Reward programs describe the incentives companies uses to retain customers. In reward programs, brands encourage customers to make purchases—especially repeat purchases—in exchange for a percentage off, a free gift, access to a special shopping event, etc. The incentive varies depending on the issuing company, but the value of a well-positioned reward program as a marketing tool is universal: It creates more opportunities for conversions, expands reach, and can contribute to building customer loyalty.
There are three main categories of reward programs: Fixed ratio, interval, and continuous reinforcement. Fixed ratio reward programs rely on repetition and inherently build brand loyalty. Common examples of the fixed ratio reward strategies are the “buy ten, get one free” (or similar) punch cards offered by many businesses today. Instead of repetition, interval reward systems incorporate time as the key element. Examples of this strategy include rewards that are initiated regularly at a certain time, such as businesses that send special deals or coupons on a customer’s birthday. In the continuous reinforcement model, rewards are offered all the time. As a result, customers come to expect them. For example, companies that always offer “free shipping” or “five percent off with store card” are using a continuous reinforcement reward system.
While many reward or loyalty programs are free or offered as a result of a minimal purchase, other types are, in a sense, pay-to-play. For example, some companies offer discount “clubs” or other paid options for which their customers can opt-in, usually paying a one-time or annual subscription fee. Examples include Amazon’s $99/year Prime shipping option or Game Stop’s $14.99/year reward program that offers a host of extras, such as an e-zine and bonus points on purchases.
IMA has assembled a list of reward program/loyalty program solutions here.