Customer promotions are used by businesses to engage prospects and customers with motivators like gift cards, discounts, or exclusive offers. These programs aim to drive new revenue, enhance customer satisfaction and loyalty, and ultimately increase returns on investment (ROI).

Why use customer rewards and incentives?  

Leveraging customer rewards and incentives is more important than ever, especially given the high cost of customer acquisition and dips in consumer likelihood to purchase. Recent data from Tango and Blackhawk Network also reveals that companies using customer rewards and incentives like gift cards and prepaid cards see a 16% higher return on marketing investments than those using discounts or swag.  

The right incentive program can be a powerful driver of ROI across the customer journey. Consider customer advocacy: in a market where 84% of consumers trust online reviews as much as personal recommendations, and customers who are referred go on to refer 30-57% more new customers than those who aren't referred. Maintaining happy customers is crucial for business success. Learn about other potential benefits below.  

Benefits of customer reward and incentive programs

Implementing customer promotions can provide numerous advantages for your business, including:

• Increased sales: By offering the right promotions, you can motivate customers to make quicker purchases and boost your sales volume. Based on the above-cited research from Tango and Blackhawk Network, companies that opt for rewards and incentives rather than discounts and swag see a 36% faster average sales cycle, from lead acceptance to closure.

• Enhanced customer loyalty: Providing frequent buyers with special benefits, like gift cards or points, fosters a sense of belonging and encourages them to stay loyal to your brand.

• Greater customer lifetime value (CLV): Incentives that promote repeat purchases and higher spending per transaction significantly increase a customer's long-term value. Businesses typically see a 34% annual improvement in CLV when using rewards and incentives.

• More new customers: Referral, case study, and testimonial programs can draw new customers to your product or service. Marketing efforts are also more effective with gift cards and prepaid cards, leading to a 14% higher conversion rate than discounts, swag, and other promotions.

• Improved access to data: Incentive programs can enhance survey participation, helping companies gather valuable customer data for more effective sales, marketing, and customer success campaigns.

• Better brand perception: An incentive program can enhance brand perception by demonstrating that you value customer loyalty, creating positive associations with your business. Companies using rewards and incentives report a twofold annual improvement in customer satisfaction.

Which factors determine customer rewards and incentives program ROI?

Several elements influence the ROI of customer rewards and incentives programs. Understanding and strategically optimizing these factors can help businesses expand their return on investment.

1. Strategy and program design

Choosing the right place in the customer lifecycle to implement your rewards and incentives program is crucial. Here are some strategies for different stages:

Acquisition:

• Goals: Building awareness, acquiring net-new buyers, and improving brand engagement.

• Reward and incentive strategies: Demo or quote incentives, sign-up incentives, gifts with purchase, rebates, sweepstakes, and contests.

Loyalty and retention:

• Goals: Driving loyalty, encouraging advocacy, retaining customers, upselling, and cross-selling.

• Reward and incentive strategies: Incentives for reviews, testimonials, and case studies, survey participation rewards, referral incentives, and customer loyalty programs.

Win-backs:

• Goal: Re-engaging customers who are about to churn or have already churned.

• Reward and incentive strategies: Make-goods or appeasements, and exclusive sign-up incentives—gifts with purchase, rebates, or sweepstakes—for returning customers.

2. Costs

Managing the cost of your rewards and incentives program involves several factors, each of which have a direct impact on ROI:

• Number of eligible prospects or customers: Setting limits on promotion redemptions and eligibility can help leaders manage the budget.

• Percentage of eligible participants claiming the promotion: Precision in targeting cold or warm leads vs. new or current customers and setting participation limits allows teams to focus on the most valuable recipients while managing costs.

• Cost of promotion per end-user: Experimenting with promotion values to balance participants' time and budget, including third-party fees, can ensure companies find a “sweet spot.”

• Fulfillment costs: Digital delivery methods can reduce costs associated with physical delivery, packaging, postage, and worker hours—not to mention security concerns like mail fraud.

3. Outcomes

Monitoring the success of your program involves tracking various metrics—depending on your program, some or all the following may directly impact your return on investment:

• Participation and redemption rate improvement

• Response rate improvement

• Program cost improvement

• Total sales growth

• Customer loyalty rate

• Referral count

• Average purchase value

• Customer feedback scores

Customer incentives in action: IncentivePilot

IncentivePilot, co-founded by Andrew Phelps, is an online platform designed to boost revenue and save organizations thousands of hours annually through enterprise incentive programs and sales contests. By eliminating the logistical challenges of running effective and engaging sales incentive programs, IncentivePilot aims to transform customer engagement.  

Rewards play a crucial role in driving IncentivePilot’s channel seller behavior. Their gamified incentive program helps customers attract new partners, activate sellers with new behaviors, build pipelines, and close deals. They adopted Tango's solution to help the IncentivePilot team address difficulties managing program details.

Challenges:

• Problems with data, inventory, and communication from a prize vendor

• Undesirable incentives and long wait times for prizes

Solutions:

• Integrated Tango’s Gift Card API to generate Reward Links

• Sellers earn gift cards for completing training or attending events

• Rewards woven into complex programs like poker, mystery games, or arcade games

The results have been impressive: over 50,000 activities and goals achieved by more than 10,000 sellers, with over 300 new sellers joining every month. IncentivePilot has distributed over $8 million in rewards for completed activities, virtually eliminating the time to fulfill rewards.

Discover how to maximize ROI for customer reward and incentive programs

Ready to experience your own winning results?

Take a deeper dive into ROI strategies and by downloading our eBook, "Customer rewards and incentives: Increasing ROI." Learn how to optimize your rewards and incentives program to achieve maximum ROI and drive meaningful business growth.

Source: BHN EQ 2024 Next-Generation Promotions Research, Nov 2024, n=711, B2B Incentive Program Decision-Makers, 18+, US, Canada, UK, Australia

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