When doing promotions planning, the question inevitably arises: how should we structure our prizes? As with any good question, the answer is: it depends on your audience and the specific goals of your online promotion strategy. Given a fixed budget, the main problem in structuring your prizes is to find the right balance between a small numbers (often just one) of high-value prizes, versus a large number of low-value prizes. It’s important to note during your promotions planning that what you’re trying to impact is not the actual customer satisfaction or perceived value upon using the product. Instead you’re trying to impact the combination of the customer’s expected (or anticipated) value of the product and prize(s) together. There are a number of factors to consider in our online promotion strategy that impact what sort of prize structure will be most enticing to your target audience. Two of the most critical are 1) whether you’re targeting current customers or non-customers, and 2) how risk tolerant your target audience is. Risk Tolerance: It’s important to recognize in your promotions planning that your targets may be more or less risk tolerant. All else equal, a more risk tolerant audience will prefer a single high-value prize, and a risk adverse audience will prefer many smaller-value prizes. As part of your overall online promotion strategy, it is important to balance the risk tolerance of your target(s) against the number of prizes you offer. Coming up in Part 2†the #1 factor in determining your prize structure!
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