Incentive Marketing – Good or evil?
Recently incentive marketing has boomed and has fast become popular among marketers. The simple reason being the campaign seems to drive conversions at a very low cost. But do they really do any value add and help improve the sales chart? Users are increasing getting hooked to such platform with the notion of collecting incentives they are awarded, be it in terms of cash back or a free service / product in lieu of the purchases they do via such platforms. Let’s have a look at few of the aspects associated with incentive marketing.
One of the major concerns with incentive marketing is the lack of product discovery as the intent to buy a particular product is already made. Which means such marketing campaign does not bring any incremental performance in essence. They just eat a pie of transactions that is driven naturally by either organic or other channels. At a high level it just increases the cost of the company in the long term and if company is looking for efficient the cost just gets adjusted in the cost, impacting the user itself.
Notional high performance and vested interests:
Since most of such platforms are rewarding users to complete a transaction via their platform, the cost of acquiring a conversion is too low for these platforms or negligible. There is usually not much media cost they need to bear as the users come back to them on their own, looking for incentive they are promised by them. Because of this, such players are able to offer a very low pricing to run the marketing campaigns. This makes the performance metrics look notionally very high from these campaigns. But the real question to ask is that are they really driving any value from the high converting conversions?
In some cases the marketers are biased towards such campaigns as they can improve their own KPIs internally by getting such sales attributed to their efforts at seemingly high performance. With many e-commerce players in a growth phase and have a lot of chaos in the teams, these attribute gets un-noticed!
Validation and cancellation adjustments:
Since the nature of commercials for such campaigns are tied to the transaction driven by them, the payout is either a cost per transaction or a commission of the sale value. The players typically earmark a portion of their payouts for the incentive they give to users, either in terms of cashback or other rewards in kind. This makes the platform prone to fraudulent transactions. This is why marketers have started validating each and every transaction driven on such pricing models. They typically also adjust the orders cancelled by a user from the payouts.
Impact on performance marketing ecosystem:
With the growth of incentive marketing, there is an undue pressure on other platforms in the ecosystem that are driving performance by technology. Some marketers have started measuring them with the same lens as affiliates, expecting similar ROI metrics which is unfair. The cancellation and validation process as discussed above has led to the process of offsetting cancelled / returned orders. This is unfair to ethical platform that are driving the performance based on technology or optimization. The returns cost a dent in their margins and expose them to risk of loses. This coupled with the competitive pricing causes these players to lose out and struggle to sustain, in spite of the value they might be driving.
So the question to ask the marketers is that should they really support incentive marketing where it’s not really needed. Though such promotional campaigns might drive some new user acquisitions by activating them through an incentive to try out their service, does it really drive any value from their existing customers?
And the question for a user is that does using these programs really drive them any benefit or are they paying for the incentives themselves indirectly?