The Value of Incentives

Potty training. Parents with children who have gone through this process, are going through it or will be going through it: you have my sympathy. When you really think about it, the idea of using a toilet is a foreign concept to a toddler. What’s the real value for them if they’ve been getting their tush wiped for the past three years? Why change a good thing?

Parents have many tactics at their disposal to add value for their children, but most default to incentivization. Kids get stickers, treats, toys and all manner of incentives to use the potty.

Simply put, incentives are a motivation to behave in a certain way. From an early age, we’re exposed to this basic economic (and behavioral) principle. Perhaps this is why most American companies are in love with incentives; consumers are primed for this tactic, even if they are fully aware of the reason behind the incentive.  And yet, there are a surprising number of marketers who don’t use incentives to their full advantage.

Some claim that their audience wouldn’t be swayed by incentives, but even sophisticated audiences can be convinced. There is a reason why pharmaceutical sales reps can no longer give incentives to doctors—including simple things like pens and pizza lunches—they worked! (See Wazana.) Individuals have many motivations to do what they do, the trick is figuring out how to unlock that.

Stephen Levitt writes in Freakonomics, “The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme,” although the solution “may not be pretty.” In marketing this holds true as well, but we try to avoid the “ugly” solutions lest they be taken as bribes.

Incentives don’t always mean giving something away, either. In late 2011 Patagonia partnered with eBay to start the Common Threads Program, which encouraged people not to buy new Patagonia clothes, rather to buy only what they need through eBay. In exchange, Patagonia agreed to only build products that last. By May 2014, nearly 70,000 people had signed the Common Threads pledge. During this time, Patagonia consistently increased its profits. By aligning its values to those of its customers and potential customers, Patagonia incentivized a broader scope of people to buy from them based on those shared values.

By truly understanding our audience, and who we want our audience to be, we gain understanding of what really motivates their actions. Armed with this knowledge we can then provide real incentives that deliver value to both the consumer and the company making the offer.

Now, if only I can figure out my son’s motivation for potty training success…


Now it’s my turn to incentivize you, and, since this is the internet, a video incentive seems most apt. If this post generates five non-employee comments on the HB website within a week of being posted, I will share a video of myself getting pelted by water balloons thrown by HB staffers. The video link will be posted to our newsletter, so be sure to sign up! Incentivized?

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