Why eCommerce Incentives Will Be Key Throughout 2021


Rodney LawsEditor at Ecommerce Platforms

Tuesday, January 5, 2021

Sometimes the overall value proposition of an online product just isn’t enough. You can provide a refined shopping experience, informative on-site copy, industry-standard support and speedy fulfilment, and yet still see a prospect fall short of converting. It’s a frustrating experience that can leave you feeling somewhat hopeless. But what exactly are you supposed to do?

Article 8 Minutes

In those cases, you’re most likely missing compelling incentives: tacked-on reasons to buy from you that typically involve one-time or contextually-determined value additions. Once you’ve made your regular case for purchasing, a good incentive can push it over the edge.

Here’s the thing; while incentives are already useful (and have been for a long time), they’re going to be key in 2021, and there are three big reasons why:

Shoppers want to find long-term options

It’s easy to think that people enjoy how easy it is to find fresh products online, particularly using vast marketplaces that put sellers in direct competition. There’s almost always a cheaper price if you’re willing to keep looking for it, and don’t we all want to save as much money as we can? Well, yes because we’ll take savings when they’re convenient, and no because there are various things we prize more than modest price differentials.

In particular we prize sellers that we can rely on for the long term (particularly when they can provide personalized experiences), because we don’t really like making difficult choices. It’s exhausting and time-consuming, and it’s so much easier to know before you buy that you can just go to store X and you’ll get roughly the buying experience you’re looking for.

But that kind of trust isn’t easily earned. It takes online sellers consistently doing great work to earn the benefit of the doubt, and that’s best achieved through a combination of steady service and the smart use of incentives to make the high points significantly higher. Here are some incentive types that can be highly effective:

Free trials

It’s always good to make a strong first impression, and perhaps the easiest way to do this and lure someone in is to offer something for free with no significant strings attached. This gets their goodwill for a short while, allowing you to win them over with the general quality of your products or service. It’s most effective for subscription-based models, though.

Look at the best SaaS tools or streaming media services. They can front-load valuable incentives to win long-term ROI because they know that it doesn’t really matter if some people exploit those incentives. Amazon can offer a free Prime trial because it knows that most users will end up keeping it, and the same can be said of Netflix, Spotify, etc. The occasional use of a throwaway email address to get another trial is just a drop in the bucket.

This is a great incentive to use when you’re absolutely confident that someone will be happy with your products or service. You can also use a simple satisfaction guarantee, saying that anyone who isn’t completely happy with your contribution can get their money back with no questions asked. The same truth applies: some will abuse it, but overall it will make money.

Welcome bonuses

One of the reasons why free trials in particular are so effective is that they offer value for nothing, playing into the basic desire to profit from any given arrangement — but sometimes it isn’t possible to get rid of the element of investment. This is the issue that faces financial schemes and services such as gambling sites, trading platforms and investment services.

Those business types can’t forgo the financial commitment because it’s how they work and there’s too much money on the line. Imagine a bank offering interest on money you didn’t actually have to deposit, or a casino granting you a month of playing with house funds. It’s fundamentally absurd — so how can those businesses win people over?

The same thing about most users sticking around applies here. When someone plays just one round of online poker, they have an excellent chance of becoming a long-term customer: if they lose, they’ll want to do better, and if they win, they’ll want to ride that wave. Accordingly, the only major hurdle is the first one — after that, retention is relatively easy.

That means an upfront incentive is the right way to go, which is where welcome bonuses enter the picture. They don’t let users participate for free, but they do throw in temporary advantages to tip the odds slightly in their favor for a while. Banks offer switching bonuses to incentivize people to move from their competitors, and top comparison sites track them to keep people aware of which banks currently have the most appealing conditions.

Serving the same function, welcome packages with significant bonuses are ubiquitous in new casinos (e.g. “200 free spins”), with many allowing users to select the options they prefer so they can effectively personalize their experiences. Since most people accept deep-down that the house will always hold the power, this is a way to let them have an edge for a while.

Tier-based discounts

The third common incentive is the tier-based discount, and this plays into brand loyalty in a big way. Ecommerce companies that don’t rely on subscription models need to do more than impress people to begin with; they need to keep impressing them over time. Tier-based discounts depend on duration of service and size of investment: when someone has been a customer for a certain amount of time and spent a certain amount of money, they move up.

Each tier, of course, gives them further discounts and perks. You don’t need to offer a lot of value, because just a small discount will add up to a significant amount over time. Give someone 3% off a type of product that they order on a regular basis and you’ll have given them a truly compelling reason to trust you with their business on an indefinite basis.

To implement such a model, you can turn to a loyalty program service: leading loyalty system software can make it simple and easy to construct and deploy your discounts, allowing you to get a complex and effective system in place without requiring an arduous amount of work.

Profit margins keep getting tighter

Despite what we’ve covered so far, it’s still entirely possible to earn conversions through simply being the cheapest — but it’s getting harder with each passing year as profit margins keep narrowing. The reason for this the ever-rising sophistication of online tools and manufacturing processes. All but the richest companies end up using the same factories, the same materials and the same shipping services.

The result is near-identical profit margins that all go down whenever someone attempts to succeed by undercutting their competitors — and the more than happens, the harder things get for everyone. Why? Because it’s hard to put the genie back in the bottle. Lower prices too much and shoppers will adjust their valuations accordingly (this is why tools like Prisync are so important, allowing dynamic pricing in line with industry expectations).

Usefully, incentives don’t need to provide great value. They can simply be thoughtful, attention-grabbing or amusing. Have you ever purchased something only to get a small bag of gummy bears in the package? Those bears cost next to nothing to add, yet finding a free gift of any variety can make a buying experience feel significantly more premium.

In online gambling, the bonuses are all weighed carefully against the ROI they produce and tightly controlled with terms and conditions to ensure they aren’t abused. It’s all about maximizing the appearance of added value to win people over without fundamentally risking the company’s short-term profitability.

Ecommerce is becoming very crowded

Something that’s driving the other points we’ve addressed is the overcrowding of the ecommerce landscape. With the COVID-19 pandemic hitting traditional retail hard, driving holdout sellers to move online at last and pushing unemployed people to try online retail, it’s generated a huge influx of ecommerce activity. Most stores will fail, no doubt, but new ones will always appear to replace them.

This has amped up the challenge for any given seller. Any niche you care to imagine is currently being fought over by numerous similar competitors who have a head-start on you — if you want to carve out a piece of that pie, you need to do far more than have a good store. You need to find ways to make your value propositions different, and that means using incentives.

If your rivals offer savings, you can take a different route and offer improved service. If they offer faster shipping, you can offer more customizable shipping by perhaps using a specialized packaging service. It ultimately comes down to standing out from the crowd. How you brand your business will always have a huge effect on how effectively you do this, but using incentives well can help you almost as much.

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Rodney Laws

Editor at Ecommerce Platforms


Rodney Laws is an ecommerce expert with over a decade of experience in building online businesses. Check out his reviews on EcommercePlatforms.io and you’ll find practical tips to build the best online store for your business. Connect with him on Twitter @EcomPlatformsio.


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