Experienced direct marketers know that an effective way to optimize their offers is to give away premiums as incentives to buy. Subscribe to this or that magazine and take delivery of a calculator or compact disc, compliments of the publisher. Give to such and such nonprofit organization and receive a free umbrella or tote bag. Buy something from us and we’ll give something to you. It’s only human nature, after all. People are more inclined to try something new if you can dangle an attractive, appetizing come-on as a reward for their business. You have to think quid pro quo. Which is precisely what banks in the Boston area are doing a lot of lately, according to an article appearing in today’s business section of The Boston Globe.
“Banks have been offering new customers coolers, folding chairs, beach towels, and small cash rewards for a couple of years,” writes Bruce Mohl, “but competition has intensified since Bank of America Corp. took over FleetBoston Financial Corp. last year. Promotions seem to be getting bigger and better and offered more frequently.”
According to the article, Citizens Bank is “testing a promotion that offers a free iPod mini or a $200 gift certificate to any person who opens a checking account with a $2,500 initial balance.”
If you ask me, that’s not just a carrot on the end of the stick, that’s a whole garden salad, dressing included.
Also, Sovereign Bank “is in the midst of a $200,000 sweepstakes” (the branch in Sudbury, my hometown, even has a sign on the door that says, “You could win a $2,500 shopping spree!”) and Eastern Bank “has been offering a free companion airline ticket to new customers.”
Not be outdone, of course, TD Banknorth Inc. – yes, the same bank all New England sports fans have to thank profusely for resurrecting the name of the legendary, old Garden – “will stay open from 7 a.m. to 7 p.m. on Thursdays starting next week and offer special gifts to customers who come in on Thursday to do business. The gift next month is a $50 VISA gift card to customers who open a home equity loan or line of credit.”
Good for all of these banks. And good for their constituencies, too. After all, premiums are more often than not a win-win proposition all around. From a marketer’s perspective, using a premium – especially one with a high perceived value or one that has a natural tie-in to your organization – to sweeten the pot will invariably result in a much greater demand for whatever it is you have to offer. The appeal and popularity of a premium will also go a long way toward solidifying the relationship between companies and customers or, on the nonprofit side of business, donors and charitable organizations. Everyone is happy to get something free and don’t soon forget such acts of goodwill.
Not to say there isn’t a potential downside to using premiums, however. Some consumers only want the free gift. Whether they realize it or not, they don’t care as much about your organization as they do about getting something for nothing. In the long run, they may not be as loyal as those who come to you out of a genuine interest in your products and services. They may be so dependent on incentives that the only way they’ll stay with you is if the gravy train continues to roll, doling out tchotchkes all along the way.
Premiums can be encumbrances in other ways, too. They can add costs and complications for which marketers need to be prepared. Ultimately, any such promotional lures and enticements should be tested carefully and, in most cases, used as an exception, not as a rule. They are most effective when you want to make a big splash for some reason or other, such as new product introductions or any new customer acquisition campaign amidst a fiercely competitive marketplace. In those instances, premiums are usually as good as, well, money in the bank.
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