05 Incentive

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Session 5 IncentiveLanding Page Optimization


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Session 2 Lesson Plan

INTRODUCTION

Landing Page Optimization


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Landing Page OptimizationSession 5 Introduction

Conversion Sequence

C = 4m + 3v + 2(i-f) - 2a

Wherein:

C = Probability of conversion

m = Motivation of user

v = Clarity of the value proposition

i = Incentive (additional) to take action

f = Friction elements present

a = Anxiety elements present


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EXPERIMENT



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Background: A student from our certification course in landing page

optimization tested two different incentive options on a B2B email landingpage seeking to promote the download of a specific white paper

Goal: To improve landing page conversion rates while generating opt-ins for

ongoing communication

Primary research question: Which incentive will generate the mostconversions?

Approach: A/B single-factor test

Experiment ID:(Protected)

Location: MarketingExperiments Research Library

Research Notes:

Session 5 Experiment


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a chance to win one

of twenty $25 Amazon

gift cards...

a chance to win one

of ten $50 Amazon gift

cards...

Incentive #1 Incentive #2

The cost of these offers was the same, but which do you think performed best?



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Subscription path CR Relative diff v. control

Incentive #1 43.0% -

Incentive #2 56.5% 31.4%

31% increase in conversion rateThe second incentive outperformed the first by 31.4%



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Background: Anonline people search company that was losing many orders

due to cart abandonment. We wanted to find a way to recover as many ofthese orders as possible with a minimum incremental marketing spend

Goal: To recover partially completed but abandoned orders through a

sequence of basket recovery emails

Primary research question: Which basket recovery sequence and offer willgenerate the most sales?

Approach: A/B split test (variable cluster)

Research Notes:

Experiment ID:(Protected)

Location: MarketingExperiments Research Library



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The table below shows the performance of the initial test, using asequence of two email messages.


Email DescriptionEmails

Sent

CTP

ClicksCTR Sales CR Price

Net

Rev

Email Capture1-hr email ND 8834 252 2.85% 24 9.52% $29.00 $696.00


EMAIL TOTALS 17444 352 2.02% 25 7.10% $725.00

Note: With no additional marketing spend, the initial set of basket recovery emailmessages yielded 25 recovered sales for $725 in additional revenue from a single send.


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We then added a third email to

the sequence that offered a

discount on the cost of the

service as an incentive.

The original price was $29.95,the discounted price is $19.95

(33% off).



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3 Message Series with Discount Incentive:


149% Increase in ConversionThe third email increased the conversion rate by 149%

What you need to understand: Adding the discount incentive email boostedconversion rate for the series by over 149% (17.7% vs. 7.1%) and generated a

more than 273% higher level of net revenue ($1,982 vs. $725). Conversion from

click through to sale for the third email was over 43%.

Email DescriptionEmails

Sent

CTP

ClicksCTR Sales CR Price Net Rev



Email Capture5thday email ND 8419 145 1.72 63 43.45% 19.95 $1,256.85

EMAIL TOTALS 25,863 497 1.92% 88 17.71% $1,981.00


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INCENTIVE



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Definition: Incentive

(Dictionary general usage):

Something that incites or tends to incite to action or greater

effort, as a reward offered for increased productivity.

(Marketing):

An appealing element you introduce to stimulate a desired action

(discount, bonus, ).

Session 5 Incentive - Definition


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1. The objective of Incentive is to tip the balance of emotional forces from

negative (exerted by Friction elements) to positive.

2. Often, businesses will try one incentive offer and then quit. Incentives must

be tested. Until you find one that gives you a major boost, you must assume

you have not yet found an ideal incentive.

Session 5 Incentive Principles

Friction Elements Incentives

ABANDON COMPLETION

FKey Principles


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Discount Incentives (20% off, buy-one-get-one-free)

Content Incentives (Whitepapers, Books, Articles, Reports , eBooks)

Add-on Incentives (subscription extensions, warrantee extensions)

Order/Delivery Incentives (Free shipping, accelerated shipping, instant

download)

Accompanying product Incentives

Free accessories (carrying case)

Complementary products (memory card)

Examples of Incentives:

Session 5 Incentive Principles


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3. Determining the ideal incentive consists of three primary

components:

Marketing Intuition

Perceived Value Differential (PVD)

Return on Incentive (ROIc)

Session 5 Determining the Ideal Incentive

FKey Principles


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Landing Page OptimizationSession 5 Determining the Ideal Incentive

OPTIMALITYUsing PVD to

narrow-down and

determine the

optimal incentives to

test

Ideal

Incentive

All

Incentives

FEASIBILITYUsing marketing

intuition to

determine which

incentives are

relevant to the

audience as well as

cost effective

ACTUALITYTesting and using ROIc

calculations to find best

performing incentive

The path to finding an

ideal incentive

FKey Principles


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MARKETING INTUITION



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Landing Page OptimizationSession 5 Determining the Ideal Incentive Marketing Intuition

FKey Principles

1. When we refer to marketing intuition concerning incentives, we are

referring to the ability to answer two often overlooked questions:

A. Is the incentive relevant?

To the ideal customers motivations

To the core offering of the page


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U2 Ticket Contest - Calltoday for a chance to wintwo free ticks to see U2 live

Whats wrong

with this

incentive?


