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We’ve come a long way from the negative and misleading image of rewards programs aimed only at low-income consumers. I know millionaire investors who make sure to use their air miles and take advantage of the punch cards and point systems at local family cafes. The traditional approach of building a brand and loyal customer base is being replaced by rewards programs, which disproportionately benefit the biggest spenders. The more these consumers spend, the more they receive in return, creating a virtuous circle for buyer and seller.
In our survey of over 50,000 consumers, only 3% said they would stick with their flagship brand if a competitor offered cash back or point incentives. The explosion in the number of products at marginal price differentials on retail platforms helps explain this drastic change. With so many online transactions, consumers are swayed by the best deals, the best reviews, and the best rewards.
Rewards accumulate over time, so the goal of these programs is to create an ongoing relationship with customers, especially those who spend the most. It’s a simple equation: offering them the most value ensures they stay the most loyal. Brand equity may not be dead, but it is being redefined by the need to reward loyal customers in this more complex operating environment.
Related: How Brands Can Turn Short-Term Rewards into Long-Term Loyalty
Rewards programs are everywhere
From your local juice store offering a free drink after collecting 10 stamps to major players such as Amazon Prime and Target Circle, rewards programs are everywhere and public awareness is high. Nearly 80% of respondents in our survey said they were aware of apps and websites that offered shopping rewards. According to software company Oracle, 72% of consumers join at least one loyalty program.
While reviews undeniably wield tremendous influence over consumer choices, it’s clear that consumer habits increasingly revolve around the strategic redemption of rewards points. For example, when Discover Card designates certain vendors to offer additional points for a limited period, consumers are incentivized to step up their spending at those locations. Such strategic initiatives benefit consumers with bonus points and stimulate the entire ecosystem, creating a win-win scenario for all parties involved.
Brand loyalty is also informed by consumers’ preferred rewards, with two studies split into category #1: Capgemini reports that 69% of consumers prefer cashback over all other rewards, while Merkle found that 79% of respondents preferred discounts. The constant is that everyone wants to be recognized and appreciated for their loyalty.
What suits you best?
There are two types of loyalty programs: your own hosted program and an externally hosted program that offers a rewards ecosystem. No matter what you choose, you don’t need to have a business.
A hosted program can vary from company to company, but it’s probably the type you’re most familiar with. You spend enough money or make enough purchases at a business and are rewarded with a free item or something similar from the same business. Almost every small business now has punch cards or a point system that rewards us for returning regularly, whether it’s your local coffee shop or the corner restaurant.
Alternatively, I see growth in external loyalty programs that allow brands to reach new customers And reward them for staying. These programs can be divided into two additional categories: one that partners with individual industries or market segments, such as Ibotta’s hosted rewards program that offers grocery and retail discounts , and one that applies to the entire consumer landscape.
I call the second type of program a “unified provider”. This type of rewards program is uniquely evolving as mobile apps allow people to be rewarded based on where and when they spend at different stores and brands and accumulate rewards.
Related: 3 Types of Rewards Programs Every Retail Brand Should Know About
Go beyond games
The increase in mobile usage over the past decade has unlocked vast potential for these unified rewards platforms. My business aims to become the primary channel for consumers to earn rewards from various avenues of spending. Initially focusing on mobile games, we plan to expand into other industries like fuel, groceries, and other areas where consumers want to be rewarded.
One of the main advantages of a unified provider is its cumulative nature. This allows consumers to accumulate more points than they ever could through several independent programs. The more consumers spend in various categories, the more rewards they accumulate, creating higher value for the unified provider. In turn, the supplier can afford to share more rewards with the customer, ensuring that they remain engaged with various suppliers. In essence, this creates a virtuous circle where all parties involved come out ahead.
Do your homework
The gaming arena for rewards and mobile rewards programs is relatively unexplored. Understandably, people are skeptical about earning gift cards just for playing a game – it sounds too good to be true! This newness and a dynamic market point to a clear need for brands to do their homework before venturing into these emerging rewards ecosystems.
If you want your business to use an externally hosted rewards program, be aware that the market can be volatile. New suppliers often appear only to disappear just as quickly if they fail to strike a balance that benefits all stakeholders. Reliable resources are essential to gather information and make informed decisions. The main contributors to the app install ecosystem regularly publish performance indexes from the main vendors. These indexes often include information about players in the field of rewarded engagement, making them valuable starting points for vetting potential partners.
Related: Dunkin’ Donuts Customers Express Their Rage Online For Pricier Rewards Program
Retention of Rewards
The narrative of consumerism has pivoted; it’s not just about brand loyalty anymore. The landscape of innovative rewards programs, from local to global companies, is expanding, evolving and firmly establishing its presence. And it’s not just about choice or variety.
Repeat customers generate approximately 65% of a company’s revenue, underscoring the vital role of rewards programs in customer retention, sustainable business growth and market differentiation. They have become more than just a trend; rewards programs are an essential strategic tool in today’s consumer market. Brands that recognize this shift and harness the power of rewards will thrive in this dynamic environment, improving their relationships with consumers and ultimately their bottom line.