The initial order incentive (IOI) is an incentive that a customer receives on the order in which they opt into a subscription. To drive successful subscription conversion the IOI should be better than, or at least competitive with, the majority of your promotions, and be the best way to purchase from you on any given day.
The IOI should also work harmoniously with any recurring order incentives, retention rewards, samples, or other program benefits to ensure that customers are retained and program growth is sustainable. Incentives should provide sustained and meaningful value for customers who remain subscribed.
Some clients offer a large IOI to drive high conversion but these are often vulnerable to “gamers” who are customers that sign-up for the subscription program to benefit from the large IOI but churn prior to their first recurring order.
Minimizing Risk
To prevent gamers from taking advantage of your IOI we recommend several strategies to optimize your incentive structure:
- One is to balance the structure by minimizing the variance between the IOI and any recurring or future incentives.
- Another is to tie value to milestones to maximize subscription lifetime value (LTV). An example of the balanced approach is a Health & Wellness retailer that offers 20% off the customer’s initial order and 15% off recurring orders.
- Alternatively, a milestone-driven example is a beauty brand that offers 10% off the initial order, 5% off subsequent orders, and every 5th order is free. Both strategies are focused on driving healthy conversion and retention metrics that lead to program revenue growth.
For a more in-depth discussion of initial order incentives and other types of incentives, please contact your Ordergroove success partner.