Brands are moving away from blanket discounting to smarter rewards and incentives, using social media tools and data to target consumers.
Instead of offering all customers a voucher or promotional deal – such as buy one, get one free – brands such as Tesco, GameSeek and Acer are recognising the value of creating experiences and personalised rewards and incentives for consumers.
“I remember when 10 per cent or 20 per cent off still meant something, when products sold at the recommended retail price for a long time before anyone even thought of discounting them,” says Stephen Staley, managing director of online video games retailer GameSeek. “These days, some products can retail at upwards of 50 per cent off the moment they go on sale, which is insane.
“The moment you slash prices, you devalue the products and it’s almost impossible to return to full price.”
GameSeek is working with social commerce business Buyapowa to ensure customers earn their rewards by involving their peers and becoming advocates of the brand. In this way, brands can go beyond having an online storefront to using fans or followers to create their own incentives for others.
Brands including Tesco, Sony, Warehouse and Pepsi Max are also teaming up with Buyapowa to enable customers to create their own deals, known as ‘co-buys’. Consumers become brand advocates, selecting an offer from a list and promoting it to their friends, families and colleagues.
The more people who buy in, the better the offer becomes, while the advocate may obtain the product for free depending on how many people they bring to the deal. Tesco, for example, is using the model to sell wine (see Case Study below).
Affiliate site Quidco, which gives consumers cashback on purchases from registered retailers, also takes a personal approach. “We try to move away from blanket offers and be smarter with it,” says Andreas Andreou, commercial director.
Quidco earns commission on online purchases and passes some of that money back to users. Andreou believes retailers could get a better return on investment if they offered unique rewards within each customer group.
“Retailers could say they want to go after a competitor’s customers or for existing customers to spend more with them,” he says. “You shouldn’t pay the same to a competitor’s customer as you would to a loyal customer.”
Quidco uses data to inform campaigns and personalise offers, so a retailer may give 5 per cent cashback to one consumer and 3 per cent to another, depending on their respective spending behaviours. “This has been a lot smarter than creating a blanket 10 per cent offer,” says Andreou.
Creativity with coupons
Innovation in the use of coupons has also brought changes for consumers. Last month, Valassis Communications launched an omnichannel redemption solution called Verso, which allows brands to change their offers in real time.
The system scans a coupon and checks its validity against a live master file. So an offer can be changed in real time from a money-off coupon to a free product or be worth more during a set period, creating flexibility for the retailer in rewarding customers.
High-street brands are also adding an element of individuality to their gift cards and vouchers. Fashion retailer New Look’s egift card, for example, can be personalised with messages and video. The card is currently available only to consumers but the store hopes to adapt it for staff incentives too.
Brands need to look at what they are trying to achieve and whether the reward is the right fit for the audience or not
Tracy Aslam, head of sales and business development at New Look business solutions, says: “Brands need to look at what they are trying to achieve and whether the reward is the right fit for the audience. They need to dress it up and make it relevant.”
House of Fraser is focusing on the variety of channels through which consumers now shop, with gifting options including cards, paper vouchers and e-gifts. However, Quidco says some retailers are losing out by still treating channels as silos.
Andreou says: “When we try to work with retailers in a multichannel environment, we sometimes find they’re not ready for it or don’t have the department set up. It’s costing them because all the stats show that multichannel customers are the ones they need to go after.”
When planning new incentive strategies, brands must bear in mind the value of the reward to the recipient. Staff incentives, for example, should be tailored to motivate the employee concerned, while for consumers it must be relevant to both the brand and its target audience.
For example, peanut crunch bar Mr Tom used social and digital media to run a competition with a £1,000 prize. It wanted consumers to talk about the brand on social media so it created its ‘Keeping Britain nuts’ campaign.
Working with outdoor advertising company JCDecaux, the campaign was a “celebration of the nutty pastime of gurning”. Outdoor screens featured photos of consumers pulling faces, submitted via social media. The activity increased the number of followers by more than 7,000 per cent and initiated chats with existing and new fans.
