How do companies give away higher value rewards for seemingly much lower value comparative spend?

Take huge cash prize pools as one example.

A business gives you the opportunity to go into the draw to win $1million if you buy a product - maybe you spend as little as $1, and you’re in the draw.

Here’s the secret, the company itself is certainly not giving away the $1million, no way!

They take out insurance to offer the prize, and the insurer takes the risk. 

They are banking on the odds statistically being well and truly in their favour in never having to pay out.

Incentive-based marketing v price-discounting

The strategy is called ‘incentive-based marketing’ according to leading marketer, John Dwyer (JD).

“It’s an insanely powerful customer-attraction tool that most business owners ignore. Instead they feel compelled to go with price-discounting instead.

 It’s just nuts!

 McDonald’s have done it for decades with the free toy in a happy meal, and Amazon more recently giving you a TV streaming service and other broad benefits in return for paying a very small comparative annual fee!”

Being more creative than price discounting 

There is no doubt that many businesses fall into a long-term trap of solely relying on reducing their prices to generate a spike in sales. And this is a huge problem JD sees everywhere, all the time.

“It’s a crazy race to the bottom.” 

“We know it kills our margin, and our brand value, yet we constantly keep pursuing this relentless path of price reductions as the primary method to stimulate customer action.

Try something different!”

Giving away holidays

Frustrated by this ‘race to the bottom’, JD developed his own method to help businesses of all sizes cease price discounting, while still generating a spike in sales.

“I call our Free Aussie Luxury Holiday strategy, a ‘marquee’ incentive program.

Right now, it means you can offer prospects a holiday for two worth up to $900, when they buy from you - but here’s the key, the business only pays for about 10% of that value ($97 at time of speaking). 

It’s a marketing cost.

And, before you ask, no it’s not a dodgy timeshare and no silly conditions!”

The cost of the holiday to the business, $97 in this case, is roughly the same as a 10% discount on price (on a $900 product for example).

“And who bothers to get out of bed for just a 10% price discount these days?”, says JD.

“It works on the psychology that there is so much more value to the prospect, to give something of greater and overwhelming comparative value, than taking just a few bucks off.

How about a free holiday instead?

It’s simply a case of turning a lame 10% Discount into a compelling ‘value-add’ bonus.

We call it an Adult Happy Meal Toy - and post lockdowns, it’s arguably the most powerful customer-attraction incentive you could possibly offer.”

Where do the hotel rooms come from?

JD explains a little bit about the mechanics to see how this actually works.

“We’ve secured lots of unsold hotel rooms at 4 Star resorts around Australia, which is how we can manage and make the program work for businesses.

And hotels love us because we put people in their resorts when they would have otherwise been empty.  

And ‘free guests’ tend to spend more on food & beverage when they’re staying - so it makes sense if you think about it.

We just had to parcel it all up for businesses to take advantage of.

It’s a true win-win-win scenario”

Lower-priced, higher volume products

The program can also be adapted to smaller ticket items according to JD. 

“It doesn’t just have to be a larger sales price item. For example, you could incentivise loyalty with a customer getting their free holiday after 10 hair cuts, 10 café visits or 10 massages and so on.

Just play with the numbers and see what works for you in your business. But, I can assure you that this will seriously outperform just a simple 10-15% price discount offer, and should cost you even less when executed properly.” 

At a time when everyone is looking to hit the ground running and make up for a lot of lost selling time in their business, an incentive based promotion activity like this, may be just the thing to make all the difference.

You can find out more detailed information about JD’s Free Luxury Holiday program HERE.