Magazine article Marketing

Incentives: The Power of Paper

Magazine article Marketing

Incentives: The Power of Paper

Article excerpt

Traditional paper-based vouchers are sustaining their appeal in the face of electronic alternatives.

Vouchers' continuing role at the heart of the promotions and incentives sector is something of a mystery. They are, after all, often labelled as boring and an uninspired choice of reward, and their appeal has been undermined over the years by a series of tax and benefit changes that have increased their cost to clients.

Yet sales figures testify to their ongoing popularity. According to industry body the Voucher Association, the market value for vouchers was a record pounds 1.4bn in 2004, with fourth-quarter figures up 3.7% year on year. What's more, Mintel research indicates that marketers are using vouchers more - 30% of buyers questioned said they would spend more on them in 2005 than last year.

Marketers were persuaded long ago that vouchers are effective for staff motivation, channel promotions and third-party incentives. Tracy Aslam, head of incentive business at Kingfisher Gift Vouchers - whose tokens are redeemable at stores such as B&Q, Comet and Woolworths - argues that, when used as an employee reward, vouchers are a more effective motivator than cash. 'Cash in the wage packet is easily absorbed into everyday spend,' she says. 'With vouchers, there is a reminder of how they were earned when recipients spend them.'

Budget constraints

Yet when it comes to general consumer promotions, vouchers have a lower profile. Philip Shelley, sales manager of gift vouchers at Dixons Group Business and vice-chairman of the Voucher Association, says that a major reason is budget. 'In consumer promotions, you are often trying to reward as many people as possible, and you simply cannot afford to give everyone a face-value voucher,' he explains.

That said, vouchers are sometimes used to make up a prize fund - though Shelley points out that it is not always great business for voucher companies.

'We are looking for incremental spend,' he says. 'If you have a prize worth pounds 1000 and redeem it as Dixons vouchers, then that is the amount somebody will spend. If you give them a pounds 20 voucher, they will almost definitely spend more with us.'

Andrew Johnson, sales and marketing director at Virgin Incentives and Virgin Experience Days, says that a defined value is a drawback of consumer promotions - a pounds 10 voucher is worth pounds 10, whereas a piece of merchandise might be viewed as more valuable, even if it cost less. However, the flexibility of vouchers is motivational, and Johnson believes brands are now buying into that. 'One of our biggest single orders came from a furniture retailer running a huge consumer promotion, and about 18 months ago Polaroid ran an instant-win on-pack promotion using Virgin Experience Days gift vouchers,' he says. 'We have also worked with crisps and snack brands doing on- and in-pack promotions.'

Consumer promotions, in the FMCG area in particular, are likely to feature discount vouchers. Two-for-one, free-trial or money-off vouchers are inevitably cheaper than face-value vouchers, and have proved hugely popular with promoters. Graham Howarth, head of sales promotion at P&MM, which worked with Ford on a test drive promotion offering free family cinema vouchers to see the Thunderbirds movie, says these types of deal have grown because they allow promoters to publicise an eye-catching offer without breaking the bank. 'They are low in cost but high in perceived value, allowing clients to offer a very powerful headline.'

Price of success

Because they rely on a degree of under-redemption, such promotions can be problematic if an offer provokes an unexpectedly large response. Howarth says vouchers are so flexible it is possible to make a promotion fit any budget, but warns that if an offer seems too good to be true, then it probably is. …

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