“To incent, or not to incent: that is the question…” – Hamlet (William Shakespeare)

OK, OK. This is not exactly the line that Shakespeare put in his famous play. However, the question “to incent or not to incent?” drives through many business owners’ minds when they consider their marketing and advertising options. Business owners have a flood of options to choose – TV, radio, print, social media, email, text marketing, etc. Then they face a whole slew of questions as to how to pull off a successful marketing campaign (what copy? what imagery? etc.). On top of all that, of course, is the question: to incent or not to incent? How can you decide?

Well, we are here to help. All customer action (or inaction) leads to some resulting metric – if you take the time to measure it. The truth is, you can measure even limited results, and those measurements can offer insight into your return on investment. If you don’t have your own metrics, you might find value in ours. The focus of this article asks and gives insight to the age-old question “how do you get your customers to act?” by examining the use of incentives in two very similar restaurants.

Mixed Opinions about Incentives

The jury is out regarding incentives. We have clients who incent and clients who don’t. Incentive “supporters” believe that an incentive will give them a chance to gain the attention of existing and new customers. Those clients who don’t incent contend, “I shouldn’t have to buy my customer’s loyalty.” This opinion is understandable – after all, you spend time, effort, money in the product (or providing a service) and then you “give away” yet more of the revenue. Both perspectives are understandable and are likely to come from positive or negative experiences[i] using incentives, respectively. So who’s right?

This article has good news… BOTH options work!

Experiment Summary

For those readers that want the summary now, here are the key findings:

  • Text message interactions get traction and build audience with either approach. Both incentive-based and non-incentive-based approaches build positive audience growth.
  • However, audience growth accelerates when an incentive is present.
  • Summary: Both approaches work; incentives build the customer list faster.

This blog and research confirms – incentives work. Instead of theories, here are real results from the experiences of real business owners.

Customer Growth Graphs with and without use of incentives

The Experiment

Do incentives work? This is hardly a new question. Pricing strategies that win a buyer’s business, bulk buying options, and the always-loved “BOGO!” coupon have been around for years. These strategies are still here for one reason – they work. But how does the effect of an incentive work in new media? Can you attract the attention and cause a reaction with mobile text messaging?

Here we outline a field experiment that we ran with two customers. The customers were very similar, so it allowed us to control for most of the dependent variables (see below). Our independent variable was the presence of “a clear, but non-specific incentive.”

Experiment: Dependent Variables

The dependent variables in this experiment included the following: business type, business sub-type, business size, business volume, business location, product offering, and display design.

Business Type and Sub-Type.

Both businesses were restaurants and both fell into the sub category of “Casual, Full Dine-In.” Both businesses had a fully stocked bar with beer, wine, and spirits. Both businesses have similar busy times (Friday and Saturdays). Both businesses had a similar capacity, one with 121 occupancy, the other with 133. There is one difference –the food fare. One restaurant (Business A) is a Tex-Mex format. While the other (Business B) is a typical “brew pub” (burgers, sandwiches, fries, and brews).

Business Size, Description, and Location.

Both businesses were of the same approximate size. Both occupied a single-story location with indoor dining only. Both businesses had ample parking. Both businesses are located on the same well-traveled highway. Both businesses were in the same general area, 42 miles apart in eastern Florida. Both businesses are located in areas supported by local population and have ample tourism volume (a common trait in Florida). This distance also controls for a major issue when it comes to restaurant selection – regional cuisine differences.

Weather.

Weather in Florida is known to be volatile and can impact business volume. By selecting the participants to be as close as possible, we have tried to control for weather as much as possible. It is also the case that Florida has hyper-local weather (“raining in the back yard, sunny in the front yard”), so it is possible bad weather could have had an impact on the result. However, neither business has an outdoor dining area, so neither fair nor inclement weather would benefit or harm them. The duration of the experiment was over six weeks, so we believe this blunts negative impacts from weather.

Collection Method.

Both restaurants used the same size display, placed on each of the restaurant’s tables. The displays were the same size (6”h x 4”w). The displays had the exact same language, with the exception of the incentive/non-incentive statement and the branded keyword[ii]. The same designer designed both displays. The color schemes were different, but both represented the business’ branding (one with a blue/red theme; one with an orange/red theme).

Collection Timing.

When the restaurants placed their displays, we electronically tracked results for 45 days. The collection periods were similar (early Fall 2018), but separated by two weeks.

Experiment Conclusions

At the conclusion of the 45-day period, here were the observable results:

  • Business A (Incentive) collected 237 contacts
  • Business B (Non-Incentive) collected 93 contacts
  • Business A had 254 percent more contacts collected than Business B
  • Text message interactions get traction and build audience with either approach; both the incentive-based and non-incentive-based approach resulted in positive audience growth
  • Offering incentives does accelerate audience growth
  • Summary: Both approaches work; incentives build the customer list more quickly

After Experiment Notes

We have kept in contact with the businesses. Both businesses are still growing their lists. Business A (Incentive) has maintained a larger list and now has 286 contacts, while Business B (Non-Incentive) has 158 contacts. So similar businesses (location, size, etc.) are able to grow and maintain a list of customers. The business using incentives still maintains a larger list. However, we have some interesting observations about Business B (Non-Incentive) that are interesting.  Plus we have a longer-term review of the accounts about ongoing usage. Stay tuned for our deep-dive into that topic.

Appendix

[i] Negative Incentive Experiences

An entire blog series that could be written about the “outbreak” of incentive-based offers gone wrong. For those who have been around a few years, we can recall the late-2000s’ craze of group couponing and the devastating effect it had on small business owners. Indeed, our clients who do not like incentives have admitted to being burned by these options. Ironically, they don’t like incentives because incentives worked too well. Again, an article for a different time.

[ii] Keyword

A keyword is a very specific feature of text messaging interactions. How to use a keyword is fairly simple – a message is sent to a number with a specific word, where the word has been preselected and has preset actions. This is unique to SMS text marketing and SMS messaging. An example would be texting the word “KEYWORD” to 43506 (43506 is the registered short code for txtsignal).