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STRATEGIES, DECISION MAKING TOOLS & HACKS FOR PUBLISHERS’ INCENTIVE MARKETING PROGRAMS
In response to publishing business models undergoing radical change in recent years, successful publishers are experimenting with new strategies and tactics to grow their subscriber base, retain existing subscribers, engage readers and create more value for advertisers. Creative incentive marketing using reward programs are extremely effective and affordable for publishers working to grow and/or maintain their subscriber bases while also increasing profitability.
WHAT IS INCENTIVE MARKETING? Incentive marketing uses offers designed to motivate a subscriber or prospective subscriber to take a desired action. A wide variety of offers are used within incentive marketing programs including free subscriptions, discounts, trial periods, tchotchke gifts, gift cards and extended subscriptions to name just a few. Incentive offers are limited only by marketers’ creativity and, of course, return on investment (ROI) projections. Often, incentive marketing is used to motivate subscribers to subscribe. However, as we will explore within this paper, incentive marketing can be used very effectively to influence a variety of behaviors beneficial to publishers.
PSYCHOLOGY OF NON-MONETARY INCENTIVE OFFERS When presented with an incentive promotion, subscribers astutely assess the value of the incentive. Is the reward, i.e. the incentive, worth the investment of the purchase and/or the effort required to act on the offer? Within the field of psychology, this assessment is known as the “expected utility” of the award. Is the investment or effort required perceived to be positively related to the value of the incentive? If the answer is “Yes”, consumers will respond favorably. When the answer is “No”, your offer will generate lackluster interest. When the value of the incentive is slightly or very ambiguous, the perceived value of the award tends to be higher. Given that non-cash incentives are more difficult to assign an exact value, there is greater ambiguity which helps to create a higher perceived value.
PSYCHOLOGY OF GIFT CARD INCENTIVES. AREN’T GIFT CARDS THE SAME AS CASH? Given that gift cards have a fixed monetary value; it is reasonable to question whether or not consumers will perceive a gift card offer to be the same as a cash offer. However, there are four important factors contributing to gift cards being perceived to have greater value than cash incentives:
Brand awareness is a very significant influence within
Arguably the greatest value a gift card provides a
the consumer experience; therefore, by offering leading
recipient is that a gift card “permits” or “justifies” the
industry brand gift cards marketers increase the value
purchase of products or services that the consumer
and attractiveness of the offer. In addition, by offering
may not normally buy. Gift cards facilitate the purchase
gift cards for brands consumers are already familiar
of a treat or luxury item that might be outside the
with, publishers can benefit from that awareness
subscriber’s budget (e.g. – the choice of Outback
and have an easier time creating excitement for their
Steakhouse, Olive Garden, the Cheesecake Factory
program. Finally, given the greater perceived value of
or some other restaurant allows participation in a
leading brand gift cards, publishers can often lower the
dining pleasure they may not have otherwise allowed
actual value of the gift card, lowering program costs,
while maintaining desired perceived incentive value (e.g. – “Subscribe today and receive a gift card from Target,
Longer-Term Incentive Value
Walmart, The Home Depot or Amazon”). As mentioned above, the downside of cash incentives
is that they are a singular moment in time and are not separate from a purchase. Gift cards provide the benefit
Monetary offers, which usually take the form of
of extending the value of the promotion and of the
discounts, cannot be separated from the purchase
publisher sponsoring the promotion over the period
resulting in very short-lived value for the marketer. The
the gift card is redeemed. Then, after redemption,
consumer may have been incented to take a particular
the subscriber continues to remember the offer and
action, but there is no lasting benefit for the marketer
the publisher whenever they use or interact with the
beyond that moment in time. With a gift card as the
item that was purchased with the gift card (e.g. – the
incentive the subscriber has multiple benefits as well as
subscriber purchases a blender and may recall the
positive branding opportunities (receiving the gift card
newspaper helped enable the blender purchase).
in the mail, putting the gift card in a wallet, and using the gift card at a retailer or restaurant).
