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Session 5 Incentive
Conversion Sequence
C = 4m + 3v + 2(i-f) - 2a
Wherein:
C = Probability of conversion m = Motivation of user v = Clarity of the value proposition i = Incentive (additional) to take action f = Friction elements present a = Anxiety elements present
Research Notes: Background: A student from our certification course in landing page optimization tested two different incentive options on a B2B email landing page seeking to promote the download of a specific white paper Goal: To improve landing page conversion rates while generating opt-ins for ongoing communication Primary research question: Which incentive will generate the most conversions? Approach: A/B single-factor test
Incentive #1
Incentive #2
The cost of these offers was the same, but which do you think performed best?
CR 43.0% 56.5%
Research Notes: Background: An online people search company that was losing many orders due to cart abandonment. We wanted to find a way to recover as many of these orders as possible with a minimum incremental marketing spend Goal: To recover partially completed but abandoned orders through a sequence of basket recovery emails Primary research question: Which basket recovery sequence and offer will generate the most sales? Approach: A/B split test (variable cluster)
The table below shows the performance of the initial test, using a sequence of two email messages.
Emails Sent
ND ND 8834 8610 17444
Email Description
Email Capture 1-hr email Email Capture 24-hr email
CTP Clicks
252 100 352
CTR
2.85% 1.16% 2.02%
Sales
24 1 25
CR
9.52% 1.00% 7.10%
Price
$29.00 $29.00
Net Rev
$696.00 $29.00 $725.00
EMAIL TOTALS
Note: With no additional marketing spend, the initial set of basket recovery email messages yielded 25 recovered sales for $725 in additional revenue from a single send.
We then added a third email to the sequence that offered a discount on the cost of the service as an incentive.
The original price was $29.95, the discounted price is $19.95 (33% off).
CTP Clicks
252 100 145 497
CTR
2.85% 1.16% 1.72 1.92%
Sales
24 1 63 88
CR
9.52% 1.00% 43.45% 17.71%
Price
$29.00 $29.00 19.95
Net Rev
$696.00 $29.00 $1,256.85 $1,981.00
EMAIL TOTALS
What you need to understand: Adding the discount incentive email boosted conversion rate for the series by over 149% (17.7% vs. 7.1%) and generated a more than 273% higher level of net revenue ($1,982 vs. $725). Conversion from click through to sale for the third email was over 43%.
Definition: Incentive
(Dictionary general usage): Something that incites or tends to incite to action or greater effort, as a reward offered for increased productivity. (Marketing): An appealing element you introduce to stimulate a desired action (discount, bonus, ).
Key Principles
1. The objective of Incentive is to tip the balance of emotional forces from negative (exerted by Friction elements) to positive.
ABANDON
Friction Elements Incentives
COMPLETION
2. Often, businesses will try one incentive offer and then quit. Incentives must be tested. Until you find one that gives you a major boost, you must assume you have not yet found an ideal incentive.
Examples of Incentives:
F
3.
Key Principles
Determining the ideal incentive consists of three primary components: Marketing Intuition Perceived Value Differential (PVD) Return on Incentive (ROIc)
Key Principles
The path to finding an ideal incentive
FEASIBILITY
All Incentives
Using marketing intuition to determine which incentives are relevant to the audience as well as cost effective
OPTIMALITY
Using PVD to narrow-down and determine the optimal incentives to test
ACTUALITY
Testing and using ROIc calculations to find best performing incentive
Ideal Incentive
F
1.
Key Principles
When we refer to marketing intuition concerning incentives, we are referring to the ability to answer two often overlooked questions:
A. Is the incentive relevant?
To the ideal customers motivations To the core offering of the page
Note: If you have to spend time explaining the value or attempting to sell the incentive, it is not relevant enough to your ideal prospects. The value of the incentive must contribute value to your offer, without competing against it.
F
1.
Key Principles
When we refer to marketing intuition concerning incentives, we are referring to the ability to answer two often overlooked questions:
1. Is the incentive relevant?
To the ideal customers motivations To the core offering of the page
2.
PVD = Vp - C$n
Wherein: PVD = Perceived Value Differential
Vp
Example:
An incentive that costs $5 per unit but has an estimated perceived value of $49 is better than one costing $19 but an estimated perceived value of $30.
Note: Of the feasible incentives, you want to identify those with higher estimated PVD, for they are more likely to drive the biggest differential between net revenue and net delivered cost.
F
1. 2.
Key Principles
High PVD is predicated on both market-driven elements and marketer-driven elements. For market-driven elements, you are seeking an item that combines high market value with low delivery costs. (e.g., bundled, electronic, outsourced) For marketer-driven elements, you are seeking to improve the presentation of the incentive.
3.
But this A FREE Box of 15 Titleist Pro- V1x Golf Balls Sign-up for 12 Months of Golf Digest and get
The Packaging
Not this A FREE Set of Titleist ProV1x Golf Balls
But this
A FREE Set of Titleist ProV1x Golf Balls Sign-up for 12 Months of Golf Digest and get
The Exclusivity
2010
A FREE Set of Golf Balls from the 2010 Masters Reserve Supply (only 200 sets in existence)
The 60-Minute Training Video How I play Golf by Tiger Woods + A boxed set of the golf balls Tiger prefers to use on his own home course.
