Improve the Consumer Experience through Incentive Marketing

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Web 2.0 has ushered in a new era of increased activity and interactivity online that has opened the door to countless new Web sites and services – most of  which rely heavily on advertising for revenue.  With thousands of new businesses displaying ads online and competing for ad dollars, advertisers have a myriad of options for buying space and targeting their desired audience.

While this phenomenon presents little downside for online advertisers, not all of these new sites will survive on traditional advertising alone, forcing them to explore other options for revenue generation.  For the most part, charging consumers for a site’s products or services hasn’t been a perfect solution because people are often hesitant to pay for digital or virtual goods.

Because of this, online merchants need to look for innovative ways to augment the consumer’s willingness to pay.  The interactivity provided by the internet allows for alternative payment methods that, if used correctly, creates sources of revenue for online businesses struggling to monetize customers, while providing a risk-free and highly effective customer acquisition channels for advertisers.

The Universal Problem

Imagine walking into your local supermarket, filling your shopping cart with groceries, and when you get to the checkout line, you see hundreds of abandoned carts loaded with items, strewn haphazardly about, but with no shoppers to be found.  Was there a fire?  Natural disaster?  In a brick and mortar supermarket, only a catastrophe could cause such an odd sight, but online, it is par for the course.  The majority of people who take the time to load a shopping cart never make it through the checkout line; the industry average projects a staggering 60 percent figure of abandoned shopping carts.

To help reverse this trend, alternative payment options have begun to emerge, including recognizable names like PayPal, Google Checkout and BillMeLater, but none have solved the universal problem that has online companies asking: “Why don’t these people pay?” Until now, alternative payments have found ways to simplify the experience and reduce the amount of friction in a checkout – call it the solution to the “my wallet is downstairs and I’m upstairs” effect that brings so many checkouts to a grinding, permanent halt.

But why would somebody go through the effort and maneuvers of shopping without actually following through?  Quite often it comes down to price, or moreover, willingness to pay.  There is a lull between loading a shopping cart and actually paying that allows an online shopper plenty of time to pontificate the merits of the would-be purchase, look for a better price, or simply get distracted and lose interest. So the challenge for alternative payment companies is to overcome the consumer’s fundamental resistance.

Turning Browsers into Buyers: Incentive Marketing as an Alternative Payment Option

While incentive marketing has been around forever (i.e. get something free for by signing up for a credit card) the web allows complementary merchants and advertisers to be matched together on a one-to-one basis and offered to relevant buyers.  For example, McAfee is doing this to increase their revenue – so you can pay for a McAfee product by signing up for a trial offer from Stamps.com or buying something at the Gap.  You only have to complete one offer from the dozens that are displayed specifically for you.  Unlike many other incentive programs, the quality to advertisers is also significantly higher as consumers are being attracted to advertiser offers at the point of another transaction.

Using incentive marketing as a payment vehicle is easy to do, but very hard to do well.  Amazon has used a promotion of “Get $30 Off When you Sign Up for an Amazon.com Visa Card” that shows up in every US checkout, but most shoppers never even get to the checkout page, and of those who do, not everyone wants yet another credit card.  Since different advertisers have different customer acquisition prices, knowing which advertiser offers to show to whom proves to be an extremely difficult task, since the highest paying offers might have the worst conversions.  Dynamically and optimally offering the right services and products is significantly more lucrative to merchants, and more compelling to consumers.

How can you differentiate between browsers and buyers, and what can you do with the former?  If a shopper closes the browser window on the shopping cart page, you can show him a message offering a substantial discount funded by a blue chip advertiser.  When a shopper is studiously researching shipping prices, you might be dealing with a frugal customer more likely to comparison-shop her way off your website and into the arms of a competitor – a good time and place to offer her a discounted or free product.  Former customers who haven’t returned to your site in months or years are buying other things elsewhere; you can win them back by offering them discounts when they transact with your trusted partners – the same companies they are willing to shop with today.  All of this yields incremental revenue for merchants, but also recaptures the attention and goodwill of their customers.

Using incentive marketing as a payment option also has the tremendous benefit of injecting positive seasonality into almost any business.  People buy flowers for Valentine’s Day, chocolate bunnies for Easter, fishing rods for Father’s Day, etc.  Even if your business has nothing to do with Valentine’s Day and never will, you can offer your shoppers a discount if they buy flowers from your advertising partner – something they need to do anyway, without a preference from whom.  But now this yields you significant revenue and customers.

Conclusion

The emergence of alternative payment methods has greatly impacted businesses and how they relate to consumers. When done correctly, advertising supported payments can have a nonpareil impact on almost any e-commerce merchant. It’s an efficient way of yielding more paying customers, and utilizing the unique medium of the Internet to turn every browser into a buyer somewhere, and creating two transactions where otherwise there may be none.

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