“Too many marketers deal with premiums almost as an afterthought.  This is a huge mistake.  I know for a fact that premiums can and do drive sales, and that a change of premium, with no other changes, can dramatically alter the results of a promotion.  For this reason, just as much careful thought should be given to the premium as to the main offer.”
 – Dan Kennedy, Power Points #34

Research has shown that a direct mail letter with a premium offer can out pull a sales letter alone by as much as 300%!  Before we get too far into why they work so well, you may be thinking, “What is a premium?”

A premium is anything of value your prospect/client/patient receives for taking some action that you want.  Often, the best premiums are not even tied to what you are offering!  It’s often an unrelated item for the personal use of the buyer and not even for their business (if you’re selling B2B).  The key is that is has perceived vale.  It may not cost a lot, but it should look like it costs a lot.

When offering premiums, a picture is worth a thousand words.  Always include a picture of the item, as this is much more effective than simply describing the item.

There’s a reason why for years Sports Illustrated gave away a sneaker phone.  There’s a reason they now give away your choice of any of the 32 professional football team shirts.  Why?  Because Sports Illustrated knows that premiums work!  They’ve be doing it for decades now.  

The Estee Lauder Company set the standard with their “Gift-With-Purchase” strategy that is rampant in the cosmetics industry, and others.  The allure of ‘something for nothing’ has always enticed consumers.  Doesn’t it make sense to appeal to this very basic, controlling emotion?

First and foremost, everybody wants something for FREE!  It’s a simple human instinct that appeals to our need for self gratification.  That’s the simple answer.

Premiums cost very little, but have a high perceived value.  You can very often offer premiums that your prospect perceives as very valuable but costs you very little in ‘real’ dollars.  Remember, you are sending only a picture of the premium to the whole mailing and then giving the actual gift only to those who respond!  

It likely seems nuts to you that premiums can actually lower your cost pre transaction,, but here’s how it works.  Let’s say you mail out 10,000 sales letters, with no premium and you get a 2% response rate.  That would be 200 responders.  Let’s further assume that you can be profitable with those 200 responders.  Now let’s say you offer the premium, and response goes up to 3%.  This is not an out-of-the-ordinary response when you offer a premium.  You now only need to send out 6,700 pieces of mail to get the same 200 responders as you did without the premium.  And, for easy math, let’s say each mailing cost $1.00.  You would save $3,300 on just the single mailing.  Your premium cost you $5 each for the 200 responders for a total cost of $1,000.  You still save $2,300 over the offer without the premium!

This is a myth that needs to be addressed and debunked right now.  In almost all instances, a premium unrelated to your product will outperform a premium that IS related to your business.

Here are a couple examples.  For years in my main business I have sent out a free Big Key Calculator to responders to my mailing.  I sell to independent retailers and I don’t sell calculators!  Yes, they could use it in their store (or home, or wherever), but it is in no way related to what I want to offer them.

For years, Sports Illustrated gave away sneaker phones.  This is in no way related to what Sports Illustrated offers, a weekly sports-news magazine.  They simply matched the premium with their target demographic.  They didn’t offer a month’s free of magazines, or a free report about sports.  IT’S A CHEAP, BARELY SERVICABLE PHONE!  Tell me how that is related to sports!

Have you ever received an offer from Omaha Steaks?  They almost always offer a premium with a purchase, and it’s an unrelated product.  They don’t offer you an extra free pound of meat and I don’t know about you, but I sure don’t want a free report on how a cow goes from the pasture to my plate.  However, a free meat thermometer might be just the ticket to make sure my steak is nice and rare!

Here’s another example.  Let’s say you’re a mortgage broker.  You want people to call/fax/write/e-mail for a free appraisal of their mortgage payments.  I’m willing to bet my paycheck for the next year that an unrelated premium (that is targeted to your niche), will outperform a free report about your mortgage payments at least 10 to 1!

You should know enough about your target niche to offer an appropriate premium.  Some will obviously work better than others.  If you’re selling a high end, high priced luxury car, a $25.00 gift card to Wal-Mart probably isn’t the right premium.  However, a leather briefcase with a perceived value of $25.00 could likely do the trick!

If the right premium is matched correctly with your list, your premium can often drive the sale.  This is the “psychology of second interest,” as world famous retailer Murray Raphel called it.

Selling the second interest can be included in many sales processes, but it extremely applicable with premiums.  After all, how may Cracker Jack boxes did you buy as a kid (or for your kids) just to get that cheap little toy inside?  Or how about McDonald’s Happy Meals, just for the pre-packaged toy that cost McDonald’s a couple of pennys?

As marketers, you know (or should know), that you will almost always get a better ROI from your current clients.  Knowing this, you can ask your current clients to refer their friends, family and business associates to you!  You can offer a FREE gift for each new client they refer.  The best place to start to get new business is to ask your current happy and satisfied clients!  Offer them something of high perceived value, and they’ll refer their friends to you!  

Two part premiums are a great way to cut through the clutter, AND make sure you get the follow up response you’re looking for.  One of the best I’ve ever seen was for a financial group.  It went to a highly selected list of CEO’s and CFO’s.  They were sent a glass case and in it was an autographed baseball with spots for two more.  At one point in the sales process the prospect was given one of the signed baseballs.  Further on they got the second ball and finally, they were given the third ball when the sale was finalized.  

And they didn’t go on the cheap here either.  The balls were signed by Hall of Famers Stan Musial, Hank Aaron and Willy Mays!  The total cost for the signed baseballs and mailing was around $17,000, but it generated over $60 million in business for the group.  This certainly cut the clutter, built a relationship and helped close the deal.

This is just one of many ‘Two-Part’ premiums you can offer.  Sending part of something demands the reader to respond for the second part.  Here are just a couple more ideas:

• Mail and empty baseball holder Respond and get the autographed baseball
• Mail the headphones only respond and get a free CD DiscMan.
• Mail the tool kit without the screw drive Respond and get the screwdriver

The first thing you need to do, if you haven’t already, is find out the life-time value (LTV) of your average client.  This is vital information to have about your business.  Going into a marketing campaign without knowing your LTV, is like entering an archery contest and not knowing where the target is located!  How do you know where to shoot?  How hard?  Hi high?  How low?  Pretty though.

Let’s say my average sales from a first time client is $100.00.  I know, on average, that they’ll be worth $200 each year for 5 more years.  That client is worth $1,100 to me.  I now have a base to know what I can spend in my marketing campaign.

It is also vital to know your average sale.  $5, $50, $5,000?  How much of that are you willing to give away for a purchase?  Or an appointment?  Do you close well?  If so, you just need to get more appointments and a premium will give you that bump you need.  You need to find the premium to match your budget.  If your LTV is smaller, use an appropriate premium.  If you have a large transaction size, a more lavish or expensive premium may be in order.  


Some questions to ask yourself when adding premiums to your offer.

• Does the bonus(es) have a high perceived value?
• Can you make bonuses by breaking out parts of your product?
• Are you going to use non-linked bonuses?
• Are the bonuses set up to be more desired than the product?
• Are you using bonuses to enhance purchase of upgrade (deluxe) product choice?
• Are you creating or buying multiple bonuses, instead of just one?
• Can you link bonuses to fast response? (time, limited quantity, first time buyers, etc)
• Are you offering unannounced bonuses either at purchase or after?