INCENTIVE PROGRAM OPPORTUNITIES FOR PUBLISHERS Publishers should work to incent behaviors well beyond new subscriber acquisition. Of course, new subscriber acquisition is incredibly important and gift card incentive programs work well for these efforts. However, some of the areas publishers can incent include:
• Subscription renewals
• Advanced subscription renewals
• Longer term subscriptions purchases
• Enrollment in auto-pay
• Digital edition subscription enrollment
• Participation in an advertiser programs
Publishers should map the full range of subscriber, reader and advertiser behaviors that will contribute to profitability and create incentive programs for each one of these behavioral leverage points.
FORMULAS & GUIDELINES FOR INCENTIVE PROGRAM DECISION MAKING In order to know how to structure an incentive program, return on investment (ROI) and payback period (PP) calculations appropriate for each program are helpful to create offers and to, over time, adjust factors to optimize results.
Value of New Subscriber Acquisition For new subscriber acquisition incentive programs, the Lifetime Value (LTV) of the Subscriber is the most appropriate calculation. For the purposes the LTV has two primary components: 1) Subscription revenues specifically associated with the individual and 2) the increase in overall newspaper ad value due to increased readership/distribution. For the below calculation only revenues specifically associated with the subscriber are considered due to industry variations related to ad revenue (geographic, demographic, sociographic, subscription type criteria).
LTV = (Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Subscriber)
For example, if a newspaper publisher’s 13-week subscription price is $83.85, the subscriber repeats this purchase 4 times throughout the course of the year and a new subscriber maintains a subscription for an average of 3.75 years, the calculation would be as follows:
$83.85 (Value of 13-week subscription)
X 4 (Number of 13-week subscription purchases over the course of the year)
X 3.75 (Average number of years a new subscriber is retained)
$314.47 New Subscriber LTV
How Much Should You Spend on Incentives? Although setting effective incentive amounts for your specific
Value of Auto-pay Enrollment
business will require experimentation, the following are
Lifetime Value (LTV) of Subscriber X
guidelines for consideration. As in any organization there are
Average Additional Subscriber
multiple competing priorities for each usable dollar. With that
Retention Period if Enrolled in
in mind and because we believe all expectations should be
Auto-pay – LTV of Subscriber =
conservative in nature we recommend the following parameters
Value of Auto-pay Enrollment
when deciding on the appropriate spend:
- B ehavior change promotions (Auto-pay enrollment, early subscription renewal, etc.) should have an expected
$314.47 (LTV) of Subscriber
X 1.42 Y ears Average Addition Auto-pay Subscriber
promotional “lift” of 315% to 405% versus a control group
Retention (92% subscriber
where no promotional incentive is offered subject to the
retention using Auto-pay and
same other population variables (e.g. – instead of having
62% subscriber retention
1,000 subscribers enroll in Auto-pay the organization can
when paying by personal check)
reasonably expect to have 3,000 to 4,000 subscribers enroll in Auto-pay during the term of the promotion).
- LTV of Subscriber
- S ubscriber acquisition promotions should have an incremental sales “lift” of 32% to 40% versus a control group where no promotional incentive is offered subject to the same other population variables.
$132.00 Value of Auto-pay Enrollment
Incentive program ROI should fit into one of these rules of thumb:
• 5% of total sales revenue excepted to be achieved from promotion
• 5 -10% of incremental sales revenue
• 12-24% of incremental profit
• 15 -25% of cost savings in a cost-reduction program (an auto-pay incentive is an example of an increased revenue and cost lowering promotion)
Subscriber promotions are subject to the ABC (Audit Bureau Committee) and its governing rules to ensure a publication does not risk a reclassification of subscriber revenues to excessive subscriber rewards. That said, for subscriber acquisition a promotional gift equal 25% of the subscription purchased falls within ABC guidelines and also acts as a noticeable and desired motivator for the prospect. With gift card promotions, the participation of national brands (restaurants, retailers and gas) lend additional promotional credibility enabling the organization to not have to pursue larger promotional gifts to motivate action. As it relates to basic subscriber behavior promotions (Auto-pay enrollment, advanced subscriptions, etc), statistically, the utilization of national brands (restaurants, retailers and gas), enables the organization to have the promotional program noticed and participated in for lesser reward offered (e.g. – “Receive a $10 gift card from Subway, Chili’s, Exxon/Mobil or Kohl’s” will outperform a $20 discount or free subscription months valued at $25 to the subscriber).