Vs.
Vs.
PRE-EVENT EMAIL TRAINING
PVD = Vp - C$n
Est. Perceived value (Vp): $450 Net Delivered cost (C$n): $30
PVD: $450 - $30 = $420
PVD = Vp - C$n
Est. Perceived value (Vp): $400 Net Delivered cost (C$n): $1
PVD: $400 - $1 = $399
PVD = Vp - C$n
Est. Perceived value (Vp): $500 Net Delivered cost (C$n): $275
PVD: $500 - $275 = $225
PRE-EVENT EMAIL TRAINING
PVD = $400 - $1
PVD = $420
PVD = $399
PVD = $225
This PVD calculation suggests that the printed book will be the ideal incentive, with the digital book as a close second. However, because of the ever-changing perception of digital media, gaining certainty about these incentives would require testing and further ROIc calculations.
ROIc = $14,000
Print calculations: P$n = (200 sold) x $500 = $100,000 C$n = (200 sold) x ($400 + $30) = $86,000 (Ticket Price - $500 Delivered Cost - $400)
ROIc = $18,810
Digital calculations: P$n = (190 sold) x $500 = $95,000 C$n = (190 sold) x ($400 + $1) = $76,190
F
1. 2.
Key Principles
Incentives must be tested. The ultimate and final indicator that you have discovered the ideal incentive is ROIc. There are two primary ways to measure this: 1) Total ROIc and 2) Percent ROIc.
Key Principles
Total ROIc: The total dollar difference between incentive offer cost and net increase in sales over a specified time period. Focuses on total volume of return.
Example:
Key Principles
Percent ROIc: The percent difference between cost and net increase in sales for a specified time period. Focuses on efficiency of return.
Wherein:
ROIc% = Percent Return on Incentive P$n = Net profit impact from Incentive C$n = Net delivered cost of Incentive
(C$n = $10,000)
Appendix
ROIc Calculations (click on any of the following links to see example ROIc calculations for specific incentive types)
1. Example 1: Whitepaper 2. Example 2: Free Gift 3. Example 3: Complementary Product
Final Note: ROIc is simple in principle can be messy in practice due to differing 1. Revenue models
Subscription (length, renewals, multi-year) E-commerce (Order size?, attribution)
2. Incentive types
Premiums (free gifts, electronic v. physical) Discounts (terms)
Rebates (terms)
Free shipping (thresholds, )
You should partner with your accounting and sales departments to establish the correct computation of the ROIc elements for your particular business model.
FEASIBILITY
All Incentives
Using marketing intuition to determine which incentives are relevant to the audience as well as cost effective
OPTIMALITY
Using PVD to narrow-down and determine the optimal incentives to test
ACTUALITY
Testing and using ROIc calculations to find best performing incentive
Ideal Incentive
Key Principles
1. The objective of Incentive is to tip the balance of emotional forces from negative (exerted by Friction elements) to positive.
ABANDON
Friction Elements Incentives
COMPLETION
2. Often, businesses will try one incentive offer and then quit. Incentives must be tested. Until you find one that gives you a major boost, you must assume you have not yet found an ideal incentive.
F
3.
Key Principles
Determining the ideal incentive consists of three primary components: Marketing Intuition Perceived Value Differential (PVD) Return on Incentive (ROIc)
Key Principles
The path to finding an ideal incentive
FEASIBILITY
All Incentives
Using marketing intuition to determine which incentives are relevant to the audience as well as cost effective
OPTIMALITY
Using PVD to narrow-down and determine the optimal incentives to test
ACTUALITY
Testing and using ROIc calculations to find best performing incentive
Ideal Incentive
Key Principles
PVD = Vp - C$n
Wherein: PVD = Perceived Value Differential
Vp
F
4. 5.
Key Principles
High PVD is predicated on both market-driven elements and marketer-driven elements. For market-driven elements, you are seeking an item that combines high market value with low delivery costs. (e.g., bundled, electronic, outsourced) For marketer-driven elements, you are seeking to improve the presentation of the incentive.
6.
F
7. 8.
Key Principles
Incentives must be tested. The ultimate and final indicator that you have discovered the ideal incentive is ROIc. There are two primary ways to measure this: 1) Total ROIc and 2) Percent ROIc.
Key Principles
Total ROIc: The total dollar difference between incentive offer cost and net increase in sales over a specified time period. Focuses on total volume of return.
Percent ROIc: The percent difference between cost and net increase in sales for a specified time period. Focuses on efficiency of return.
Example: White Paper or E-Book This Internet newsletter publisher offers three free e-books when you register for their free electronic newsletter. Assumptions: Net profit value of a new subscriber is $2/mo. from ad and list revenue. Incurred cost for e-book delivery is $0.10/unit for royalties + bandwidth. Avg. subscriber retention: 12 mos. Incentive generates 600 additional units per month from 5000 to 5600.