Incentives

P&S takes a look at the whole idea of incentives and how they could benefit retailers

The idea of an incentive is basically to offer someone something extra in order for them to achieve a target set by the person offering it. The upshot of this is that the target is reached keeping the person who offered it happy, and the person that has achieved it feels they have gained ‘something for nothing’. Ultimately it creates a feel good factor, yet shouldn’t be dismissed as just this as it can be a very useful business tool.

For example, your suppliers may well offer you incentives from time to time when they want to make a push on their amount of sales, or have incentives in place to keep you ordering from them. Last month P&S looked at clothing in our regular ‘Essential Mod’ feature and Wolfrace told us how they send retailers a selection of their clothing range with big orders. While this is a broad idea of an incentive, it shows how this sort of thing is prevalent. You may not knowingly aim to sell more Wolfrace products because of it, but if you’re torn between ordering from two different suppliers then something like that may just swing it in their favour. Alternatively, some suppliers may offer a fixed incentive at the end of a period of time where in that period they set targets for retailers to hit. It’s not massively widespread in our industry, but in other areas of business retailers who sell the largest number of product from that manufacturer in the promotion period can end up with holidays to the Caribbean and similar. Perhaps more of this sort of thing in the performance and styling industry should be employed. At the moment, one of the major incentives you may benefit from though is price discounts for buying in bulk and this certainly isn’t something to be sniffed at, as again it essentially equates to you getting something for nothing. However, it generally means you know that you have to sell those products by larger numbers to get that discount, so it isn’t something that happens by chance.

Incentives need to benefit everyone, and from those you take advantage of you can hopefully see how you prosper. Sell more of one product and get each unit at a lower price for example and you clearly benefit, in the same way your supplier will as they may have moved more product and made more profit than if they hadn’t. But incentives can also be a useful tool for retailers to employ themselves. Look around you and retailers in other areas use them all the time – buy ten cups of coffee from one café, get your little card stamped and then get a free cup of coffee as a bonus. Or buy goods from Tesco, swipe your Club Card at the checkout and then a couple of times a year get a voucher to spend in store on whatever you like. Ultimately everyone likes to get something for nothing, or at least think they are, and it can be a brilliant lure to making them buy your products in the first place.

Before you start offering incentives though, you have to think carefully to make sure they will actually benefit you. There’s no point in selling more product or giving away something for free if you end up worse off. You may also want to concentrate offering incentives around a product or range of products that has not been selling well or decide that it should be a more general incentive scheme that all customers to your business can benefit from. Something like the free coffee after ten stamps idea may be difficult to implement too as there aren’t many products you sell that will be bought with the same regularity as people buy coffee, and a free cup of coffee is not exactly going to put the café out of business either. You may find that a loyalty card type idea would work best as it means previous customers are more likely to come to you first rather than try a competitor on the off chance, yet how you reward them for their loyalty is the tricky part. Ideally you need it to be something of low financial value to you put with high value to your customers.

The whole point of incentives is to offer a lure, and you need to make that lure attractive. Financial incentives are always well responded to, so you may want to give a voucher to spend in your shop to customers who have bought ten things from you over a certain price for example. But it doesn’t have to be financial or even cost you a lot of money. It may be something like a t-shirt or sticker after their fifth purchase from you, which is an incentive that may not actually lure customers towards you initially, acting as more of a reward, but it gives them something for nothing and they will feel valued by you which could keep them coming back. Ultimately in an age where retailers claim they have to work harder to make the same kind of profits as they did a few years ago, any sales tool that you can add to your arsenal needs to be looked at. Incentives, when set about in the right way, offer a way for you to get customers spending more with you and feeling good about it too, which can only be a positive thing for your business.