Effective Use of Premiums and Incentives - American Marketing Association

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Effective Use of Premiums and Incentives

By Susan Draddy
Susan Draddy has spent over 20 years in the promotion industry. She is currently President/COO of Carlson Draddy & Associates (CDA), a Westport, CT-based marketing communications agency.

	1. Introduction

We all want to feel that we're being rewarded, whether it's for a job well done or for buying the "right" brand of toothpaste. As one of the oldest forms of promotion, premiums and incentives have likely been used for centuries to induce a desired behavior.

When was the last time you purchased a certain brand of jelly just to get that collectible?

Before the phrase B-to-B was even coined, incentives were being used as a means to reach measurable business goals, improve business relationships and motivate employees and the sales force.

The premium and incentive trend has so captured the American spirit that an entire industry has been built to help support premiums and incentives including promotion agencies, premium development and production companies (domestic and off-shore) and fulfillment companies. Regardless of the level of sophistication, premiums and incentive programs can yield incredible results.

Industry Trends

In 2000, the Premium and Incentive market was a $29 billion* industry. In 2000, industry spending by type was as follows:

Sales Incentives -- $8.7 billion (or 33%)*
Dealer Incentives -- $8.3 billion (31%) *
End User (B-to-C and B-to-B) -- $6.3 billion (23%)*
Non-sales Employee Incentives -- $3.6 billion (13%)*

The industry is growing, with more companies offering incentives and others spending more on premiums and incentives in 2000 versus 1999:

50 percent of businesses are spending about the same
35 percent spent more
Only 5 percent spent less

Source: * Promo Magazine - Industry Report - May 2001

Uses of Premiums and Incentives

Premiums and incentives can be used strategically to meet a wide range of marketing objectives, some of which include:

Employee, Sales force, Distributor, Dealer Objectives:

Maximizing sales
Rewarding loyalty or performance
Gaining share of focus from employees, sales force or distributors
Adding value to defend against competitive promotions, programs or pricing
Educating target audiences

Customer Objectives:

Gaining Product awareness or trial
Increasing sales or market share
Differentiating your product from the competition
Reinforcing brand attributes
Encouraging retail display
Increasing consumer loyalty
Adding value to defend against price reduction strategy

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2001 MarketingPower.com Inc. Contents used by permission of the author.

Table of Contents

1.	Introduction
2.	Premium Offers
3.	Incentives
4.	Premium / Incentive Tiers
5.	Key Success Factors
6.	Step-by-Step Guide