! There are vacation packages to fit every budget, from $10 to $500, and more, from Hawaii to the Mexican Riviera to Mazatlan. The less expensive packages are for lodging only, and the more expensive ones include airfare.

One caveat: Be sure that you use a reputable source. This is really important, because you don’t want to offer a vacation incentive as a premium to the consumers, and then find out later that the person or firm who offered that “unbelievable” deal to you was no longer in business. One company, Action Marketing Programs, Inc., has taken an unusual approach to giving their clients assurance that their customers will be able to travel when they are supposed to. It has a $5,000,000 performance bond, similar to what builders provide a company or individual when they begin construction on a building. (If they can’t fulfill the terms of the contract, the “surety” steps over and guarantees the contract will be carried out as agreed upon, up to the limit of the performance bond.)

Incentive and premiums can make a competitive difference in your sales. They work to motivate salespeople to go that extra mile for the added benefit and, when used to give customers that little nudge to buy, they increase the perceived value of your product. No wonder the field has soaked up nine billion dollars like the Sahara in a monsoon.