Reward programmes deepen consumer loyalty

Reward programs have the largest positive impact on consumer loyalty. New research¹ revealed that slightly less than half of U.S. businesses surveyed offer consumer reward programs despite evidence that these programs deepen engagement and build loyalty. These are key findings of new incentives research commissioned by branded payments provider Blackhawk Network that examined businesses that offer different types of reward programs to learn why they are used, how rewards are chosen and how programs vary across industries.

“Our research showed that the companies surveyed that offer reward-based promotions report higher year-over-year revenue growth and average profit margin per customer compared to those that offer discounts. Interestingly, only half of the companies we surveyed offered consumer rewards programs,” said Theresa McEndree, vice president of marketing at Blackhawk Network, which researched consumer incentive programs across the health and wellness, travel, financial, retail and telecom industries. “Businesses have long seen the value in rewards programs, but many are overlooking the measurable demand for consumer reward programs. Today, rewards programs are easier to implement with fully digital, personalized and customizable options that can be simply managed and quickly delivered.”

Blackhawk Network’s research found that, though consumer rewards’ value is known, 47 percent of those surveyed offer reward programs to consumers. Paradoxically, 87 percent of program managers surveyed report reward programs being highly valued by customers and 79 percent report that rewards programs positively impact business performance. Additionally, some industries value consumer rewards programs more than others. Fewer than half (49 percent) of the wellness program managers surveyed report consumer reward programs as being “very important” to their business; conversely, 78 percent of the telecom industry program managers surveyed report consumer reward programs as “very important” to their company.

The new incentives research also examined how and why businesses that do utilize consumer reward programs do so. Key findings include:

• Rewards programs serve many purposes. According to the businesses surveyed, the main reasons rewards programs are offered are to deepen engagement, build loyalty and show recipients they are valued and appreciated. Overall, 91 percent of consumer reward program managers surveyed believe rewards make consumers feel valued; 88 percent report that the rewards program encourages customers to be more loyal; and the same percentage feel rewards programs build loyalty. Other positive attributes of consumer reward programs include how rewards motivate recipients and show that companies care about customers.
• Reward selection is based on specific criteria. Convenience, cost-effectiveness and speed of delivery are key drivers of reward selection by businesses for their incentives programs. Reward program managers report appreciating ease of management and instant validation as top attributes of prepaid cards, and also report that recipients’ ability to use prepaid cards virtually anywhere is the most important reward feature that supports their business objectives.
• Prepaid cards are the most popular reward options. Across the industries surveyed, open-loop prepaid cards were the preferred reward of choice by 68 percent of businesses, but certain industries were more likely to offer them than others. The retail and telecom industries more commonly offer prepaid card rewards. Plastic closed-loop gift cards and checks are the second most popular types of rewards across industries.
• Digital rewards are impactful. Of the rewards program managers surveyed, the majority reported that digital rewards successfully motivate consumers. According to 92 percent of respondents, digital gift cards are the most powerful digital incentives, followed by unique codes for online gift card catalogs (90 percent), online gift card catalogs where points can be exchanged for rewards (89 percent), digital open-loop prepaid cards (87 percent) and reward cards that can be added to mobile wallets (86 percent).
• Reward programs serve different purposes across industries. When asked what is most important to them in a consumer rewards program, businesses responded differently across industries. Retail and telecom program managers were most likely to cite “creating customer loyalty” as the most important aspect of a consumer reward program. Financial, travel and health and wellness program managers cited “attracting new customers” as the most important aspect of a consumer rewards program.