Do Your Customer Incentives Work?
The other day I was shopping in a major department store and I couldn’t help overhearing a conversation between a sales clerk and her customer.
The customer was complaining because she wanted to use her coupons, but none of them would work. After expressing her extreme frustration, she asked pointedly, “Is there any single thing in this store I can buy with the coupon?”
I felt her pain.
As a holder of this company’s charge card, I also get coupons on a regular basis.
Typically they advertise “20% off your entire purchase” or “$10 off a purchase of $30 or more.”
Sounds like a wonderful deal, doesn’t it?
Unfortunately, these coupons are very hard to use. Where the coupons have always had a certain number of name brand restrictions, products that aren’t included in the offer, they are now excluding much more.
If the store puts up a sign that says Deal of the Day, or Special Purchase or something like that, suddenly the coupon doesn’t apply.
This is a recipe for frustration to shoppers who spend time selecting items to purchase based on the assumption that they’re getting a discount, only to find out at the register that they aren’t.
The end result is unhappy customers who often leave items at checkout. Instead of going home with purchases they were looking forward to making, they walk out angry or disappointed.
When these buyers do complete the purchase, they feel that they have one so under duress, or that they have been taken advantage of.
These are the hardly the feelings of goodwill a customer interaction should inspire.
Some Incentives Hurt Business
I see it more and more in retail environments. Coupons that are nearly impossible to use. Discounts, such as $10 off your entire purchase, that end up being scraped back in full when a partial return is made.
Instead of encouraging customers to come back, these businesses are pushing customers away. The message they’re sending is “we don’t really care about you, we simply want your money.”
In the world with an incredible amount of competition and choice, this is not a smart strategy.
The way to win repeat business and increase profitability is to treat customers well. This applies not only in retail, but virtually any consumer or business to business (B2B) environment.
Companies that treat their customers like people (which they are, by the way) earn more loyalty in the long term. They don’t need extreme incentives because their customers come for the experience.
Value brings people back. No matter what business you’re in, it’s imperative to help buyers see the value in their relationship with your company.
Are Your Incentives Backfiring?
Pay attention to the feedback you’re getting. If you’re in a retail environment, observe or listen to interactions between customers and sales people:
- What’s being said at the point of sale, are the subtle or overt complaints being expressed?
- What’s the general tone of the conversation is it upbeat or negative?
- What do your buyers’ facial expressions and body language suggest?
Do customers submit offer codes online, and then dump the transaction, abandoning the cart? That could be a sign of a problem with an offer or incentives you’ve provided.
Does your business rely on discounts? If your revenue model depends on sales and coupons to bring in business, buyers are not seeing the value in paying full price.
You may have trained them to wait for an offer, and they will until you break the vicious cycle.
How to Get Back on Track
To ensure that your incentives actually add value and create stronger customer relationships, track them. Set up systems to monitor the offers you extend, who uses them, and what the results are.
Certainly you’ll find bargain-oriented customers who will always wait for the sale. Others may increase their business if you give them rewards that are actually tied to things like frequency or volume.
Make sure any offers are relevant for your customers, not simply discounts to meet your need for short-term sales.
Relevant offers may include:
- An incentive to purchase an add-on when the main item or service is purchased at full price. (For example, half-price bags with the purchase of the vacuum cleaner.)
- Experiences that build relationships with customers, without requiring a purchase. This creates comfortable environment in which people can buy without pressure.
- Recognition to customers as part of a community or affinity group. This affirms their decision to do business with you, without eroding margins.
A true sign of a healthy business is one that can succeed without endless discounts and price cuts. Those are desperation strategies.
Instead, think in terms of rewards and relationships. Recognize customers for loyalty, and insure real, not artificial, loyalty.
Have you broken the discount cycle? If so, share your story in the comments below.