The Rewards Program Cult
A visit to Starbucks earns you a star for every dollar you spend on a drink or an item on the menu. Similarly, purchasing items at your favorite clothing store or restaurant can go towards rewards such as 25% off your next purchase or a free appetizer on your next meal. Welcome to the prevalence of the rewards program—the carrot dangled in front of every consumer for the promise of perks and benefits with one more purchase or two.
Surprisingly enough, it was believed that the early roots of customer loyalty programs started in the late 18th century. American retailers started utilizing a strategy called premium marketing, handing copper tokens with purchases to customers. These copper tokens were later redeemed for products on future purchases. This customer retention strategy remained popular through the 19th century and paved the way to the rewards programs of today.
In order to cut down on costs, around 1891 retailers replaced the coins with green shield stamps. These stamps became one of the first loyalty programs and is considered the predecessor of popular programs like Macy’s, Starbucks, and other retailers of today.
The late 1900s also witnessed the birth of one of the most popular loyalty programs: frequent flier miles. American Airlines was the first to launch this program in 1981.
Today, with the advancements in technology, the development of apps and the rampant use of social media, rewards programs have evolved and are more ingrained into our day-to-day routines. Corporate companies like Starbucks, McDonalds, Dunkin’ Donuts, Ralphs, and gas stations rely on their rewards programs to keep their existing customers and possibly reach new clientele as well.
At the heart of all rewards programs is the psychology of positive reinforcement. Spend money, get perks back. Rewards or loyalty programs are a business strategy to acquire and retain loyal customers for your brand. The more customers are loyal to your business, the more profit you as a business will generate.
According to Small Biz Genius, a website geared towards small business development:
- 75% of consumers say they favor companies that offer rewards.
- 56% of customers stay loyal to brands which “get them”
- 65% of a company’s business comes from existing customers
- 58% of companies pursue personalization strategies for customer retention
Because companies do not want to lose their current customer base, rewards programs are designed to offer “insider” perks and keep them connected to your brand. Recently, with the everchanging buyer habits, customer loyalty is no longer assured. It’s become more essential to cultivate that relationship by offering these incentives.
As a business, there are benefits to offering a rewards program apart from customer retention. They provide valuable feedback to brands as well as insights on their customers’ spending habits. This becomes an essential resource for future marketing and product development efforts. Offering a rewards program enables brands to foster a sense of community and connection with their clients. This often leads to an opportunity to reach new customers.
If you are considering implementing a rewards program for your brand, here are a couple of suggestions to run it effectively:
- Keep it simple.
- Offer tangible rewards to potential customers.
- Have a system of checks and balances to prevent fraudulent activities.
- Create a tiered program to reward your best customers with greater deals.
- Promote your loyalty program through your staff, social media accounts, and other marketing avenues.
As with all business and marketing strategies, creating a rewards program must be carefully planned, strategically placed, and purposefully executed.
