When Cash Is No Longer King of Incentives!

Don’t get me wrong, cash is great and is one of the greatest advancements in allowing humans to trade with one another, but I wanted to take you through a slightly different view when it comes to using it to convert your customers.


I’m talking here specifically about incentives. I see lots of companies offering cash discounts to encourage sales. This could be 10% off, or a fixed amount i.e. £50 off. I guess the benefit is that it is quickly and easily understood by the customer, but at what cost?

Here are some things to consider: how does a straight cash discount affect your brand and the underlying value of your product? Give a customer a £50 discount on a £500 product and if asked later, the customer will say the price was £450. The perceived value of your product has immediately diminished.


Now think about what happens to that £50. You never take it off the customer, you leave it in their bank account. For most customers this means that the £50 just pays off something dull like their utility bill and on many occasions, the customer is unlikely to even notice.

How does this discount affect you the company? You have knocked the full £50 straight off your bottom line and not just once if it is a renewing contract. The customer now expects to get £50 each time they renew and if they don’t they feel somehow duped. If it is just a single purchase often the perception is the company inflated the price by £50 anyway to give away the discount, thus diminishing brand value. Behavioural economics can explain a lot here.

What about gifts as alternatives to cash discounts? Say for example you offer customers a pair of headphones with an RRP of £50 if they buy your £500 product. If you are operating at volume you may be able to get a discount on the purchase price of the headphones. Sure this can be seen by customers as a reward, a treat or a thank you. The customer still pays full price for the product.

How many headphones do you order? How many customers will be motivated by your choice of gift, don’t most of us have a pair of headphones already? How do you store and fulfil these headphones? What happens if they break or get lost in transit? Who handles customer service and at what additional cost?

Now have a think about digital gift cards as an alternative. If I offer you a choice of gift cards, I involve you the customer in the process, you feel like you have had input into getting the most appropriate choice for you.

Granted you have still paid full price for the product but you have been given the opportunity to treat yourself without any inhibitions. You can now use your choice of gift card to buy yourself or your family a little luxury guilt free.

Digital gift cards can be sent immediately via email, you are not waiting for days or weeks for a fulfilment house to send you your free gift.

Now from the company’s perspective, there are more benefits. The core price of your product or service is maintained. Gift cards can be cheaper than cash as there are discounts available and you can benefit from breakage should you wish to do so (or not). Ordering and fulfilment is simplified as well as being fully trackable due to its digital nature. There is a final significant benefit, by offering a choice of incentive, you can achieve a significant uplift in sales and conversions.

When it comes to cost-effectively boosting sales and conversions, cash discounts are simple, but they most definitely are not king.

If you are interested in understanding and influencing customer behaviour or boosting sales and conversions, talk to Loyalty Bay.

Convert your users using reward light boxes and digital gift cards
Convert your users using reward light boxes and digital gift cards
About the Author :

Founder, Director of Product and Marketing at Loyalty Bay. I’m tasked with creating global scalable products and building out the Product and Marketing teams, now that we are part of Perkbox.