The Theory Behind Customer Incentive Programs

von Natasha Ambavle |

The Theory Behind Customer Incentive Programs

What if I offer you an incentive for reading this blog post?

Chances are, you would read it to the T, paying attention to every word and sentence.

Wouldn’t you?

The incentive theory of motivation (a behavioral theory) suggests that people are motivated by a drive for incentives and reinforcement. And this has worked exceptionally well in marketing too. In an interview with Business News Daily, Doug Spear, Executive Vice President of Linkable Networks said that “Loyalty and incentive programs have become ‘must-haves’ due to the associated performance metrics for businesses that implement them, and the fact that consumers have come to expect a loyalty offering or savings opportunity from the businesses that they engage with.” According to Wirecard, “75% of consumers say they are likely to make another purchase after receiving an incentive.” This is the impact of a customer incentive program!

So, What Exactly is a Customer Incentive Program?

A customer incentive program is a marketing strategy designed to motivate customers to engage and purchase from the brand by offering them incentives in return. It is designed to offer customers a ‘more valuable’ reward when the customer meets his required goal or target.  An incentive program encourages the customer to remain associated with the brand, which in turn means improved revenue, shorter sales cycle, stronger customer base and organic promotion for the brand.

Difference Between an Incentive and a Loyalty Program?

Contrary to popular notions, an incentive program is different from a Treueprogramm. The intrinsic difference between a loyalty and an incentive program is that the former is a long-term strategy aimed at lasting results such as building brand following, brand image and credibility. Incentive programs offer instant benefits to both the brand and customer that eventually help in brand-lift.

Another stark difference is that in a loyalty program, a customer is rewarded after every purchase but the scope and range of marketing objectives in an incentive program may vary Therefore, in an incentive program a customer may be rewarded after achieving a certain goal or target. An incentive program is aimed at driving business and sales growth while a loyalty program is aimed at increasing customer loyalty. This means company costs in an incentive program are much more similar to a Treueprogramm. The fundamental idea behind the best customer incentive programs is ‘give more to receive more’. When compared to a loyalty strategy an incentive strategy will show quantifiable growth in sales and revenue in a relatively short span.

How Can an Incentive Program Help Your Business?

  • Positively Influences Customer’s Buying Behavior – The best customer incentive programs are designed to keep customers engaged with the brand for an extended period of time by incentivizing their purchases. Incentives act as a stimulator that encourages customers to repeat their behaviors and purchase patterns in order to receive more incentives and achieve targets.
  • Makes the Customers Proactive – An incentive program ensures high customer engagement. Engaged customers generate organic reviews and help with word-of-mouth marketing (WOMM). They are very likely to support and interact with the brand on their social platforms and will even help you identify weak points in your marketing strategies through their feedback mechanism.
  • Errors are Easily Forgiven – Customers that are engaged with a brand through their incentive programs are forgiving. They are more likely to overlook small errors or misjudgements by the brand and in all probability will continue their association with the brand. It also becomes easier for the brand to make up to these customers, in case of a mishap, with additional incentives and rewards.
  • Improvement in Customer Satisfaction Levels – A incentive is a great way to improve customer satisfaction. According to Bond Brand Loyalty, “Consumers who redeem incentives see a 1.6x lift in brand satisfaction over customers who don’t redeem.” A satisfied customer is a retained customer with a high probability of turning into a strong brand advocate.
  • Access to Data and UserGenerated Content – Needless to say, the scope of data you can accumulate through an incentive program is endless. User data can help you design better strategies and help you understand your customer better. Also, an incentive program will generate organic user-content which will have better reach and marketing penetration and help you with organic promotion.
  • Effective Brand Building Activity -The best customer incentive programs are efficient brand-building activities that help in improving customer satisfaction and retention rate which influences brand loyalty and advocacy and by extension improves brand value and credibility in the market.

Tips to Building an Efficient Incentive Program

  • Have Predefined Objectives – No marketing strategy, including an incentive program, can offer great ROI if you do not have clear and predefined objectives. Ask yourself, what is it that you seek to achieve? What are your marketing goals? And then set out to design your incentive program for best results.
  • Be Clear about your KPIs – Once you have your well-defined set of objectives, the next step is to clarify your KPIs to your customers. Your incentive program can help you achieve any marketing goal and objective and giving out KPIs and clear directives to your customers will avoid confusion and help you achieve your objective quickly and effectively.
  • Target the Right Audience – An incentive program works best when you know your target audience. This insight and data will help you design a program that is sure to entice your audience and determine incentives and rewards that you are certain will excite them. Studying and analyzing your target audience will help you design an effective strategy.
  • Avoid Monetary Incentives – Although monetary incentives will give your brand immediate traction, the results may not be lasting nor beneficial for you in the long run. Most customers that receive monetary incentives are highly engaged with the brand but it is on a superficial level. The best customer incentive programs work towards developing real engagement and connection with the brand by offering incentives that are related to the brand’s line of service or product. You could also incentivize customers with experiences like a dine-out or amusement park ticket, these incentives will add greater value to customer’s life and help in developing a positive brand association.
  • Partner with a Charity or an NGO – Promoting a charitable cause through your incentive program will help in building a positive brand image that the customers may feel proud to be associated with. It will help you create brand values that resonate with your customers and attract like-minded clients for future partnerships as well.

How Can You Design a Suitable Incentive Program for Your Business?

To reap maximum benefits on your investment, you need a bespoke incentive program that embodies your brand values and resonates with your brand image as well as excites your target group. Annex Cloud has helped renowned brands to leverage the power of incentives and loyalty programs and it can help you design a dynamic and custom program that suits your business aesthetics as well. To know how we can help your brand grow, click here.

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