16 April 2015 • Marketing Week
As consumers grow less impressed by the discounts brands offer through vouchers, using the tactic successfully has become as much about brand building and forming beneficial partnerships as about the depth of the money-off offer.
Vouchers have long been used as a way of driving business to a brand, but as their use has exploded since the recession consumers are no longer so impressed by discounts they have come to expect. Therefore successful voucher campaigns are now just as much about building a brand and creating differentiation, especially in highly competitive markets.
According to a study from online promotion specialists RapidCampaign in February 2015, promotions influence 28% of consumers to spend more, 27% to buy from retailers they would not normally choose, and 25% to make purchases they would otherwise not have made.
So with a growing number of brands offering vouchers and incentives, how do companies ensure that this strategy differentiates them rather than devaluing their offering?
The restaurant sector is one industry renowned for discounts and deals, with many High Street brands offering regular promotions. “For many consumers there is now an expectation of good value in the form of offers and discounts in the restaurant sector and this is something that is likely to continue,” says Sarah Tinsley, head of marketing at Beefeater Restaurants.
Beefeater offers traditional ‘money off’ discounts as well as its permanent ‘kids eat free on Saturdays’ offer, and will also schedule discounts to support certain initiatives such as the introduction of a new menu. “We will plan our discounts throughout the year to fall within key calendar dates or when we are launching new sites or menu options, as well as responding to the commercial needs of the business.”
But Tinsley says that the company is increasingly seeing guests respond to offers that are not price-driven. “Through our kids partnership with Mr Men, we have trialled offering gifts-in-kind, such as a Mr Men water bottle and a branded magazine, which was well received and added another reason for families to visit during the school holidays.”
Brands in different sectors will have different motivations for offering vouchers and incentives. In the notoriously cut-throat financial services industry, online bank First Direct is among many providers that offer £100 in cash for switching current accounts. “Moving banks is a big decision and First Direct recognises that this, coupled with our lack of high street presence, means we need to do more to encourage customers to consider us,” says Zoe Shore, head of customer communications at First Direct.
“We use the incentive as a way to encourage people to look into first direct, to find out more about what we stand for.”
At fledgling minicab booking app Kabbee, which works with over 60 of the capital’s taxi fleets, customer acquisition is the key driver behind offering incentives. Like rivals such as Uber, Kabbee’s ‘Refer a Friend’ programme rewards both the existing customer and the new customer with £10 credit each for a future journey.
“In this way we are constantly acquiring [new] customers so it is a great customer acquisition channel for us,” says Cristina Astorri, Kabbee’s marketing director. “We are seeing a steady growth month on month in the number of people that use it – it’s the most successful voucher programme we have.”
The initiative also aids customer value and retention, key performance indicators that Kabbee closely monitors. “We try to attract the best customers whether using vouchers or not, and we have seen that the customers we acquire from our Refer a Friend programme actually have a very high lifetime value – higher sometimes than channels where there is no incentive. It works very well as a retention channel too, for the people who have actually referred. They are enthusiastic and are true ambassadors.”
This chimes with the RapidCampaign research, which shows that over half (53%) of UK adults look more closely at promotions if their friends have recommended them.
Cash is still king when it comes to wooing consumers. As First Direct’s Shore says: “We’ve tested other forms of incentive over the years, but cash is always the one that drives the greatest response.”
As well as offering cash to new customers, First Direct uses a cash incentive to demonstrate the strength of its faith in its offering. “We differentiate ourselves by offering customers £100 to leave if they’re not 100% happy. We’re the only bank to do so and we’re pretty pleased that so far only around 0.01% take us up on the offer.”
It is a strength of belief that Kabbee also shares, offering a ‘five-minute punctuality promise’ to customers who are members of its loyalty programme, meaning the journey is refunded if the taxi arrives more than five minutes after the booked pick-up time.
“It has surprised me because, in a way, customers like the punctuality promise more than credit – they like the fact that a company can guarantee quality and assume responsibility,” says Astorri. It is a brave attempt to differentiate it from competitors such as Uber, particularly given that Kabbee doesn’t own its own fleet, instead relying on the punctuality of third-party fleets.
While cash might be the ultimate consumer candy, retail vouchers are also popular, particularly among the over-35 audience. RapidCampaign’s research shows that coupons and voucher codes are most popular among the 35-44 age group. Insurance provider Aviva incentivises customers to buy more than one product by offering retail vouchers from Marks & Spencer and Amazon.
“We use vouchers as part of a wider programme of customer recognition, reward and engagement,” says Rachael Laurie, head of customer marketing at Aviva. “The feedback we get from customers is that vouchers continue to be warmly received, and many consider this type of reward the next best thing to cash.”
In some industries, for example telecoms, these retailer incentives have become a key part of the offer to new customers. Many providers now not only offer their broadband service free of charge (excluding monthly line rental), but also a £100 voucher to convince new customers to sign up. But striking the right partnership is key for both brand and retailer. “The most popular vouchers are those from well-known and aspirational retail brands which resonate with our customers,” says Laurie. “We have also used cinema tickets before now, to great effect.”
Kabbee launched a loyalty programme, Kabbee Treats, in November 2014, with customers earning ‘miles’ to be used for both journey credits and retail vouchers. “We work with lots of partners such as Bloom and Wild, Naked Wines and LateRooms and customers can redeem the vouchers direct from our app,” says Astorri, who believes research is essential in identifying which partners’ offerings will best appeal to customers.
“We look at Google Analytics to examine the interests of our customers, and we do surveys and ask which benefits they would like to receive and what interests most. Travel is particularly popular because a lot of our fares are to the airport, so a great partner is LateRooms because we know customers are looking for accommodation when they travel.”
But Astorri says it is important to keep a close eye on how partner offers are received. “We need to make sure that the consumer really likes these offers, so we look at redemption rates and, based on that, we make a call on whether we need to change them.” The company also has seasonal partnerships and focuses on quality not quantity. “We try not to have too many [partner offers] because we don’t want to confuse customers – we want a few of good value rather than a lot of not such good value.”
Of course the partnership also needs to work for the retail brand offering the vouchers. For Marks & Spencer, which partners with numerous brands to offers its gift cards and vouchers, it is about broadening its reach, but only with carefully chosen companies.
“We like to work with brands that complement the M&S brand – we want to be associated with those that have a good reputation in the minds of UK consumers,” says Stuart Lawrence, head of M&S for Business. “The brands we work with vary considerably and they partner with us for lots of different reasons. It might be for the association with our reputation for great customer service; or for a green brand, for example, it might be because of the synergies with Plan A [its environmental and ethical programme].”
Sainsbury’s partners with a number of brands too, offering vouchers and gift cards to customers of brands such as BT Broadband. It takes a similar view. “We work with partners whose ethical standards and values match those of Sainsbury’s, as well as making sure that their services and products are not in competition with what we offer,” says a Sainsbury’s spokesperson. The supermarket benefits from these associations too. “We see new customers through our door and they tend to spend more as they receive savings through the vouchers.”
While discounts clearly work for certain brands in crowded industries, adopting this strategy is still an art which needs to be mastered if companies are going to successfully differentiate themselves. As Tinsley says, “As with all brands, it’s important that you do not over-discount, and that when you do it, it’s an offer that fits within your brand identity. We always carefully consider what value it brings to guests as well as what value it brings to our brand.”
It is also about taking a long term view, as Astorri confirms: “There are always people who look for savings and then just leave, jumping from one company to another so they can save, and that is not the kind of customer we want.”
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