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Customer Incentive Programs Reward Your Business

by | Jul 25, 2022

One of the lesser-talked-about effects of the pandemic on the retail industry was how transient consumers became. It’s hard to blame them. Store closures and supply chain disruptions made it hard to find everyday items and it caused roughly three-quarters of them to change the way they shopped. E-commerce exploded, leading shoppers to try new stores, brands, or avenues to get their goods.  Now that the industry is working its way back to “normal,” effective customer incentive programs are vital to keeping loyal customers and attracting new ones that are still shopping around.

Why incentivize?

Well, it’s easier and cheaper.

There’s an age-old retail axiom that says it costs more to acquire new customers than it does to keep current ones.

“Your No. 1 priority is customer retention,” says Dan Nesmith, president of Paladin Data Corporation, a leading provider of digital retail solutions. “You can’t gain new customers until you solve why you are losing the ones you have. ”

Heightened competition is the main reason a store needs to keep its customers close. During the height of the pandemic, a study by research firm McKinsey showed that 35% of U.S. consumers tried a new brand and 77% changed the way they shopped to find products they needed. Supply chain disruption was the culprit for much of that change, but most of those shoppers said they intended to continue forward with their newfound sources and behaviors.

Nesmith says superior inventory control, which includes a variety of suppliers, and a pleasant shopping experience are keys to keeping consumers engaged.

“(Consumers) don’t tolerate outs,” he says. “Stores aren’t just competing with stores down the road. They have to provide an overwhelming shopping experience to avoid losing customers to competitors or online sources.”

Another old retail axiom says about 20% of a store’s customers produce 80% of its total sales.

Research shows that existing customers, on average, are 50% more likely to try new products and spend 31% more than new customers. And new customer acquisition costs have increased by almost 50% in the past five years. So, keeping the top 20% happy and engaged in shopping ,

Benefits of a Customer Incentive Program

Incentive programs help stores build stronger relationships with all their customers. They also:

Improve customer satisfaction and retention

Encourage repeat business

Differentiate your store from competitors

Boost sales through offer redemption and peripheral purchases

Increases brand awareness

“Today’s most successful customer-loyalty programs are engaging and retaining customers by building an emotional connection to the brand and making participation in the program effortless,” Kim Courvoisier, of the customer engagement platform, Thanx, told Business Insider.

Other Gains

The information gained from customers through incentive programs is more valuable than the purchases those customers make. Getting names, email addresses, phone numbers, and often age, family status, and income range gives stores a much better idea of who their clientele is and what they purchase and value.

Knowing what loyal customers are buying allows stores to adjust inventory to fit those wants and needs. It also allows them to seek additional suppliers for those items to avoid the out-of-stocks that Nesmith says can lead to lost customers. All this information can be utilized through a modern point-of-sale and business management platform to simplify ordering, improve inventory control, and enhance customer satisfaction.

Knowing contact information such as email addresses and cell phone numbers also opens avenues for stores to reach out through customer incentives on websites and with text messages. E-coupons are popular with retailers of all kinds. Research shows that nearly all (95%) of text messages are read within three minutes of being received.

Rewarding Rewards

Points programs are pretty simple and the most popular type of customer incentive program. Members earn points through purchases and those points are often applied through discounts on future purchases – 10%, 20%, or more. Some offer double or triple points to encourage larger purchases.

The key to successful customer incentive programs is making sure the rewards are perceived as rewarding.

Accenture found that members of customer incentive programs typically spend on average 12% to 18% more than other customers.  According to the research firm, McKinsey, loyalty programs can add about 20% of profit to a business.

Some customer incentive programs reward members for referrals. Ninety-two percent of shoppers trust referrals from friends and those shoppers are four times more likely to buy.

Other ways to offer customers value are:

Passing on supplier discounts to customers or those who regularly purchase a lot of the items that are being discounted.

Offer birthday or other holiday incentives.

Give added discounts to top customers.

Ben Honeycutt, owner of Oak Knolls Hardware in Orcutt, California, uses his point of sale to power his customer incentive program.

“I look at my customer listings and rankings. I find out who my best customers are. Last year, we bought some nice gifts and sent them out at the holidays,” he explains.

Buying Loyalty

Subscription programs have a proven track record of building customer loyalty. Costco and Sam’s Club are two perfect examples. Customers pay for the ability to purchase those stores’ discounted merchandise.

A 2020 survey from McKinsey discovered that members of paid loyalty programs are 60% more likely to spend more after joining. It also noted that free loyalty programs only increase that chance by roughly 30%.

“Customer loyalty programs offer companies a way to focus their resources on engaging, keeping, and growing customer relationships. Loyal customers provide a stable revenue stream, higher profit margins, and brand advocates who do much of their marketing for them,” says Sallie Burnett, chief executive of Customer Insight Group.

Tying it all Together 

Associates must know as much about the details of the program and its members as they do about where products are inside the store.

They need to know to ask each customer if they are incentive program members, how to apply rewards, and often help customers take advantage of those rewards.

Retail technology also pulls a successful customer incentive program together. Modern point-of-sale systems or retail management platforms make it easy to sign up members, record sales, provide discounts, deliver communications to customers, and generally keep customers happy.

“The actions taken in your stores every day drive customer retention,” Nesmith says. “Customer retention and increased ticket totals will drive increased customer counts which will drive increase revenues.”


Research from Bain & Company shows that increasing customer retention rates by 5% increases profits from 25% to 95%. Customer incentive programs are an integral part of creating loyal customers and attracting new shoppers.

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