Premiums - Freebies from the Financial Side (1,436 words)
Why more credit card marketers ARE using premiums companies spend $23 billion annually on premium, incentive and promotion programs, and the industry continues to grow, it was announced at the Premium Show recently held in New York. Premiums are more than just inexpensive pens and watches—many different types of incentives can be offered and should be tested. A good premium can boost your response and more than pay for the added cost.
Financial service firms are among those marketers using premiums to attract and retain customers. According to Joe Laufer, director of corporate development at Hanig and Co., the company has provided many different premiums for all types of financial service firms to acquire new customers, to motivate customers to activate their accounts and to re-activate dormant accounts. Additionally, premiums are designed to keep people charging at a certain level—with programs such as Citicorp's CitiDollars program.
Besides credit card issuers, Hanig has also provided premiums to insurance companies. The premiums are used to encourage prospects to obtain a quote on auto, home or life insurance. Premiums are also used by banks to entice prospects to open a savings or checking account. Laufer has found that in a direct mail program, a good premium control can beat a premium-less control by 40 percent to 80 percent.
What premiums are currently hot? According to Laufer, one new premium that has garnered a lot of attention is the world's smallest, most powerful travel alarm clock radio. Another successful premium for Hanig has been the three-piece music system, a miniature boombox with detachable speakers. Also popular: his and hers sports watches. One of the larger premiums that has been successful is an old-time radio.
How much will a premium run you? It depends. Hanig has premiums that run from 15 cents to $10. A calculator, for example, can cost anywhere from $1 to $3 depending on the model. The his and hers watches are available for about $1 a piece. The type and price of the premium you offer should correspond with what you are trying to sell—the more you ask the customer to spend, the better the premium should be.
You should determine upfront how much you can spend on premiums to make
your campaign successful—if you spend too little, you might not see a boost in response; if you spend too much, you might lose your bottom line. In offering a premium, you must walk a fine line.
In addition, make sure to check whether there are any regulations regarding the use of premiums in your industry. In banking, for example, there are rules that govern how much you can spend on premiums.
Furthermore, direct mail is not the only medium successfully employing premiums. By tailoring your script, a telemarketing effort can use premiums as an incentive to order, upsell or cross-sell. The "baby boom box," "big key calculator" and "world's smallest, most powerful travel alarm clock radio" translate well over the phone and can help boost telephone sales.
Credit Card Isssuers and Premiums
With the glut of credit card mailings going to each household, each offering more or less the same offer —a low introductory APR, no annual fee—how can you get your offer to stand out? By offering a premium, credit card issuers can entice consumers to choose and then use their cards.
But is it worth the extra expense to offer a premium? According to the May 1998 issue of Card Marketing, the total mail volume of credit card solicitations in 1997 numbered 3 billion pieces. Couple that with the lowest response level recorded (1.3 percent), and it's no wonder that credit card issuers are looking to premiums to boost response.
The premiums credit card marketers are offering run the gamut from calculators to a pound of Godiva chocolate. Does the premium have to relate to the product you are offering? It helps—a travel alarm clock premium is a good bet to entice a travel affinity card recipient—but it's not necessary. The most important aspect of this type of promotion is how desirable the premium is. "While a premium offer will almost always do better than no premium, a good premium will work better than a poor one," writes Jim Kobs in "Profitable Direct Marketing."
The standard technique that credit card issuers are using is as follows. On the outer envelope, the premium is pictured or mentioned to entice the recipient to take a closer look. Then, inside, the premium is offered if 1) the recipient sends for the card and 2) the recipient uses the card before an imposed deadline.
Why make it a two-step process? Once the card is used, it will most likely stay in the consumer's wallet, where he or she is more likely to use it again. Also, it discourages tire kickers from getting the card just to get the premium, and then never using it.
One exception to this rule is an offer from Bank One to a potential Visa card recipient. For simply receiving the card (as far as we can tell from reading the fine print), the recipient can receive a miniature alarm clock. Though the actual cost depends on the type and quantity, generally speaking, this premium is not a costly investment to acquire a new customer.
However, most credit issuers offering larger premiums and incentives to potential cardmembers require the customer to use the card before the premium is sent.
Novus, Bank One and FIRST USA
Here are some examples of how credit card marketers have been using a wide array of premiums in recent months.
Novus Financial, the company that issues both Discover and Bravo cards, offers several different premiums to encourage customer acquisition and card activation. A Lands' End apron and a calculator are two premiums given to customers who activate the Bravo card. Why should Bravo offer a premium? Since the Bravo card is a lesser known card than Visa, MasterCard or even Discover, a premium might be just the right nudge to introduce the card and encourage a recipient to get it.
But by far, the most enticing premiums we saw were offered by Bank One and First USA to their Platinum Visa prospects. For acquiring and activating the card, some cardmembers were offered a pound of Godiva chocolate, others a Sharp electronic organizer. Both have a high perceived value and well known brand names to strengthen the First USA/Bank One Visa offer.
In the mailing that offers a pound of Godiva choclates as a premium, the brochure states:
We choose Godiva chocolates as our special gift to you, because like the First USA Platinum Card, Godiva represents excellence unrivaled.
Godiva's reputation as a fine chocolate adds to the desirability of the offer and gives the card an added boost of exclusivity. The offer makes the prospect feel like a member of the elite and the additional touch—the indulgent gift of chocolates—makes a cardmember feel pampered.
In another First USA package, the Sharp Electronic Organizer is offered to professionals. This letter clearly employs a different tactic:
You know better than most that successfully managing a hectic professional schedule requires organization and discipline. So to help you keep control, we'll send you the Sharp Electronic Organizer...
This effort speaks to the professional with words of understanding and offers the gift as a way to help them manage their busy schedule. In addition, this premium is desirable because it is a fairly new gadget, an electronic toy for adults that they can add to their other "toys"—such as their cellular phone and beeper.
MBNA and First USA also offer premiums to affinity card prospects. These packages have the advantage of offering premiums that are related to the affinity card that is being offered.
For example, MBNA offers hockey fans a team hat. First USA offers Philadelphia Phillies' fans a Phillies' windbreaker. MBNA offers a stadium blanket to University alumni. With these offers, like the ones above, the card must be used before the premium is sent.
And another financial service card, the debit/charge card, also uses premiums to entice existing members to use the credit option of the card (see related story in the November 1997 issue of Who's Mailing What!, now Inside Direct Mail). For example, CoreStates Bank offered card carriers a bag of Hershey's Nuggets if they used the credit option of their card.
How can you use premiums to help you sell your product or service? Following is a listing of companies that can help you use premiums to increase sales, instill brand loyalty, activate dormant customers and so on...