In today’s highly competitive landscape, brands are competing against one another on a “discount race” to try and offer the most competitive prices to their consumers.
However, consumers have come to also expect more personalized incentives and are expressing greater value towards more relevant non-cash rewards.
While cash incentives are more traditional, used widely by organizations to boost short-term sales, research has shown they may negatively impact the perception of the brand quality in the long-term.
The psychological rationale behind a price discount is to provide the consumer with a sense of receiving additional value by paying below the price. Whereas for a non-monetary promotions – such as a free gift with purchase, the rationale can be considered two-fold as it not only drives the user’s purchase intent with a complementary reward, but it also creates a higher perceived brand value by not marking down the price of the original product.
Ifeelgoods has recently released a white paper analyzing the impact of a non-cash incentive promotion versus a cash incentive promotion on brand equity and purchase intention.
As a tool to gather and measure comparative results, Ifeelgoods designed and conducted a 1,000 person online survey. Two versions of the survey were created and respondents were randomly assigned to one version of the survey, giving each user a 50/50 chance to see Survey 1 and a 50/50 chance to see Survey 2.
Each survey would display a different banner ads to respondents: one offering a free music album with the purchase of headphones, and one offering a $10 cash discount with the purchase of the same headphones. Then, exposed respondents answered 16 questions analyzing their shopping habits and shopping frequency, as well as assessing their purchased intention and perceived value of the headphones.
The results demonstrated that non-cash incentives outperform cash incentives in both brand equity and purchase intention. More specifically: Reward-based promotions exceed performance of discount-based promotions by over 21% for positive brand image association. Reward-based promotions have been shown to outperform discount-based promotions by over 42% with regard to brand differentiation. Reward-based promotions also outperform discount-based promotion by over 13% for purchase intention
The survey offers empirical evidence that, despite perceived popularity of discount-based promotions, reward-based promotions actually result in both higher purchase intention (short-term) and greater brand equity (long-term).
Based on the survey, the gap between cash-incentive and non-cash incentive is even wider for brands whose population is composed of frequent and utilitarian shoppers.
Being able to understand the different effects online promotions can have and knowing how to successfully leverage them is paramount to successful digital marketing.
If you’re interested in knowing more about this study, you can download the Ifeelgoods white paper through this
Michael Amar is Ifeelgoods’ CEO and Co-founder.
