Reward programs in marketing works and we don’t have to look very far behind, to find the evidence. A recent study found out that 82.4% of customers tend to shop more from stores that have some form of reward program. This goes on to prove the effectiveness why use reward marketing and how it can help you in edging out the competition. This blog attempts to dig deep and find out the inner workings of the marketing strategy in question - What is Reward Marketing and How it Can Help?
Reward Program has a vast scope as it can be used to create better engagement with - employees via employee rewards, channel partners, and customers via different reward and loyalty programs (anything to do with building a human relationship). When applied in marketing, rewards can help you -
Reward marketing is a practice where you leverage a reward or loyalty program through program participation. This is done by providing appealing and attractive rewards.
Acquisition: Customer acquisition is essential for businesses of any age and size. Being able to attract and convert new customers systematically, keeps companies healthy and growing — and investors happy. But how do you do that?
Consider reward marketing. Reward marketing helps you provide that extra something - be it incentives, credits, physical gifts, monetary rewards or even non-monetary rewards to your customers. The best thing about reward marketing is its multi-purpose properties. Reward marketing is not just a one-way funnel but a flywheel that helps you acquire the right kind of customers who will stick around.
Retention: Building a new customer base is expensive. The costs may vary across industries. But according to Mehdi Khosrow-Pour in his book "Emerging Trends and Challenges in Information Technology Management," replacing a customer is five times more costly than keeping an old one.
A better approach is to keep the customers you have, by opting for customer incentives or smart reward marketing programs. This will help you in retaining customers and making them loyal towards your brand. Knowing that making a second purchase from your brand will earn customers coupon codes/vouchers will make your product more attractive than those of your competitors.
Referrals: Another benefit of reward marketing is that it can help you tip a potential customer to make a purchase – especially when backed up by a friend's recommendation. Referral rewards come in all shapes and sizes, but the trick is offering ones that complement your brand experience and meet your customers' needs. The most common ways are -
Customer Advocacy: Customer Advocacy is a way that allows brands to acquire new and valuable customers organically. The positive attitude of the customers towards your brand's products/services and leads them to recommend the same to others after experiencing it themselves.
Your customer advocates are driven by something called - SAPS (Status, Access, Power or Stuff), and reward marketing can do that. You see, reward marketing is not only about giving coupons and freebies but creating an ecosystem where customers can share knowledge, expertise and making customers feel that their opinion matters.
Point-based system: This is a kind of reward program that lets customers collect points that can be redeemed on various products/services. They are much easier to set up, making it the most popular type of customer retention program.
Many e-commerce businesses who struggle to get customers in the virtual door might find a solution in this kind of loyalty program. There are various ways the customer can earn such points. For example - social sharing, grievance compensation, emails, or any other actions you take to drive traffic to your site.
Frequent buyers program: It is an excellent tool for maintaining brand loyalty. It's generally in the form of a gift card, voucher, discounts, freebies, or special customer treatment. It is usually given to customers who come to your site or store and hit "purchase" more frequently. It is an easy and commonly used customer retention program for both technical (Amazon, Victoria Secrets) and non-technically advanced (coffee shops, gas stations) businesses.
Gamification: Gamification is not a new tactic in the marketing field. Companies have been creating experiences of a game in a non-game environment to increase sales. Gamification will always be relevant because it plays on people's natural competitive instincts, to trigger action and influence buyer choices. This type of program can be used for both customer acquisition and retention. There are different elements to gamification, and each drives a different result -
Referral program: In this program, you reward your advocates or happy customer for successfully referring their friends to the store. For example, Some brands give cash-back to customers who refer your app to their friends. Referral Rewards is a great way to enhance sales because it not only generates new leads but also retains older customers by rewarding them.
Contest/Sweepstakes: Contest/sweepstakes are designed to fulfil the human need to win. A win is of no use if there is no reward. However, the way of determining the win is different for both contests and sweepstakes. In sweepstakes winners are chosen by luck.
The prizes can range anything from - stickers, t-shirts, houses, cars, and enormous cash wins. They are a great way of acquiring new customers. Contests, on the other hand, draw winners based on some merit. In such cases, the prize is also something that gains the interest and motivates customers to enter the contest. This is a useful tool for retaining customers who are already part of your target base. Contest and sweepstakes together are a force to be reckoned. They not only generate interest but also help in expanding your reach to a larger target audience.
Product reviews: The e-commerce sector commonly uses this kind of reward marketing. Customers can rate and comment on products they have purchased on the product page. Other consumers can read remarks when making a purchase decision. However, nudging customers to share their positive feedback is not easy.
What is in it for them?
If you want your customers to rate and give feedback positively, you have to give them something back. That is where reward marketing can help you out. For example, there is this apparel company that uses reward marketing to up its product reviews. After 3-5 days of product delivery, they re-engage their customers by asking them to rate/ review their products. For each product review, customers gain points. They can redeem those collected points for their next purchase.
It is a win-win situation because -
(a) it leads to increased traffic, as customers come back to redeem their points.
(b) Their ratings and reviews help new customers in making the crucial decision of purchase.
A perfectly running reward program should be rewarding, engaging, and motivating. Here are some tips to consider while running a reward marketing program :
The relationship between your brand and the customers is like a marriage.
It is not always a smooth road. Your consumer’s (your spouse) relation with you can get complicated, and their needs and behaviours can change over time.
Hence, brands will sometimes need to work hard and be more sensitive to their customer needs. They will need to come up with new engaging strategies, one being reward marketing, if they do not want their relationship to end up in a divorce.