How to innovate with incentives

In order to revive the appeal of vouchers and incentives it is imperative that brands take a fresh approach to discount offers, and as technology advances so must the accessibility of voucher use.

Consumers get bombarded with offers on a daily basis, so in order to cut through the clutter, brands constantly need to come up with new and clever ways of incentivising them. Sending the same tired discount voucher may get some take-up but it will not create the long-term effect brands require today.

“At a macro level, the pace of innovation across the whole digital landscape is rapid, particularly in the world of mobile,” says Philip Maple, general manager of consumer business at O2. “When we talk to customers, we see their needs are changing and quite frankly, unless we evolve and change with them, we are going to become less relevant.”

In order to incentivise customers and keep up with changing needs, the mobile operator has continually adapted the deals available on its Priority service.

“When we embarked on this journey, it was a world of paper vouchers. It was very static. For us to innovate, we have to make sure the offer is easy to use and relevant to customers in a meaningful way; the best way of doing that is by putting it on their phones so they can use it wherever and whenever they want,” he adds.

Although there might be temptation to provide consumers with a multitude of offers in the hope that one or two might be appropriate, Maple advises that it should be about quality rather than quantity.

“We’re not big on just bombarding customers with lots of messages; part of it is about discovery,” he says. “We can load up the Priority digital platform with lots of offers but what we would rather do is talk to customers and figure out their passion points – what’s important to them – and then try and meet their needs with relevant offers or experiences. It’s not always about quantity; it’s about relevance and quality of exclusive offers that other people can’t give them.”

Priority is known for giving customers early access to music gigs, but in order to keep the concept fresh, O2 has expanded the concept into other areas by partnering with brands in gaming and TV.

Red Letter Days used augmented reality app blippar to introduce an interactive approach to its vouchers

Most recently, the brand partnered with Channel 4 to give customers the opportunity to watch the first episode of the final series of Peep Show, 48 hours before it was broadcast on TV.

“It’s one of those exclusive money-can’t-buy offers we put before our customers. We’re always working hard to make sure we are still fresh, innovative and finding different ways to delight our customers. At the heart of that is being able to make our customers feel good about being with O2,” says Maple.

Although the surprise element of early access is important, he believes it is equally crucial to be relevant on a day-to-day basis by reacting to what is happening in a wider context. “When the weather gets bad, for example, we’ll be working with Halfords to make sure our customers can get hold of de-icers, so the little things are as important to us as the big, exclusive ones. This is Priority in its simplest form,” explains Maple.

Since it has become the norm for retailers and restaurants to give consumers a discount, Red Letter Days CEO and managing director Bill Alexander suggests “brands now have to do something different to stand out above competitors and other voucher noise”.

As such, the business has adapted its approach this year by reducing its reliance on promotions. “It’s easy to try and beat competitors with a better offer but you end up devaluing your product altogether. Our experiences are premium and it’s important we continue to convey this message to our consumers,” he says.

Red Letter Days has also started offering promotions in various formats, including e-vouchers, digital codes and physical vouchers.

“We have also introduced a range of special offers rather than just one voucher that sits across all experiences. It’s a great way to highlight our ‘wow’ experiences and inspire customers for gift ideas,” Alexander adds.

The company’s research revealed that customers like receiving a direct mail catalogue, but this Christmas it has updated the format by using augmented reality app Blippar and making it more personal to meet consumers’ increasingly sophisticated demands.

“Personalisation doesn’t have to just involve taking your customers’ names: you can do something clever that gets them to make the incentive personal,” he explains. “Our Blippar feature encourages users to take their own selfie within a sky-dive experience and share the picture to win [a competition].”

Since consumers will be more involved in gaining the incentive, the hope is they will be more engaged with the brand. “It also means your relationship with that consumer will last longer. Instead of receiving a discount code and making a purchase, they’ll have to spend time doing something to receive the discount before making the purchase,” he adds.

Going beyond discounts

Echoing Alexander’s view that consumers are becoming fatigued with the number of offers they receive, Gourmet Burger Kitchen (GBK) has “significantly reduced” the number of traditional discount vouchers it provides, according to marketing director Katie McDermott.

“Our customers are most receptive to personalised incentives, whether it be via an email, our app or in person,” she says. “The benefit of our app is we can use data to personalise offers based on customer location, frequency of visits and participation in previous offers.”

GBK also works with Santander to provide customers with card-linked offers based on their purchase behaviour, which informs the brand how it should target and reward certain consumers.

