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John Rose's Blog

Discounts, Gift-With-Purchase, Prize Drawings or Lifestyle and Travel Rewards? And the winner is…

It never ceases to amaze me how so many marketing programs are driven more by habit or inertia, and so few are driven by common sense or innovation.

Let’s take sales promotions for example. There are all sorts of promotions. But they basically fall into one of four categories: discounts, gift-with-purchase (i.e. merchandise give-away), prize drawings, and lifestyle and travel rewards. And it would appear, that little research has been done to determine which work best, which will enhance the brand and which may in fact cause long-term damage in spite of any near term success.

I’ve always believed more in the give-them-more versus the charge-them-less philosophy. So I’m generally opposed to discounts in most forms. The Groupon juggernaut and its clones are shrinking marketing budgets faster than a bowl of cookies in our conference room and can be a real brand killer (more about that in a future post). That’s not to say that there is no place for discounts (shedding inventory of old models to make room for new can work just fine, for example). I’m just saying that they should be used sparingly and carefully constructed to insulate brands against long-term price and perception erosion.
And what about gift-with-purchase, prize drawings, and lifestyle and travel rewards? Which one works best?

We decided to find out.

During the period from 23 to 27 May we conducted a survey to determine the promotion preference of consumers when making various purchases. We polled 80 consumers (50% women, 50% men) between the ages of 18 – 45 in Moscow, St. Petersburg, Novosibirsk, Yekaterinburg and Nizhny Novgorod. We asked them which incentives would best motivate them when making low, medium and high value purchases. The incentives were represented as a 10% cash discount, merchandise gift-with-purchase (TV’s, stereos, etc.), a prize drawing or a guaranteed leisure or travel reward (i.e. cinema tickets, spa treatment, bowling, hotel stay, airline ticket, etc).

You can see the full survey here. However, the results are clear: consumers prefer travel and leisure rewards over any other incentive.

In fact, consumers prefer a guaranteed leisure or travel reward approximately 6-1 over prize drawings, 7-1 over cash discounts and, in some cases, 30-1 over merchandise. If we look at just women, the preference for leisure or travel rewards is even stronger. On average, less than 5% of women would prefer a prize drawing. Men apparently are bigger gamblers, yet on average only 18% of men would prefer a prize drawing.

So when you want to inspire consumers to purchase your product, it would be wise to evaluate and choose which reward promotions actually work best…instead of simply following questionable habits.