People who can influence their friends to buy something can be almost as valuable to a brand as what they spend themselves, says Buyapowa founder Gideon Lask. The focus should be on identifying and engaging with those consumers beyond the initial sale or transaction.
“The real value in that consumer is not just what they spend but the influence they have over their networks, their friends, family and colleagues,” he says. “If you can activate them to become an advocate and acquire those other customers, the overall cost of customer acquisition goes down, the overall lifetime value of that customer goes up and it changes the rules of acquisition and engagement.”
GameSeek’s first co-buy scheme generated revenue at a rate of £32,000 an hour, with a purchase every two seconds. Ninety per cent of customers were new to GameSeek so it managed to achieve a cost-per-acquisition reduction of about 80 per cent on traditional affiliate acquisition.
GameSeek’s Staley says: “We’re not a big national chain with stores on every high street; we’re the David to those Goliaths. But this is helping us punch above our weight and we’re winning.”
He warns, however, that although “every successful engagement can mean a stack of new customers and incremental sales, it can also mean alienating large numbers of people and missing out on new business”. It is a risk, he says, but it would be far riskier not to at least try.
New reward offers must fit seamlessly into wider marketing campaigns. Last month, PC brand Acer created an experiential zone
with JCDecauxLive at London’s Paddington Station to promote its tablets and laptops, offering money-off vouchers, an important part of the activity as the brand can collect data on potential customers.
As customers change their shopping behaviour in line with emerging technologies, so brands must adapt their reward schemes to keep up with consumers. Using data to create bespoke offers is the smart thing to do.
Case Study: Tesco
Tesco has teamed with Buyapowa to test the use of social media to encourage wine sales, with customers telling the supermarket which products to feature in offers.
Customers use social sharing tools to get their friends, families or colleagues to support the offer ideas. The most popular products are turned into co-buys, where the shopper and their contacts can share the benefits of the deal. In essence, customers choose the offers in return for word-of-mouth marketing.
Co-buys last for only a short time and apply to limited stock, encouraging customers
to sign up to alerts to ensure they do not miss out. The more people who buy the deal, the better the price becomes for everyone involved in the co-buy.
This is an incentive for shoppers to share the deals through social media sites such
as Facebook, Twitter and LinkedIn, via email or using widgets provided by Tesco for blogs and Tumblr pages.
Customers can also win the co-buys for free by introducing the greatest number of people. The campaign garnered 50 per cent peer-to-peer referral rates to Tesco co-buys,with the data showing that consumers’ trust in their friends’ recommendations is seven times greater than in a brand’s marketing campaign.
The Tesco co-buying channel has run nearly 100 consumer-curated co-buys to date, driven by thousands of requests from Tesco customers.
The big three challenges
1. Keeping up with consumers
A key challenge across all retail sectors is finding out how different groups of customers like to shop, but it is vital to determine their likes and dislikes if consumer rewards are to remain relevant. On staff incentives, John Dove, business incentives manager at House of Fraser, says: “The challenge is that continual journey to keep up to date with where the customer is going and keep up with trends.”
2. Knowing what to try
Marketers need convincing of the opportunities in co-buying, for example.
“We have no challenges in the end-consumer getting it. Our challenge is finding retailers and brands that are innovative and happy to give it a go,” says Buyapowa founder and chief executive officer Gideon Lask. “Fortunately we are finding those people among Debenhams, Paddy Power, Tesco and Argos, but we want more of them.”
3. Giving the power to consumers
It is a huge leap of faith for a brand to allow consumers to decide which deals to offer. Online video games retailer GameSeek says it used to guess what its customers would respond to but now it asks them what they would like. Managing director Stephen Staley says: “Sometimes they may ask for something you hadn’t anticipated, so you have to be quick on your feet. When you allow your customers to ‘pull’ deals from you, rather than always pushing things at them, the conversion rates go through the roof.”