Today I got into an interesting debate with a few people in regards to incentive based marketing. The question at hand is when a consumer makes a decision to purchase a product/service based on an incentive, in this case the advertisement that a dollar amount will be donated to a Charity, whose money is being donated and if you say the provider, than are they losing money?
First let’s start off with an example of this in action. Let’s take the services of a real estate agent as an example. Say Joe the real estate agent decides to send out a postcard mailing to a neighborhood near a local non-profit. On the card Joe lists his services and reasons for using him but he also puts on the card “Any house I list/sell in the community around XYZ nonprofit, I will donate 15% of my commission to the non-profit.”
So is Joe losing money by donating it to the non-profit?
I say no but some others may disagree.
Enter case study, Ethos Water. This company sells bottled water which can be found in Starbucks. If you take a look at the bottle, you clearly notice a part of sale ($0.05 per bottle) is being donated to helping children get clean drinking water in other countries.
Let’s dissect the sale. Consumer walks into starbucks and picks up the bottle of water and sees the “incentive”. They decide to buy and for this examples sake let’s say pays $1.00 (don’t know the exact sales price). Of that $1.00, $0.05 of that consumers money is going to the children. Therefore it is the consumer’s money being given. Some could argue its just accounting and technically the $1 comes in and Etho’s takes $0.05 of which and sends it off but I am strictly talking about the incentive here.
If we remove the incentive from the product (water) or service (real estate agent) and the sale does not occur without it (consumer kinda wanted water but the promise of a donation was the tipping point or the homeowner was looking at 5 real estate agents who seemed similar but Joe offered money to the community) then is Joe or Ethos truly losing any money?
No the sale was contingent upon the consumer wanting the incentive and would not have existed without it and thus just part of the pricing of the product/service.
Incentive based marketing leverages the psychology of the consumer along with their money to drive sales. The product or service is priced with this incentive already built into the price model and the marketing is implemented on this idea to turn it into a profitable business model.
Disagree that this works? Take a look at:
Tom’s Shoes – For every pair bought they donate 1 pair to charity
Thoughts? Do you have any experience doing this? Leave a comment below.
