Using Premiums to Increase Telemarketing Response

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Premiums can be an effective tool in telemarketing to increase response. They can help move your customer from considering a purchase over the telephone to making the commitment. Telemarketing offers can easily experience a 20 percent lift in response when the right premium is chosen and used in the right way.


Here are some rules to help make your premium offer more effective:


Choosing the right premium. It is crucial to choose the right item to offer. Several factors should be considered. Most importantly, the item should be easily visualized. For instance, a desktop calculator makes an immediate connection in consumers' minds. Several years ago, a client tested a designer clock as a premium. Customers could not picture the item in their minds, and response suffered. When a clock radio was substituted, response rose dramatically.


Related versus unrelated premiums. Avoid the temptation to use a product-related premium. It may seem to make sense but will not work as well as an unrelated product with a high-perceived value. Electronic products such as radios, watches and cameras have the highest perceived value and consistently out-pull other types of products. If your pricing structure can support it, consider higher-cost premiums such as personal digital assistants.


In a head-to-head test of several premiums, one client tested a product-related book item, a product-related discount coupon book and a set of sport watches. The book item increased response, but not enough to pay for itself. The coupon book actually decreased the response rate. The sport watch set, which cost the least of the three items, increased response and made the telemarketing program more profitable.


Position the premium offer carefully. Another important element of the offer is where and how you discuss the premium. This can influence the premium's effectiveness. Use the premium as a call to action such as, "And if you order now over the phone, you'll also receive ... ." This positions the premium as an additional item that customers receive for ordering today. Make sure that the sales representative lets customers know that they can keep the premium even if they cancel the service or return the product to help reinforce the legitimacy of the offer.


In addition to the call to action, the premium item might also be mentioned in the opening of the call. This can be especially effective if the customer is interrupting the sales representative early. In these cases, the premium should be positioned as part of a special offer.


Keep the decision simple. Most telemarketing purchases are impulse decisions. Do not let your premium offer complicate the ordering process. Part of this is accomplished by choosing a simple, easy to visualize premium. The decision can also be kept simple by keeping the terms of the offer simple.


Avoid offering a choice of premium over the phone. Choices mean more decisions, and customers are more likely to back out. If you are unsure which premium to offer, test each separately to see which works better. Also avoid any item that requires customers to choose colors or sizes.


Sell the premium offer to your phone representatives. Premiums need to be sold to the phone representatives as well as to customers. Phone representatives sometimes think that the premium is a bribe and undermines their relationship with customers. While this is untrue, it needs to be addressed directly. Conduct a short training session to ensure the representatives understand that the premium is an added value and another sales tool. Make sure they know that the premium is not a substitute for selling the product, but should be used to get customers over the hump of making the decision today.


Research legal requirements. There are legal constraints to any offer. Research the legal requirements for your particular product or service. Some industries, like insurance, have very strict regulations that will have to be followed. Most industries have very few regulations on the use of premiums. However, just about everyone will need to comply with the Federal Trade Commission regulations on the delivery of product. These regulations are usually easy to comply with as long as the product is delivered within the time described and any price claims are substantiated. The Direct Marketing Association has a useful pamphlet describing the FTC's sales rules.


The economics of a premium offer. Effective premiums can cost as low as 50 cents and generally do not exceed $25. Most fall in the $2 to $5 range. It is not the cost of the premium that matters, it is the increase in overall profitability of the program that is important. For instance, if a $2 premium yields a 5 percent increase in response, not only is the cost of the premium covered, but also the entire cost per sale goes down by 40 cents. If a $4 premium yields a 20 percent increase, the adjusted cost per sale shows that the premium is well worth the additional expense. The adjusted cost shows that the increase in response offsets the premium cost and saves an additional $2.26 per sale.


Using premiums to improve payment rates. When positioned properly, premiums can be used to improve payment rates on consumer offers. To accomplish this, the premium is positioned as being sent upon payment. This type of premium offer is often seen with magazine subscriptions. Typical wording might be, "And the XYZ premium will be sent out to you as soon as we receive your payment."


Premiums can drive inbound calls. Premiums can also be used to drive calls into your inbound center. A First-Class postcard can be very effective in this effort. The premium item should be featured prominently on the postcard, and customers should be told that they can receive it just for calling. Be careful to choose a premium that is inexpensive enough to send to everyone who calls. Once you have customers on the phone, have a compelling offer to persuade them to buy. This use of premiums has been equally effective for both consumers and business-to business marketing programs.


Use premiums for upsell. Another effective way to use premiums is the upsell offer, especially for business-to-business programs. Once a customer has placed an order, offer a premium for a larger order or additional items. The premium upsell can also be used for a specific item that your company wants to feature. This type of upsell strategy can be used in almost any type of call. Examples include a follow-up to a catalog mailing, an outbound reminder call or an inbound call.


Premiums in appointment settings. Premiums also can be used effectively in appointment settings. When an inside representative is calling to set appointments, offer a premium like a desktop calculator. The salesperson can then bring the premium to the meeting, starting on a positive note. This can be a great door opener for new customers. Seminar schedulers also have used premiums as an enticement for attending a seminar.


There are many other ways that premiums can be used to increase telemarketing results. You are limited only by your creativity and ability to imagine how they will fit with your offer. Test premiums wherever and whenever you have telephone contact with customers to determine how they can improve the sales process.


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