Everyone likes to get something for free. But learning how to maximize gift-with-purchase incentives is key to making this sales technique profitable to the seller.
Offering a gift with purchase is a proven way to drive sales and gain return customers. The idea? Rewarding customers for their business results in an emotional response that ends in a purchase. Gifts with purchase are proven to:
- Increase revenue
- Drive immediate sales
- Create consumer loyalty
But did you know gifts with purchase can also create additional recurring revenue streams?
Here’s how it works:
Most people believe their consumer choices are a result of rational analysis of available alternatives. In reality, however, emotional response is what drives us to buy from one store over another.
The psychology behind it is simple. Studies show that positive emotions toward a brand or seller have a great influence on decisions to buy and consumer loyalty. Creating a reward system triggers an emotional response in the buyer.
Professor of psychology and marketing Roberto Cialdini explains the phenomenon in his book Influence.
“One of the first things that we learn as citizens of our culture is the principle of reciprocation. The one that says I am obligated to give back to you the form of behavior that you give to me,” Cialdini said.
“If you invite me to a party, I should invite you to one of mine. If you remember my birthday with a gift, I should remember yours with a gift… People say yes to those they owe.”
Cosmetic giant Estée Lauder was a pioneer in using the gift-with-purchase sales strategy in the 1950s. Lauder learned early on that giving away free samples, and later, gifts with purchase, was a surefire way to increase sales and word-of-mouth referrals. For Estée Lauder, this sales approach instantly encouraged spontaneous buying, while increasing customer loyalty. By the 1960s, nearly every cosmetic company had adopted the same strategy.
How to make gifts with purchase profitable
The key to making gift-with-purchase incentives worthwhile to your bottom line is to offer something of value to your customers that doesn’t cost you a lot.
A common incentive offered by wireless providers is to offer customers $150 in store credit for every phone purchased. That costs the company a straight cash value of $150 – not smart.
What if you could offer a gift with purchase that has the same perceived value to customers, but costs you way less? Your company will benefit two-fold; you’ll make more money and gain loyal, return customers.
Consider W3 Solutions’ Road Warrior gift-with-purchase program as an example. This program allows sellers to give a year of free roadside assistance with purchase, a value of more than $100, for a very low cost to the retailer.
The roadside assistance gift with purchase incentive test pilot was run through two major retailers: Costco Wholesale Corporation and The Home Shopping Network. The offer? One-year of free roadside assistance with purchase of a GPS system.
Results: By bundling one year of roadside assistance with Garmin portable GPS devices, their results were:
- 88% increase over forecast
- 104% over all other GPS products
- 63% over forecast
- 135% over all other GPS products
At the end of the year, customers were offered a discounted rate to renew their roadside assistance. For every renewal, the retailer earned a commission.
“Twenty per cent of the customers who received the free roadside assistance, renewed their program benefits, creating a recurring revenue stream for the retailers,” said W3 Solutions’ CEO Scott Walker.
Using these gift-with-purchase techniques, retailers can drastically lower the cost of providing incentives and create additional recurring revenue.