14 PUBLISHER HACKS THAT DRIVE INCENTIVE PROGRAM RESULTS
1. Deliver gift cards in a custom printed envelopes
6. Make sure your gift card incentive amount is aligned
promoting the next step you would like the
with the action you are asking the subscriber to take.
subscriber to take. For instance, a subscriber
For example, a $5.00 gift card for participation in
receiving a gift card for converting on a new
a 30-minute survey is likely not enough incentive.
subscriber offer could be offered another gift card
However, a $5.00 gift card for participation in a 5-10
incentive to enroll in auto-pay or to refer a friend.
minute survey is perfect. “$5.00 for 5 minutes” offers work well.
2. For paper statement subscribers, promote your offer via statement inserts - the nominal cost for
7. Clearly communicate three pieces of information to avoid frustrating subscribers.
4 color/2 sides is usually less than $.02 per insert.
3. For electronically billed subscribers, promote your offer via a call to action (CTA) within the statement email.
4. Make your offer easy to understand and easy to
a. A re they eligible for the incentive?
b. How do they participate?
c. W hen and how can they expect their gift card?
act upon. Use images of the gift cards offered, rather than solely brand or retailer logos, to help clarify the offer.
5. If you are fielding a research study, give every
8. Think through cross-sell opportunities by establishing the series of actions you would like a subscriber to take over time. This is a double edged sword here, as most reward promotions encourage one action,
participate a gift card. Small gift card offers for all
one reward. Be careful to not dilute the power of the
participates outperform drawings or sweepstakes
offer with cross-selling opportunities.
where only a small number of people win. Consumers have both “I never win” mentalities and sometimes are skeptical than winners are actually selected at all.
9. Use both online and offline channels to promote your offer. Don’t forget about your social media channels.
10. Establish goal performance metrics for the program.
12. Use seasonal opportunities to build exciting gift card
After all, if you don’t measure it, you can’t manage
incentive programs. For example, run a “back to
it. Never let “what if we have too much success”
school” new subscriber campaign offering gift cards
become a stumbling block. If one subscriber
that are great for back to school shopping during
enrolling makes the organization $30 then 10,000
July and August while a Valentine’s Day promotion
enrolling will make $300,000. The accounting
offering restaurant gift cards or a New Year’s
department will be thrilled with that “problem.” Be
resolution campaign after the New Year offering
careful about mixing goal performance metrics. For
sporting goods retailer gift cards. In these cases,
example, if 65% of your subscribers are already in
timing is everything with date specific programs and
auto-pay, a huge lift really isn’t as possible due to
extensive lead time is necessary. For example, to
saturation. Experiment with incentive campaign
run a Valentine’s Day specific program, the program
lengths but always, always, always make the
needs to be designed, marketed, the subscriber
promotion “time certain” to motivate the subscriber.
needs to pick their reward and the rewards need to
Some studies show that offering a consistent
be fulfilled so that they arrive near Valentine’s Day.
program for a year or longer can increase program
In many cases, it is far easier to run a “Take your
performance in comparison to short programs.
honey out” reward that is not date specific.
Regardless of your opinion on program length, offers that are too consistent run the risk of
13. Subscribers many times associate their own dollar
becoming an expectation rather than a behavioral
value with a “theme” allowing the program sponsor
to offer fewer dollars while appealing to their inherit value. For example, in a “lunch is on us” when you
11. Think of ways that you can work with advertisers to
enroll in auto-pay promotion, the actual reward
create an offer together. Are there opportunities for
is a $5 gift card. In reality, consumers consistently
both you and an advertiser to achieve a business
associate a value of lunch as $8. By offering $5 for
result together lowering program costs for both
lunch instead of $8, the organization is receiving a
of you, increasing effectiveness for both of you
40%+ perceived value increase at no real cost.
and advancing advertiser value and loyalty? For example, if the Olive Garden is a current advertiser,
14. As good as it is to reach back to existing subscribers
is there an advertiser benefit to offer Olive Garden
to change a behavior, it also pays to incent new
subscribers IMMEDIATELY with the same gift to avoid having to chase them at a later date. In some cases, it makes sense to run an “always on” promotion (e.g. – subscribe today, get your newspaper for only $19.95 per month and also receive Lunch-on-Us when you enroll in Auto-pay”).
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