GBK uses its app to provide personalised offers based on customers’ location, frequency of visits and use of previous offers

“We see strong results because the offers are so relevant to customers and we can measure incremental, long-term value,” explains McDermott. “Card-linked marketing campaigns can [also] be launched at short notice, which enables us to be more nimble in our approach. Instances where this is particularly pertinent include new restaurant openings or to support other promotional activity around seasonal or popular events.”

Paul Wareham, brand and communications manager for car rentals firm Hertz Europe, agrees that the targeted approach is more “intelligent”, which ensures the effectiveness can be easily tracked.

Offering customers card-linked deals is benefiting banks too, according to US data from card linked marketing technology provider Cardlytics, which partners with banks including Santander. It shows that customer attrition dropped for financial brands by 26% on average during the six months after the first reward was redeemed, as well as recording a 16% rise in online log-ins.

Exploiting cross-promotion

Taxi app Gett is incentivising customers by cross-promoting the different strands of its business. It launched champagne delivery service Gett Clicquot earlier this year and most recently Gett Salad.

In order to raise awareness and interest in the newest arm of the business, Gett is offering customers £5 credit to redeem against black cab journeys when they buy two salads.

“Black cabs are at the heart of our business, so we are always looking to see what works and thought it would be great to try something new to add value,” says Kim Monney, head of UK marketing.

She describes the move as “a bit of an experiment” but claims it generated a “massive immediate impact” resulting in a big lunchtime and early afternoon rush for orders.

“One of the benefits of being a digital business is that we can measure everything and see what works and what doesn’t,” she adds. “Success for us is really about acquisition of customers who will become long-term users of our app and our products.

“We want to get as many customers as we can but there’s no point in achieving an amazing up-take of the offer if people only use it once and then disappear because they’re chasing deals elsewhere. That’s not our business model. We really carefully target our offers, and test and learn to understand the kind of customer that we’re looking to acquire.”

When measuring success, Gett therefore looks at the number of people who have taken up the offer, as well as how many times they have gone on to use the app afterwards in order to determine what offer the business should do next time. “From that we can identify our acquisition costs and return on investment,” adds Monney.

Rewarding customers used to be simple. Yesterday’s shoppers could simply choose from a handful of vouchers, however today’s consumer is bombarded with thousands of promotions via email, social media and smart phone apps. They can use the internet to find an offer for anything from a takeaway pizza to life insurance. As a result, many marketers fear that loyalty is being eroded, and it is the customers with the least attachment to individual brands who reap the biggest rewards.

But research suggests that far from being empowering, this surfeit of offers suffocates shoppers. A survey of 2,200 UK adults by Criteo earlier this year found that more than a third of British consumers are frustrated by the volume of advertisements online. It therefore seems that simplifying the choices they face is the best route to winning their loyalty.

This presents a challenge to marketers, but also an opportunity. While making yourself heard above the noise is perhaps harder than ever before, those brands which do so effectively can achieve cut-through and  build strong relationships with consumers in an otherwise depersonalising retail environment.

Accurate data and analysis are the key to winning loyalty  – knowing one’s customer and delivering a simplified customer journey through timely and targeted offers. That’s why, through our Amex Offers platform, we can use our access to spend data to display offers for cardmembers based on their spending history. Equally, brands partner with us because our unique spend data means we can help them pinpoint exactly which of their customers they wish to target and how, such as targeting high spenders or simply helping drive average spend.

Simplicity is also essential. The speed of modern life dictates that redeeming an offer must be simpler than cutting out a voucher and keeping it until use. Even being forced to generate a code can be a barrier to purchase. Applying offers directly to credit card balances – the system employed by Amex – helps to overcome this problem. It also means that participating brands avoid the hassle of handling coupons or having to train their staff in the offer.

So vouchers are not dead, but discount incentives look very different to how they did even a decade ago. A traditional coupon is almost invisible today, while an e-replica could be buried beneath rival offers on a voucher codes website. But brands which are smarter and more targeted can build strong relationships with shoppers who are willing to be guided in their purchasing decisions, and who value simplicity over an excess of choice.

Promoter: American Express Services Europe Limited. Registered Office: Belgrave House, 76 Buckingham Palace Road, London, SW1W 9AX, United Kingdom. Registered in England and Wales with Number 1833139, American Express Services Europe Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009 (reference number 415532) for the provision of payment services.