Why You Should Offer Rewards-Not Discounts-In Uncertain Economic Times

The pandemic may be waning, but manufacturers and retailers continue to deal with lingering effects. Worker shortages, supply chain issues, and inflation, combined with a possible recession are creating an environment of economic uncertainty and making the process of finding the new normal difficult for marketers. Attracting shoppers without sacrificing profits will be an even more important balancing act, requiring a carefully planned marketing strategy. 

As you build your marketing mix, consider that reward-based promotions can outperform discount-based promotions in several key metrics, according to hundreds of American businesses.1 Reward-based promotions, like rebates, offer shoppers incentives to encourage purchases or action, while discount-based promotions reduce part of the purchase price at point of purchase.

If you’re working on your recovery strategy, here are a few helpful insights, including the top benefits of using rewards instead of discounts:

• Get higher profitability per customer. Overall, companies that use rewards versus discounts report 21% greater annual increase in average profit margin per customer.1

• Encourage sales and spend-back. 44% of companies using reward-based promotions see an increase in total sales.1 In addition, consumer research from Blackhawk Network found that getting a reward from a brand or retailer would encourage 63% of respondents to spend more from the business giving them the reward.2

• Increase customer retention and loyalty. Consumer loyalty will be more difficult to maintain post-crisis. By regularly reaching out, reward-based promotions offer businesses the opportunity to keep shoppers coming back. When given rewards, shoppers often associate a positive experience with your brand, which can lead to long-term affinity and a higher likelihood of remaining engaged with your brand over time. Conversely, discounts are often forgotten shortly after checkout.

Companies using reward-based promotions
see a 35% increase in customer lifetime value.1

• Attract more digital-minded shoppers. Current shopping trends show that consumers are evolving into hybrid shoppers—buying both online and in store.3 With this new shift, online reward redemption of digital rewards like virtual prepaid and eGifts offer opportunities for your promotions to meet this growing demand. Plus, digital rewards have a greater speed of delivery, are easy to use online and in mobile wallets, can help with customer loyalty and are easily branded.

34% of customers prefer a
digital reward over a price discount.2

• Gain valuable, long-term customer insights. During the rebate redemption process, customers are typically more than willing to provide information. This data can inform on shopper demographics and purchase information and be used to better define buyer personas and purchasing habits, encourage future behaviors and elevate your marketing strategies well into the future.

Companies using reward-based promotions enjoy a 32% increase 
in cross sell/upsell revenue.1

Companies that offer consumers reward-based promotions are more likely to experience greater success and profitability in these tough economic, post-pandemic times versus discount-based promotions. But don’t take our word for it; this competitive recovery market is the perfect time for you to try out this promotional strategy for yourself.

Talk to Blackhawk Network

Whether you’re just starting your rewards journey, or optimizing your current program, Blackhawk Network is here to help. Just click here to get started or call 866.219.7533.

1. Next-Generation Promotions, Aberdeen Group on behalf of Blackhawk Network, 2021

2. Gift Card State of the Union, Murphy Research on behalf of Blackhawk Network, 2019

3. Consumers Want it All: Hybrid Shopping, Sustainability, and Purpose Driven Brands” published by NRF and IBM in January 2022. The sample size included 19,100 respondents age 18+ in 28 countries.

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