Customers like great products and excellent customer service. But they love rewards. 

No matter what the reward – a gift card, a free entree, a branded tote – even the thought of receiving something can make an experience much more enjoyable. 

This response to rewards is embedded in human nature. As early as childhood, rewards were always something that got our attention. We’d do every last chore and be on our best behavior if we knew a reward was at the end of it all.

While the rewards may have changed, our response is the same. We’re motivated, committed, and even happy to put in the effort. 

This is true for most consumers. When a business offers rewards, whether through a loyalty card or referral program, consumers are more inclined to buy from it – and remain loyal customers. 

Below, we go over the reasons why rewarding customers works so well and how it boosts business growth. 

Rewards make customers happy

Who isn’t happy when they’re rewarded? Not only does the reward itself brighten a customer’s day, but also the reason behind the reward. 

Rewards show that a company appreciates its customers – that it recognizes and values their support. And with the majority of company-customer relationships being purely transactional, a thoughtful reward will definitely stand out. 

These days, however, it’s necessary to go beyond the automated thank you email. Even a small token (a free ebook, entries into a raffle, or discount on their next purchase) can make a great reward. 

Rewards can encourage repeat behavior

Positive reinforcement is a popular theory in behavioral psychology. It’s essentially “rewarding the behavior you want repeated.” 

How does this apply to businesses? Rewarding the behavior that benefits your business (customers making purchases) naturally encourages the behavior to take place again. In other words, the right rewards can make the difference between a one-time purchase and a regular, loyal customer. 

It’s recommended to offer rewards immediately and tie them to the desired action (as opposed to at random, which fails to encourage any specific behavior). 

For example, if you want to increase sales, a customer loyalty reward, such as member points, can motivate future purchases. If you want more customers, on the other hand, a referral program with incentives (i.e., $25 off the next purchase) can incite existing customers to share your brand with others.

When done well, reward programs can jumpstart business growth. In fact, marketers rate referrals are the second highest source of business leads. And existing customers who are part of a loyalty reward program are said to generate between 12–18% more revenue than other customers.

Rewards add an element of fun

As a way to organize their rewards, companies often use points or tier-based structures. Customers start earning points for every purchase, referral, or other desired action. Then, once a certain number of points are accumulated, they can be redeemed for a corresponding reward.

You can add other fun gamification elements, such as a progress bar showing how many points are needed before the next reward. Or give a grand prize to the best performing customer of the month, with a special feature on your website and social media.

Many companies have seen amazing success with these types of programs. Amazon Prime and Starbucks, for example, run a popular points program with a lot of customer perks. Uber and Airbnb, on the other hand, grew quickly thanks to their well-known referral programs. 

Rewards improve your customer relationships 

Rewards connect companies with their customers in a more meaningful way. Rather than blatantly offering lower prices, rewards are engaging and personal

Even if the reward is monetary, it establishes goodwill between companies and their customers. Moreover, customers who receive rewards usually feel obliged to return the favor, which in this case means repeat purchases. 

Now imagine what happens when customers frequently purchase from a company – brand loyalty and trust. And a relationship built on these shared values is often enough to keep any competitors from luring your customers away. 

Plus, if your business uses survey forms or software tools to run your program, you can better measure customer conversion rates and how well your relationships are faring. 

No risk, all reward 

Customer rewards can turn run-of-the-mill transactions into stronger relationships. By offering something more than the expected product or service, you are showing your company’s appreciation and values. And this is what will ultimately set your business apart and lead to long-term success.


About the author:

Kat Dalao is a content manager for Referral Rock. She’s spent her career in publishing, first as a writer and then a creative director for a magazine. She’s currently based in New York, where she enjoys doing random projects, exploring the city, and cooking.

Posted by Outside Contributor

From time to time, we are glad to feature outside authors who contribute to BizzMarkBlog with their insights and experience. This is one of those features.