You don’t have to look very far to find evidence that rewards programs work. A study by Technology Advice showed that 82.4 percent of customers were more likely to shop at stores that offer some kind of loyalty program, proving that an effective rewards marketing strategy may be just what you need to edge out the competition.

The question is why reward programs work. Let’s take a look at the benefits of reward programs to help you understand why it’s a good model for your business!

The benefits of rewards marketing

At the crux of the rewards marketing model is retention. Rewards programs make it easy to build lasting connections with customers by incentivizing them to engage in a number of ways. This could simply be making a purchase, sharing a post on social media, or writing a product review.

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Reward programs make it easy to offer additional value that encourages customers to engage with your brand.

By offering rewards like discounts, free products, or exclusive access to new products and services customers are given a solid reason to engage with your brand beyond their first purchase. This promise of additional value makes it much more likely that they’ll forge a lifelong relationship with your brand.

The benefits of rewards marketing don’t stop there, though. Not only do reward programs sweeten the deal for existing customers, but they also draw in new ones. It’s just like any other value proposition in business — if you offer it and your competitor doesn’t, you’re more likely to secure the sale.

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Referrals expand your marketing reach and significant reduce marketing costs.

This is especially true when you incorporate referrals into your rewards program. Customers are always more likely to trust their peers than paid advertising, which can lead to significantly reduced marketing costs for your business. Combine this with the knowledge of who your best customers are and you can easily market to likeminded buyers who can keep the retention cycle going!

Implementing this kind of program can also help you with certain business goals unrelated to growing sales, like boosting your brand reputation or winning back customers who may have strayed. These are almost more important when you consider how they play into the life and longevity of your brand community. Having a thriving brand community makes it easy for you to extend each relationship beyond simply making a purchase and include them in your brand experience.

How to build a rewards program that works

A well-working rewards program is three things simultaneously: rewarding, engaging, and motivating. Here are some quick tips on how to ensure that your loyalty program is a success.

Make it clear and straightforward

One of the hardest parts of launching a new rewards program is explaining it to your customers. If it’s too complex or time-consuming, your customers simply won’t sign up. Make sure that you can explain the program clearly in a sentence or two, and always lead with what’s in it for the customer. The more value you can show up front, the more appealing joining will be!

Use email marketing effectively

If you want your customers to join your program, they need to know about it! Let customers know that you’ve started a program, what they can earn, and how to earn it with a simple program launch campaign to get existing customers engaged. Similarly, include a clear call-to-action and highlight the benefits of joining in your re-engagement campaigns to get dormant customers excited to revisit your store. These two campaigns will go a long way to making sure your brand community is investing in your growing program.

Make it valuable

According to the Harvard Business Review, rewards do create loyalty but only if a company knows how to share value. That means that you need to be willing to give customers rewards that actually look and feel valuable to them. The easiest way to do that is with VIP tiers. Segmenting your customers based on how often they shop with you allows you to reserve your most exclusive rewards (such as early access to sales, exclusive products, and invitations to special events) for your most loyal customers.  After all, these customers are more valuable and should be rewarded to reflect that status!

This guest post was written by Erika Jolly Brookes, CMO at Springbot, an advanced ecommerce marketing technology that makes the task of running and tracking multi-channel marketing campaigns easy. Erika leads all brand, product, marketing campaigns, and communications, and can be found running through Atlanta with her yellow labrador Sunny in her spare time.