The very first rewards programs can be dated back to the late 18th century when American retailers gave copper tokens with purchases that could be redeemed for a product on a future purchase. Today, we see them used in many industriesto retain customers, increase sales and promote brand loyalty by making customers feel like a part of something bigger within the company. These programs also encourage repeat purchases, customer satisfaction, and offer improved channels for customer engagement.
There are many different rewards programs out there, but choosing the best one for you depends on your product or service, needs, and buyer personas. If you’re considering adding one of these programs to your marketing plan but are having trouble deciding which one, you’ve come to the right place.
Here, we’ll detail some of the most popular rewards programs and how they work.
Tiered Reward Structure
Companies like Starbucks use a tiered reward structure, which has two levels, each with different rewards. When a customer joins the program, they’re entered into the lowest tier, the Green level, and have a certain set of rewards such as earning a “star” for every 50 cents they spend, a free drink on their birthday and other rewards. After the customer collects more than 300 stars, they move to the Gold Level, which offers the same benefits as the Green Level, plus the opportunity to earn double stars on certain days, a fancy gold card and rewards every 125 stars.
When employed correctly, rewards programs encourage customers to spend more money so they can reach the next level, which means your sales and revenue grow (even though you’re handing out discounts and freebies). Additionally, you’ll get to see which types of customers spend more money and assign different values to these customer groups. This comes in handy especially during re-evaluating segmentation scenarios and buyer personas. Finally, customers are satisfied and happier because as you reward them with discounts and freebies, they start to see you as friendlier.
These types of rewards programs give the customer points per each dollar spent. When the customer reaches a certain number of points, they get a discount or a gift. For example, the clothing store Express utilizes a points-based discount system where you earn a 15% off coupon every time you accrue 250 points.
These programs are great for customers because it offers a sense of instant gratification; they immediately start working towards receiving benefits and don’t have to wait to reach a certain level to receive the benefits they want. Customers essentially think of these discounts as free money - all while increasing their frequency of shopping to reach these discounts quicker.
When two or more companies partner together to bring all-inclusive discounts to members, the benefits are felt among both companies and their customers. For rewards programs like this to work, a customer signs up to become a member of a program and they earn points on every purchase that they can redeem at any of the companies in the partnership. For example, with Plenti, a rewards program that aggregates various companies, members can earn points whenever they use their Plenti card to make a purchase and redeem the rewards they earn at Macy’s, AT&T, Rite Aid, and Hulu, just to name a few.
While the mechanics are similar to a rewards-based program, company partnership programs are good for building loyalty among a multitude of brands and allows you the opportunity to reap benefits of purchases in other stores. The independence felt by allowing customers to earn rewards in more places than just with you and letting them spend the reward wherever they want translates to higher satisfaction levels, since they aren’t locked into one specific location.
Games and Sweepstakes
These programs are best used in conjunction with other rewards programs rather than on their own - they’re easy to tie into pre-existing rewards programs and offer more of an incentive to make a purchase.
For these to work, a customer gets one entry to a sweepstakes for every purchase they make. Customers will end up making more purchases to gain more entries to increase their chances of winning. Their repeat purchases will bump up your sales, and the feeling of friendly competition (especially if you periodically put on sweepstakes) encourage feelings of loyalty.
Rewards programs should be an essential part of your marketing program if you want to increase sales, repeat purchases, and ensure your customers remain loyal and happy. While it sounds daunting, the good news is there’s a multitude of programs so with a bit of research, you’ll be sure find what will best suit your needs.
For more information on rewards programs and other methods for increasing customer satisfaction, check out our free ebook below.