3 Types of Reward Programs Every Retail Brand Should Know About

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The economy is going through a period of incredible growth, due in large part to consumers doing what they do best … consuming. E-commerce, in particular, has grown rapidly, especially over the past 19 months. According to data from IBM’s US Retail Index, in 2020 the pandemic accelerated the shift from in-person shopping to e-commerce by five years. In the United States, e-commerce sales grew 31% in 2020 from a year earlier, and an additional 22% in the first half of 2021, breaking sales records every month.

As spending grows, consumers increasingly expect Cash Back Rewards and Rebates

Along with these dynamics, consumers are increasingly looking for and wait, rewards and discounts for online shopping experiences. Cash back programs and rebates are no longer the domain of coupons – they have become mainstream, in part thanks to the emergence and success of services like Rakuten, Honey, and Capital One Shopping. A survey conducted in August 2021 among 5,000 banking customers conducted by American Banker and Monigle revealed that “rewards and loyalty remain essential for the customer experience”.

Why rewards and discounts emerge as the most effective marketing strategies for retailers

As online advertising becomes more expensive (and often less effective), marketers are looking for the best way to deploy marketing budgets to acquire and retain customers. Retailers are finding that pay-for-performance channels are delivering increasingly attractive Return on Advertising Spend (ROAS) and increasing budgets for cashback, coupon and loyalty platforms built on a dedicated marketing infrastructure. pre-existing affiliation. These rewards-driven marketing channels drive key revenue metrics for retailers, including increased sales conversion rate, reduced cart abandonment rates, and higher average order value. Plus, they offer merchants the option to only pay when a sale is actually made.

Related: Choose a marketing model that lets you pay for results, not potential

Consumer services, from telecommunications to financial institutions, are also increasingly offering reward programs to benefit (and retain) customers by rewarding them for their purchases. There are several approaches to this, some more effective than others, so what’s the best way for a consumer service to implement purchase rewards? Let’s take a look at the three main categories of reward / loyalty platforms.

1. Offers linked to the card

Born out of the need to provide attribution of online advertising to offline transactions, a card-linked offer is linked to a specific payment card and allows the consumer to benefit from cash back or discounts at certain merchants. , provided that the consumer activates the reward in advance. and uses the specified card. You’ve probably seen how this works in your own credit card business. You log into your account, view a list of offers, activate them, and then purchase from that merchant to effectively “use” your offer.

Card-related offers earn rewards from local and / or offline businesses; However, they do not match e-commerce because they do not match the natural shopping behavior of consumers. Instead, as noted above, the customer needs to detour through their natural online shopping flow to activate the offers before making their purchases, as there are several steps required before they can claim the benefit. It’s not a great customer experience either, as the process requires the cardholder to jump through the hoops.

Nonetheless, card-related offers can be attractive to the small number of customers who are looking for and using them. And with their detailed transaction history, card issuers are able to target these programs to the right customers. It could also be argued that retailers get additional new customers from them, if the person who activates and uses an offer while buying from that merchant was not already a customer there. But in the end, due to the multi-step detour required to redeem, card-linked offers are not the best solution for the majority of customers.

Related: This is the new behavior of retail consumers

2. Trade portals

Another common tactic is to offer cash back and rebates through a “shopping portal” (aka “offer wall”). In this template, the program creates a separate section behind the customer’s account login, where a range of offers and cash back rewards are aggregated. The customer can then choose to shop directly from the merchant links on that page – in effect, the customer must click on the purchase portal link to receive the cashback offer. This click creates the connection, so the merchant can attribute the resulting sale. This way, the merchant can pay the affiliate commission for that sale to the bank, which in turn passes some or all of the commission back to the customer in the form of cash back.

It is convenient for the customer to be able to see all the offers in one place, but it is also a less than ideal shopping experience. There are three steps customers need to remember to start receiving cash back on their online purchase: log into their account, visit the portal, and click on the desired merchant – a sequence that is well outside of a shopping path. typical online purchase. How often do you plan to check your bank or mobile operator’s directory of offers before buying a new pair of running shoes (or anything else for that matter)? Many companies offering these shopping portals see less than 2% of customers making such a detour: most go directly to the brand’s website.

Shopping portals have the advantage of displaying offers in one convenient place, and some businesses are drawn to offer walls because they present their brands (along with the associated offers) to an audience with a strong intent to buy. ‘purchase. But ultimately, this is not the best solution for the customer, since the requested detour is outside his usual behavior and, frankly, difficult to remember.

Related: Why user experience is vital for quality SEO

3. Shopping companions

A third flavor of the reward program is a real-time shopping companion. As the description indicates, these are tools that support the buyer in their normal and daily online shopping behavior. These often take the form of browser plugins / extensions that meet the customer where they are, without taking them out of the typical online shopping flow. Whether on mobile or desktop, these tools display available offers (for example, coupons and redemption opportunities) in real time when the customer visits a particular brand’s website.

With these real-time shopping companions, there is no need to change customer behavior before they can earn cash back or reward. They don’t need to add an offer to their card or visit a specific page before they can be rewarded. They shop and buy normally. Essentially, a shopping companion like a browser extension provides a personalized experience by default, as it displays offer information that is relevant to the exact websites that an individual user visits. Notably, most of these companions now exist primarily on the desktop; there are few mobile options available.

For rewards program providers, these tools increase loyalty and add value. For retailers, participating can increase brand affinity for those who buy organically, with additional revenue generated through increased conversion rates and higher order values.

Brands must respect the behavior of modern consumers and plan the customer experience

The result ? The three types of platforms mentioned above are not mutually exclusive; companies that use a well-rounded, multi-pronged approach – with a particular focus on the customer experience – are more likely to be successful. It is now clear that brands can no longer expect customers to perform additional and unnatural maneuvers when shopping online. Their experience must be paramount to ensure repeat sales and take precedence when planning customer acquisition campaigns. Companies that seize the opportunity to meet customers where they are and complement their existing behavior with new generation shopping and rewards programs will end up in pole position in the retail market.