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Managing incentives in marketing offerings, using techniques

Marketing Management for IBA (Tilburg University)

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Incentives offer solutions, typically short term, aimed at enhancing the value of the
offering by providing additional benefits and reducing costs. Most incentives fall
into one of three categories: incentives given to customers (coupons, loyalty
programs, sweepstakes, contests, and premiums); incentives given to the company’s
collaborators, most often channel partners (price cuts, volume discounts,
allowances, and co-op advertising); and incentives given to the company’s
employees (bonuses, rewards, and contests).
Managing incentives involves two types of decisions: strategic decisions—which
are a function of the offering’s target market defined by its customers, company,
collaborators, competition, and context—and tactical decisions—which are a
function of the other marketing mix variables: product, service, brand, price,
communication, and distribution.
Most customer incentives serve one of two goals: temporarily increasing sales
volume by giving target customers an additional reason to buy the offering, or
serving as a segmentation tool by selectively enhancing the value of the company’s
offering for target customers. Customer incentives can be divided into two
categories: monetary incentives that typically aim to reduce an offering’s costs
(coupons, rebates, price reductions, and volume discounts), and nonmonetary
incentives, which often aim to enhance the offering’s benefits (premiums, prizes,
contests, and loyalty programs).
Most collaborator incentives are offered to members of the distribution channel and
can have multiple objectives: (1) to gain distribution coverage, (2) to encourage

channel members to stock the offering at certain inventory levels (to avoid stock-
outs or to transfer the inventory from the manufacturer to distributors), and (3) to

encourage channel members to promote the company’s offering. Similar to

customer incentives, trade incentives are either monetary (discounts and
allowances) or nonmonetary (contests and bonus merchandise).

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