Marketing Budgets Cutting Customer Incentives

According to the 2009 Promo Premiums and Incentives survey from Promo Magazine, 38.6% of the companies polled in this year's survey said they offer a promotional incentive program to customers or sales prospects, down slightly from the 42.1% who ran such programs last year.

That slippage in promotional program offerings was echoed through three of the four industry verticals tracked in the survey:

  • 48.6% of goods manufacturers polled in 2008 ran a customer incentive program, but this year, only 42.4% of those respondents said the same. (9% in this category "do not know")
  • Retailers offering customer incentives declined to 50% of respondents this year from 52.9% in the last survey
  • Marketing agencies offering such programs slid from 34.3% in 2008 to 31.9% this year
  • Providers of branded services showed a slight increase in customer  incentives in this year's survey, up to 50% from 47.5% last year.

60% of those with no current incentive program for customers said they had no plans to offer one in the next year, says the report. 17% would launch a premium program, and 22% are undecided. A vertical look at those who say they'll institute such a program in the coming year shows that goods manufacturers dominate (25%), followed by retailers (21.4%).

The largest proportion of respondents to this year's Promo P&I Survey (15.5%) said they expect to spend less than $5,000 on customer promotions this year,  comparable to last year's result of 13.6%. However, while the 2008 P&I Survey found only 6.4% forecasting $5,000 to $24,999 for premiums, this year the $5,000 to $24,999 category almost doubled to 11.8%.

And marketers expecting to spend $25,000 to $99,999 more than doubled to 6.4%, equal to the percentage who expect to spend nothing this year.

Looking at 2009 spending projections by verticals:

  • Last year 17.6% of goods manufacturers surveyed said they expected to spend $100,000 to $249,000 on customer incentives, while 5.9% anticipated spending $25,000 to $99,999.
  • This year only 7.1% of goods makers say they will spend the higher amount, while 14.3% expect to keep their premium spending in the lower bracket
  • Manufacturers predicting premium spending of less than $5,000 grew from 11.7% in last year's survey to 21.4% this time around
  • In 2008, 15.8% of service providers polled said they would spend $5,000 to $24,999; this year only 9.5% said the same
  • Retailers expecting to keep promotional spending below $5,000 grew from 16.7% in the 2008 poll to 35.7% this year

More than 50% of respondents answered that they "do not know" how much their companies will spend on customer incentives this year, higher than the proportion in past surveys who were unable to project spending. Possibly indicating that marketers are keeping the door open for incentives launched on the fly as needed to stimulate business during the second half of 2009, posits the report.

Poll respondents were less optimistic than a year ago about what will happen to incentive spending in 2010. This year about a third said they expect their budgets for customer premiums to grow, less than the 38.5% who foresaw budget growth in the 2008 poll. The numbers who expect budgets to stay flat year to year were almost identical. But those who expect to spend less on customer premiums in 2010 increased to 17.3% of the response group, from 7.7% in the last survey.

Gift cards rank as the top giveaway among almost one-fourth of respondents, about the same proportion as in 2008. But this year dining and entertainment vouchers and certificates turned out to be the second most popular reward format, with just more than 10% of the respondents naming them as their preferred form of customer incentive.

Hard cash dropped far down in popularity as a premium, with only 10% of those polled dolling out money as an incentive, off from the 15.4% who opted for dollars in 2008. Gift certificates, travel, and refillable stored value cards remained fairly steady.

Last year, 44% of respondents said that they hand out premiums at events or on marketing tour campaigns, while only 25% of those brands polled said they distribute premiums in that way,

The apparent pullback from live events as distribution channels plays out across the vertical segments in this year's poll.

  • Goods manufacturers said last year that 41.2% of them handed out premiums at these events; this year, that proportion is only 28.6%
  • Service providers handing out premiums through events and tours dropped from 52.6% last year to 28.6%
  • Retailers using events and tours to incentivize customers fell from 38.9% in 2008 to 14.3% in this year's study
  • Marketing agencies were off more than half, declining to 23.3% this year from 54.2% in 2008
  • Premiums handed out at retail saw an increase of almost five percentage points

51.8% of respondents cited incremental sales as their measure of return on investment from their customer incentive programs, off from the 60.4% last year who looked to sales growth to validate their premium spending. In the place of incremental sales as a measure of promotional performance, long-term or lifetime value increased slightly to 27.3%.

The number of marketers polled who report incentive programs within their own companies has dropped from about one-quarter last year to one-fifth this time. And only about 10% of the holdouts say they plan to launch a workplace rewards program in the coming year. Notably, notes the study, more marketers say their companies are using incremental productivity and employee attitude surveys as gauges for the impact of their internal incentive programs.

For more information about the study, please visit Promo Magazine here.


3 comments about "Marketing Budgets Cutting Customer Incentives".
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  1. Howie Goldfarb from Blue Star Strategic Marketing, September 17, 2009 at 11:19 a.m.

    I must say that Point of Sale incentives are the most powerful spending of a marketing budget. Second is running specials via Ad Circulars. If anything should be cut it is traditional forms of Branding. Great example is why should Coke spend on a Billboard to say Drink Coke when the customer at the supermarket sees Pepsi on sale via the club card. Pepsi get's that sale and Coke gets Zero!

  2. Rodney Brooks from ToTouch One, Inc, September 17, 2009 at 2:44 p.m.

    I offer up to 10% Loyalty Shopping $ for just switching stores.

  3. Randy s Mitchell from WEB OFFICE, September 17, 2009 at 7:21 p.m.

    Kudos to Howie Goldfarb & his 'Coke Zero' - great play on words.

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