Understanding the Incentive Theory of Motivation

The Basis of Incentive Theory

The incentive theory of motivation suggests that people are motivated to do things because of external rewards. In other words, we will work harder or change our behavior if we get something in return, like rewards, prizes, or recognition. For marketers, this means people can be influenced to buy products or services by offering them incentives.

Using Incentives in Marketing

Many companies use incentives like coupons, rebates, loyalty programs, and free gifts to motivate customers to make a purchase. For example, a ‘buy one get one free’ offer incentivizes you to buy something now to get a reward (the free item) later. Loyalty programs that give you points for purchases that can be redeemed for rewards keep you coming back to the same stores or brands.

Shortcomings of the Incentive Theory

While incentives can be effective motivators for some behaviors and in the short term, they do have limitations. Not all people are motivated by external rewards. Some may be more intrinsically motivated. Incentives can also undermine internal motivation if not used properly. They may teach people to rely on rewards rather than developing their own internal motivation.

Once the incentive is removed, people often go back to their old behaviors. For long term motivation, other strategies like building internal motivation or making a habit of the desired behavior are more effective.

Incentive theory also doesn't consider individual differences in what people find motivating. A one-size-fits-all approach to incentives may not motivate everyone. Personalized incentives tend to work better.

Using Incentives and Rewards in Marketing

Incentive theory suggests that rewards motivate people to act in a certain way. Marketers frequently use incentives and rewards to influence customer behavior and purchasing decisions.

1) Offering Discounts and Coupons

One of the most common ways marketers use incentives is by offering discounts, coupons and promotional codes. This rewards customers by allowing them to save money on purchases. Many customers will buy a product just because they have a coupon for it, even if they didn't originally intend to purchase that item.

2) Loyalty Programs and Rewards

Loyalty programs that provide rewards and benefits for repeat customers are another way marketers incentivize certain behavior. Things like frequent flyer miles, hotel points, and retail rewards programs give customers an incentive to continue doing business with a company in order to earn greater rewards.

3) Free Trials and Samples

Offering free trials, samples and demos is an incentive for customers to try a new product. Once customers experience the product, they are more likely to become paying customers. Many subscription services like Netflix or Peloton offer free trial periods so customers can experience the service before committing to an ongoing subscription.

While incentives and rewards can be an effective motivator, they don't work for every customer in every situation. Some people are motivated more by quality, brand or experience rather than rewards and savings.