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Swatek Joe 2013-11

Which Acquisition Incentive System is Better?

A few days ago, one of the ACTON Marketing sales guys asked me if I had a summary sheet that compared the practice of giving premiums to new accountholders when they open the account versus a system of multiple steps that earns a premium at the end.

Usually, I ignore anything sales guys say to me. (Just kidding.) When I looked through my files, I didn’t find anything written on the topic. But what a great idea for a blog post.

I think the issue comes down to two factors:

  1. Instant Gratification
  2. Reward vs. Effort

Let’s begin with the first.

Factor 1, Instant Gratification. Under the typical free gift offer that’s been a mainstay for financial marketers for decades, the individual opens a new account at the bank or credit union and walks out the door with the free gift.

Simple. That’s why it’s a classic. There’s no additional work for the financial institution’s staff. No extra steps for the new customer to take to get the reward.

When the prospect takes the step to initiate the sale (in your case, the account opening) and gets the reward immediately, that’s instant gratification. It’s not only easy to fulfill, it makes the new customer most happy.

Instant gratification is good for a business, too. The customer mentally connects the premium and the exhilaration of getting the free gift with your company. One-to-one connection.

So, your financial institution probably gets the greatest “bang for the buck” when instant gratification is enjoyed by your customer.

Those are the positives. In this simple form, I don’t see any negatives. I suppose cost could be a factor. If you’re in a highly competitive market where competitors give hundreds of dollars as incentives, then it costs you to keep up. But plenty of premium gifts can be purchased at a wholesale rate from premium vendors. You pay about $10 per item and the prospect perceives the gift as a $20 or greater value because that’s what it costs in a retail store. Even higher dollar, higher profile premiums come at a discount rate.

Factor 2, Reward vs. Effort. Here’s the scenario I’ll use. A bank offers a pricy gift as its incentive, but in order to get the gift the customer must complete a number of steps.

Let’s address the good points first. The big-ticket premium, like an iPod, iPad, Nook, etc., or even a large cash reward, makes a big splash, especially on the cover of your direct mail, on posters and print ads. It draws attention to your product, which is the whole point.

However, there’s no instant gratification. This becomes a quest. And like Indiana Jones pursuing the Holy Grail, one wrong step and your prize disappears down a deep, dark hole.

How does the customer feel after she’s completed four of the five steps and misses the last one? Disappointed? Angry? Does she feel like it was a trick?

Not everyone fails the quest for the same reason. Some can’t complete the steps. Others run out of time. Plenty become tired of the process or the effort it takes. The prize that seemed to call them like the ancient siren’s song loses its appeal. It’s too much to handle.

And often, that’s exactly what the financial institution hopes happens. It’s called “breakage.” Retail stores rely on this idea. They advertise a low price, but you get that price only after you apply the rebate. Only a low percentage of people fill out rebate forms.

Breakage is a money-saving factor for campaigns, but what does it do for your financial institution’s reputation? Will those “cheated” customers open other accounts or take you up on another offer? Disillusioned, they might easily be lured by a flashy new offer from your competitor.

Data from our decades of clients’ customer acquisitions show an average checking account customer will open another 2.35 accounts. Often, the purpose for the multi-step redemption is to force customers to open additional accounts or services. But the statistics show that’s not necessary. Happy customers do it anyway.

So in my estimation, the instant gratification of a reward, even a modest one, generates more goodwill among customers than a flashy, multi-step fulfillment offer. I hope this rationale helps you decide what incentive system your bank or credit union should offer. And I hope all the sales guys out there find this useful when they’re asked the question.


I covered similar, but different issues in Restrictive, Anti-Offer Trend.

This is a high-perceived-value premium that costs you a fraction of the amount.

Tagsaccount openingaccountholderbankblog postbreakagecampaigncash rewardchecking accountcredit unionCustomer AcquisitionDirect Maildiscount ratefinancial institutionfinancial marketerfree giftincentiveincentive systeminstant gratificationpremiumpremium giftpremium vendorprint adrationalerebate formsummary sheet

  • More About Instant Gratification | Financial Marketing InsightsMay 16, 2012

    [...] my post last week, Which Acquisition Incentive System is Better?, where I wrote about the advantages of awarding a premium immediately — instant gratification — [...]