How to Create Incentives That Really Pay Off
Do you ever check in on your bottom line only to find that the bottom is far too far away from the top; that the gap between your gross and your net really is gross?
If so, don't feel too bad. You're not alone. Lots of small business owners can relate to your situation. While it may be some small comfort to know that others are in the same boat, a solution to the problem would be of even greater consolation.
From the big picture perspective the solution is simple: generate more revenue. But obtaining and sustaining that goal can sometimes be like trying to hold Jello in your bare hands.
When it comes to the details and what works best, each business is unique. A promotional event or incentive that motivates one business's customer may fall flat with another's.
Allow me to illustrate with two real-life examples from conversations I had just this week.
The first conversation was with the owner of a specialty office supply service provider, whom I'll call Sally. Sally feels that what she needs to do right now is increase her client base. When I asked whether she's offering some sort of incentive to her customers to refer new business, she said she is. She offers 10% off their next order for every referral resulting in a purchase.
"Does it work?" I asked. "Are you getting referrals?"
"No," she sighed.
The second conversation was with the owner of a small deli. I'll call her Tina. Tina wants to increase the catering portion of her business. I asked her a similar question.
"Do you offer some sort of incentive to get people to try your catering services?" She answered affirmatively. Tina offers new catering customers a 10% discount on their first catering order.
And now for the big question: "Does it work?"
"Oh, yes," she said. "But I not getting enough new clients for it make a difference."
It could be easy for both Sally and Tina to come to the conclusion that their incentive programs stink and that they should give up on them. Not so fast, ladies.
Let's look a little closer at these scenarios. Both women are offering the same percentage as incentive. It's not working effectively for either one but for different reasons.
Sally's average sale is $50. It seems that the $5 savings doesn't hold enough appeal for her client base. Maybe Sally needs to up the ante a bit and take a different tack.
She could try a drawing instead. Everyone who refers a new customer gets entered in a drawing to win dinner for two at a local favorite restaurant and a limo ride to get there. Suppose this cost Sally $200 but got her 10 new referrals each month. Would it be worth it? (She could even try to get the restaurant and limo service to donate or discount their portions in exchange for the promotional exposure and then her cost would go way down.)
Now, what about Tina? Tina's promotion appeals to her audience, but she is not reaching a large enough segment of that audience. She needs to let more of her target audience know about her offer.
The majority of her daily business comes from the local business community. She could produce a high quality postcard and mail it to those businesses or, better yet, visit them personally one day a week for a month. Or instead of a postcard, there's always my personal favorite - email marketing.
Broad target tactics like BOGO specials yield limited results nowadays. The secret to success, when it comes to incentives, lies in intimately knowing who your ideal clients are and what matters most to them. When you know this and you develop your promotions and incentives accordingly, you are far more likely to get the results you want. If you need help defining your ideal client more clearly, you can download a freebie worksheet from my website to help you sharpen your focus.
The bottom line when it comes to increasing your bottom line is to know who your people are and what they want and consistently let 'em have it!