How much do you need to spend on a promotion?
Posted: December 2022
A well-considered promotion has the potential to engage thousands of new customers. But what level of budget is required for a high impact campaign? It’s one of the most frequent questions we get asked at The NDL Group, and the answer may surprise you.
As a specialist in the prize management and promotional technology space, there are two key considerations when it comes to how much to spend on prize promotions and staff incentives:
1. You can maximise ROI without overspending
2. Experiences are more powerful than cash
Large value prizes are great at creating standout and desire when creatively linked to the promoter brand, but is it possible to achieve the same result without spending a fortune? The answer is a resounding ‘yes’.
Research published by IMI International concluded that ‘sometimes our intuition (or budget) can cause us to offer a prize pool that is unnecessarily large and thus reduce ROI’.
Their research proved that brands see diminishing returns once the volume of prizes exceeds ‘thousands to be won’. To maximise active participation, we know that consumers need a quick and easy message with a simple way to get involved. Convoluted mechanics can be a turn-off and complex technologies can deliver a simple user journey at scale. Interestingly IMI’s research from thousands of consumer promotions demonstrated that a ‘1 in 20 chance of winning results in a comparable purchase intent to 1 in 5’, so a quarter of the prizes are required to achieve similar results.
“In practice, this means there is little difference in motivating purchase intent when you communicate the chance to win ‘lots’ or ‘thousands’ of prizes as opposed to a specific number. So you can reduce the cost of your promotion, but not necessarily its impact, by creating a mix of headline-grabbing and high volume, lower value on-brand prizes. The proposition can be further enhanced by teaming up with like-minded brand partners” said Phil Beal, NDL’s Group Commercial Director.
So, when the question of budget comes up, instead of asking how much a brand needs to spend, why not ask ‘how little do you need to spend to achieve the desired change in behaviour?’ It’s an approach which has enabled us here at NDL to run some of the highest impact promotional campaigns for new and established brands for the past 20 years and our success, we believe, lies in creativity and delivery.
The power of value-based experience over cash
Some of our most impactful campaigns have had little to do with their monetary value and everything to do with connecting brands with the values and aspirations of their target audience. In fact, the IMI research backed this up in concluding ‘the more utility/aspirational prize (quality) the few number of prizes required.’
“One of the most common things people do with their money is get stuff. But we have shown…in research that stuff isn’t good for you. It doesn’t make you unhappy, but it doesn’t make you happy. But one thing that does make us happy is an experience.” Michael Norton, Happy Money: The Science of Smarter Spending.
Another plus for experience-based prizes is that they can work for every budget. The important factor is to understand your audience’s deepest desires so that you connect your brand with the opportunity enjoy an unmissable experience.
“If you are appealing to parents with young children who value family time, you could offer them the chance to win cash to go on the trip of a lifetime. Cash is ubiquitous and everybody wants it. At the same time, it’s cold and faceless and the chances are it’ll get spent paying bills and on general day to day stuff.
By offering a dream family holiday itself your winners will experience something special they’ll remember forever and increasingly creates valuable winner content promoters can utilise and share. More importantly a dream holiday prize represents a content opportunity to engage the passive audience with your brand on an emotional level to motivate an outcome. Our customer experience team specialise in managing the holiday arrangements as part of an overall brand experience. It’s all about understanding your audience and knowing what’s important to them.” Phil Beal, NDL’s Group Commercial Director.
To discuss your next high impact promotional campaign, please get in touch with a member of our prize management team.
You may also enjoy reading about some of the high impact campaigns we’ve run for brands like Xbox and IKEA, or see our experiences brand Unmissable® for inspiration for your next promotional campaign.