Rewards are a fairly familiar sight now for anyone who has purchased anything at all recently. Whether it is online discounts flashing up on screen, offers dropping into our email inboxes, offers at the checkout, or prize draws printed on our receipts, everyone offers a reward of some kind for shopping with them or using their service.

So, it becomes sensible to ask, do rewards really create loyalty?

Rewards are our business here at Prizeshark, so we are inclined to think so. But we also know it’s not as simple as giving out any old reward and expecting loyal customers to return. The act of giving is an art form and a science, one that requires an understanding of our customers and a dash of creativity and insight.

Today, we’re going to explore the nuances of reward schemes and incentives and discover how to truly generate loyalty in this way.

The Benefits of Loyalty Incentives

So let us start with the basics then: what benefits can we expect to discover when we implement a successful reward scheme?

Customer Retention: When customers are rewarded fairly, appropriately, and consistently, they have a tendency to return for more. In this way, a good reward scheme develops loyal customers, which helps to increase your customer retention. This not only increases your sales but actually reduces the cost of acquiring new customers.

Customers who are rewarded tell their friends and family, reducing the need to find customers yourself. And when you have loyal customers who keep returning, it means there is less reason to spend money trying to find new customers when the same money can go much further to service and value the customers you already have.

Increased Customer Value: A reward scheme that understands its customers encourages brand loyalty, which in turn increases customer spend. That means a loyal customer is more likely, over time, to spend greater and greater amounts of money with your brand than their initial purchase would ever suggest.

When a customer has trust in your business, value your service, and feel appreciated, they feel more inclined to make more purchases with you on a more regular basis. Further to this, the amount they spend increases, and loyal customers become advocates for your premium products and begin to prefer them over other products on offer.

By rewarding loyalty, businesses can enhance their customer value as well as grow their profits steadily over time.

Customer Satisfaction: A well-rewarded customer is a satisfied customer. And despite the obvious need from a competitive standpoint, a business doesn’t really have to give their customers anything extra. Rewards are offered and seen as a way of demonstrating gratitude and appreciation for a customer choosing to spend with you rather than your competitor. That reward, in the customers’ eyes, increases the value of what they purchased as well as their experience of the brand itself, enticing them to return again and again.

Data Insights: And finally, a good loyalty program is a perfect data collection tool. It is able to build personalised customer profiles, track spending habits, offer opportunities for direct feedback, as well as help you see what rewards customers do and do not engage in.

As the foundation of a good reward scheme is knowing your customers and putting them first, utilising reward schemes in the right way can help you to gather data which will only improve the service over time and thus increase those benefits over time as well.

The Rules of Rewards

So if you want to see these benefits arise from your loyalty and reward schemes, there are a few rules we recommend you follow.

Not All Customers Are Created Equal: Every customer is different; indeed, every person is unique, and in some way, your reward scheme needs to reflect this. This is where using your data really helps to understand the different customer bases you cater to and how you might best reward each type of customer. High spenders will most likely respond to exclusive access to new products, whilst those who don’t spend as much will prefer access to regular discounts when they shop. There are many ways to differentiate and reward your customers, so getting to know them first is vital to offering the best rewards.

Value Created Must Exceed the Cost of Value Delivered: This is a simple rule that states you should only engage in a reward scheme that brings in more value than it costs to produce, run, and maintain. If the cost of rewarding your customers is greater than the value gained by rewarding customers, then it simply cannot be sustained over time and will lead to loss for your business rather than profit.

Whilst it may seem like high-value rewards is always the answer to entice more customers, a one-off luxury reward may bring a large amount of people in once, but these may not be people actually interested in your brand. By coupling these rewards with purchases and spending habits your customer is already invested in, you will create value for them, loyalty for yourselves, and create a stable relationship that sustains your business far down the line.

Conclusion

So what do we think then: do rewards really create loyalty?

Yes and no. A reward by itself is just a free gift, a one-off event in a customer’s day that leaves a small mark that fades quickly.

But a tailored reward scheme is capable of enticing customers in, rewarding them effectively and fairly for their business, and keeping them coming back to spend more and receive the excellent service that sold them in the first place.

An effective reward scheme puts the customer first and listens to their needs whilst balancing them with what is achievable for the business.

If you can get inside your customers’ heads, we are certain you can craft a reward scheme that creates loyal customers who will spend more over time and advertise on your behalf for the level of satisfaction that each instance of service instils in them.

And if you’re interested in what the experts have to say, then get in touch with us here at Prizeshark, and we’ll be happy to use our years of experience delivering the perfect rewards to help you fulfil your customers’ dreams.