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Note: If you have to spend time explaining the value or attempting to sell the

incentive, it is not relevant enough to your ideal prospects. The value of the

incentive must contribute value to your offer, without competing against it.


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1. When we refer to marketing intuition concerning incentives, we are

referring to the ability to answer two often overlooked questions:

1. Is the incentive relevant?

To the ideal customers motivations

To the core offering of the page

2. Is the incentive practical?

In terms of cost (i.e., versus return) In terms of logistics (e.g., delivery)

Session 5 Determining the Ideal Incentive Marketing Intuition

FKey Principles


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PERCEIVEDVALUEDIFFERENTIAL



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PVD = Vp - C$n

Wherein:

PVD = Perceived Value Differential

Vp = Perceived Value of Incentive

C$n = Net delivered cost of Incentive

Session 5 Determining the Ideal Incentive PVD


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Landing Page OptimizationSession 5 Determining the Ideal Incentive PVD

Incentive #1: $49 - $5 = $44

Incentive #2: $30 - $19 = $11

Better (Higher PVD)

Note: Of the feasible incentives, you want to identify those with higherestimated PVD, for they are more likely to drive the biggest differential

between net revenue and net delivered cost.

Example:

An incentive that costs $5 per unit but has an estimated

perceived value of $49 is better than one costing $19 but an

estimated perceived value of $30.


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FKey Principles

Lets look at five ways to improve the presentation of the incentive

1. High PVD is predicated on both market-driven elements and

marketer-driven elements.

2. For market-drivenelements, you are seeking an item thatcombines high market value with low delivery costs. (e.g.,

bundled, electronic, outsourced)

3. For marketer-drivenelements, you are seeking to improve the

presentation of the incentive.


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Sign-up for 12 Months

of Golf Digest and get

But this

Not this

A FREESet of 15 Golf Balls

The Name and Description

A FREEBox of 15 Titleist

Pro- V1xGolf Balls


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But this

The Packaging



A FREESet of Titleist Pro-

V1xGolf Balls

Not this

A FREESet of Titleist Pro-

V1xGolf Balls


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The Exclusivity

Exclusive Reserve Set

A FREESet of Golf Balls from the 2010 MastersReserve Supply (only 200 sets in existence)

2010


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The Proximity (to Authority)

The 60-Minute Training Video How I play Golf

by Tiger Woods +A boxed set of the golf balls Tiger prefers to use

on his own home course.


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Now, we will look at an example of how we might calculate PVD


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What is the ideal incentive for an email marketing tradeshow?

1. Printed email marketing book2. Downloadable digital email marketing book

3. Pre-event email marketing training

Vs. Vs.

PRE-EVENT EMAIL TRAINING



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Perceived Value Differential (PVD): Print book

Est. Perceived value (Vp): $450

Net Delivered cost (C$n): $30

PVD: $450 - $30 = $420

PVD = Vp - C$n



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Perceived Value Differential (PVD): Digital book

PVD = Vp - C$n



PVD: $400 - $1 = $399



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Perceived Value Differential (PVD): Pre-event Email Training

PVD = Vp - C$n



PVD: $500 - $275 = $225




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PVD = $400 - $1

PVD = $399

PVD = $450 - $30

PVD = $420

This PVD calculation suggests that the printed book will be the ideal incentive, with the digital

book as a close second. However, because of the ever-changing perception of digital media,

gaining certainty about these incentives would require testing and further ROIc calculations.


PVD = $500 - $275

PVD = $225


d


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Print calculations:

P$n= (200 sold) x $500 = $100,000

C$n= (200 sold) x ($400 + $30) = $86,000

ROIc = P$n - C$n

ROIc = $95,000-$76,190

ROIc = $18,810

ROIc = P$n - C$n

ROIc= $100,000-$86,000

ROIc = $14,000

Digital calculations:

P$n= (190 sold) x $500 = $95,000

C$n = (190 sold) x ($400 + $1) = $76,190

For instance, after testing both incentives, you might discover that the actual perceived value of

a digital book is greater than estimated and will generate a higher return.

200 Total Sales 190 Total Sales

(Ticket Price - $500 Delivered Cost - $400)



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RETURNONINCENTIVE


L di P O i i i


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Landing Page OptimizationSession 5 Determining the Ideal Incentive ROIc

FKey Principles

1. Incentives must be tested.

2. The ultimate and final indicator that you have discovered the ideal

incentive is ROIc. There are two primary ways to measure this: 1)Total ROIc and 2) Percent ROIc.

L di P O i i i


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ROIc = P$n - C$n

Wherein:

ROIc = Total Return on Incentive

P$n = Net profit impact from Incentive


ROIc= P$nC$n

(P$n = $14,000)

(C$n = $10,000)

ROIc= ($14,000$10,000)

ROIc= $4,000

Example:

FKey Principles

Session 5 Determining the Ideal Incentive ROIc

Total ROIc: The total dollardifference between incentive offer cost and

net increase in sales over a specified time period. Focuses on total

volume of return.

