Incentives For Clients: What is appropriate?
Marketing Ideas & Sales & Selling & Sales Tips

Incentives For Clients: What is appropriate?

November 20, 2020

by Tony Vidler  CFP logo   CLU logo  ChFC logo

incentivesWhat incentives are appropriate for encouraging clients to refer other clients?  Are incentives appropriate at all?


Some would even ask “Why provide incentives at all?  Surely if the product or the advice is good value in itself then no further incentive is needed?”


These questions around incentives for promotions or campaigns continue to perplex advisers, and more often than not the outcome of incentive-based promotional idea is a disappointed adviser.  They are almost always disappointed to begin with as they were hoping that it would be as easy as “offer “X” to the client and then they will just pick the phone up and call you”.  It is usually just not that simple or definitive unfortunately – unless you are offering something extraordinary.


The reason why it isn’t is simple: different people place different value of different things.


What is incentivising to one client is meaningless to another, or perhaps is even a disincentive.  To compound the difficulty of getting it right, there is a tendency to offer disproportionately valuable or invaluable incentives, which raise barriers to doing business, rather than reducing them.


A typical advisory firm example of disproportionate incentives creating a barrier would be this:


We want a client to pick the phone up and call us to review or change their general property insurances because that is an aspect of their business which we have not yet provided advice upon, and we run an awareness campaign designed to get the clients to realise that this is something we can and should do for them.  To get their attention and interest we offer everyone who responds an entry into a draw for a trip to two to somewhere exotic.

incentives for clients


The typical client’s immediate response to such an offer is suspicion, and there is a barrier immediately.  A secondary reaction is disbelief.  The result?  They are not going to take the desired action, which was to call you to have a quick chat about whether you should be reviewing their general insurance.


The incentive being offered in this example is perceived as being of particularly high value.  A lot of money is being spent to offer a trip to Disneyland, right?  So if a lot of money is being spent then that adviser must be making tons from me, right?  THAT must mean that I am paying way too much for something somewhere…..Suspicious client!


Disbelief then kicks in with “what are my chances of winning anyway?”….and the result is a group of clients who now trust the advisory firm a little less than they did previously….

Don’t overcomplicate it!

When it comes to trying to work out what sort of incentive will appeal to clients to take a particular course of action, the first step is to be very clear about what action it is you are trying to trigger.  For example: more often than not the action we are wanting a client to take is a reasonably simple one, and that is we want them to pick up the phone or email us.  We want them to initiate contact when the timing is right for them.  Ultimately we are wanting that action to turn into some business or revenue of course, but that is a consequence of the client taking the action.  The client taking the desired action is the first consequence we are seeking to create, and that is the point of having an incentive and some awareness of it to begin with.


So we need to keep the incentive or reward for taking the desired action proportionate.  It’s a “thank you” for making the effort and thinking of us.  It is an acknowledgement…a gesture…..we are not trying to create the illusion that the clients have just won the lottery.


Striking the balance between making the incentive too big and having clients wonder what the trap is or making it so small that it is completely inconsequential is the challenge.   The ideal is therefore to provide an incentive which is small, but meaningful enough or with high perceived value without appearing ostentatious or ridiculous. Overlaying al of that is the need for any incentive to make commercial sense.


If for instance you are wanting promote an additional service to clients, such as the general insurance review used earlier, you need to determine what acquiring that business is worth to you or your firm in the short term.  If it was worth only (say) $250 in initial brokerage and your expectation is that you will be able to convert one in three calls, and there is an hour and a half’s work in handling those 3 calls and picking up the piece of business, then on average each lead is worth only maybe $25-30 to you.  Putting an incentive to call that costs $30 simply doesn’t make commercial sense.  An incentive with a price point of perhaps $10-15 might make sense…but the perceived value to the client has to be higher.

client incentives


A box of chocolates or a bottle of wine begin for anyone who calls or emails and gives you the opportunity to handle that extra piece of business becomes proportionate.  They are items with a relatively low cost, but which are valued as little luxuries, and they are in keeping with what is expected as a “thank you”.  They are not valuable enough that they arouse suspicion or disbelief, and they are affordable for the firm generally.

When it comes to trying to figure out what is an appropriate incentive for a client keep it relatively simple, and make sure the reward is proportionate to the desired action.  Keep it in perspective.  Once you’ve done that all you have to do is get the message out there and make people aware of it, and the phone should start ringing more…


You might also be interested in this related article:


Do You Really Know What Your Clients Want?
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