L di P O ti i ti


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FKey Principles

ROIc% = (P$n - C$n) / C$n * 100

Wherein:

ROIc% = Percent Return on Incentive



Example:


ROIc%= P$nC$n

(P$n = $14,000)

(C$n = $10,000)

ROIc%= ($14,000$10,000)/$10,000

ROIc%= 1.4 * 100

ROIc%= 140%

Percent ROIc: The percent difference between cost and net increase in

sales for a specified time period. Focuses on efficiency of return.

L di P O ti i ti


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Appendix

ROIc Calculations (click on any of the following links to see example

ROIc calculations for specific incentive types)

1. Example 1: Whitepaper

2. Example 2: Free Gift

3. Example 3: Complementary Product

4. Example 4: Free Shipping

5. Example 5: Product Discount

L di P O ti i ti


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1. Revenue models

Subscription (length, renewals, multi-year)

E-commerce (Order size?, attribution)

2. Incentive types

Premiums (free gifts, electronic v. physical)

Discounts (terms)

Rebates (terms)

Free shipping (thresholds, )

Final Note: ROIc is simple in principlecan be messy in practice due to

differing

You should partner with your accounting and sales departments to establish the

correct computation of the ROIc elements for your particular business model.

L di P O ti i ti


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Landing Page OptimizationSession 5 Determining the Ideal Incentive

The path to finding the ideal incentive:


narrow-down and

determine the


test

Ideal

Incentive

All

Incentives


intuition to

determine which

incentives are

relevant to the

audience as well as

cost effective





ideal incentive


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CONCEPTSUMMARY




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FKey Principles

Session 5 Concept Summary

1. The objective of Incentive is to tip the balance of emotional forces from

negative (exerted by Friction elements) to positive.

Friction Elements Incentives

ABANDON COMPLETION

2. Often, businesses will try one incentive offer and then quit. Incentives mustbe tested. Until you find one that gives you a major boost, you must assume

you have not yet found an ideal incentive.



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3. Determining the ideal incentive consists of three primary

components:

Marketing Intuition

Perceived Value Differential (PVD)

Return on Incentive (ROIc)

FKey Principles




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FKey Principles



narrow-down and

determine the


test

Ideal

Incentive

All

Incentives


intuition to

determine which

incentives are

relevant to the

audience as well as

cost effective





ideal incentive



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FKey Principles


PVD = Vp - C$n

Wherein:

PVD = Perceived Value Differential

Vp = Perceived Value of Incentive




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FKey Principles


4. High PVD is predicated on both market-driven elements and

marketer-driven elements.

5. For market-drivenelements, you are seeking an item that

combines high market value with low delivery costs. (e.g.,

bundled, electronic, outsourced)

6. For marketer-drivenelements, you are seeking to improve the

presentation of the incentive.



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FKey Principles

7. Incentives must be tested.

8. The ultimate and final indicator that you have discovered the ideal

incentive is ROIc. There are two primary ways to measure this: 1)

Total ROIc and 2) Percent ROIc.




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ROIc = P$n - C$n

Wherein:

ROIc = Total Return on Incentive



FKey Principles


ROIc% = (P$n - C$n) / C$n * 100

Wherein:

ROIc% = Percent Return on Incentive



Total ROIc: The total dollardifference between incentive offer cost and net

increase in sales over a specified time period. Focuses on total volume of

return.

Percent ROIc: The percent difference between cost and net increase in sales for

a specified time period. Focuses on efficiency of return.


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END



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APPENDIX




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This Internet newsletter publisher

offers three free e-books when you

register for their free electronic

newsletter.

Example: White Paper or E-Book

Assumptions: Net profit value of a new subscriber is

$2/mo. from ad and list revenue.

Incurred cost for e-book delivery is

$0.10/unit for royalties + bandwidth.

Avg. subscriber retention: 12 mos.

Incentive generates 600 additional unitsper month from 5000 to 5600.




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Example: White Paper or E-Book

Assumptions:

Net profit value of a new subscriber is $2/mo.

from ad and list revenue.

Incurred cost for e-book delivery is $0.10/unit

for royalties + bandwidth.

Avg. subscriber retention: 12 mos.

Incentive generates 600 additional units per

month from 5000 to 5600.


P$n = [Signup-vol-impact(#subs) x (Avg net profit

per new subscriber)]

P$n=[+600 units x $2.00] = $1,200/mo.

Step 1: Compute Net Profit Impact

C$n = [Signup-vol-impact(#subs) x(Avg cost/e-book)]

C$n=[5600 units x $0.10] = $560

Step 2: Compute Net Delivered Cost

ROIc = ($1,200 $560) = $640 in the 1st month

12 mo. impact of 1st mo. subs: ROIc1,12m = ($640 +($1,200 x 11 mos.)) = $13,840.

Step 3: Compute Total Return on Incentive



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Landing Page OptimizationSession 2 Lesson Plan

END


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