Study: Reward-based promotions outperform discount-based ones
Research conducted by Aberdeen Group for a study by Hawk Incentives, a Blackhawk Company, found that reward-based promotions can outperform discount offers by driving better purchase intent and sales lift without damaging a brand’s image from discounting. (In previous research by Aberdeen, nearly 80% of surveyed consumers preferred rewards in the form of prepaid cards to other incentives such as discounts or merchandise.)
Aberdeen’s research findings were based on a survey of more than 200 U.S. businesses on the use and performance of reward-based and discount-based promotions. Key takeaways include:
• Reward-based promotions can generate more annual company revenue and greater profitability per customer. Companies surveyed report an average year-over-year revenue growth increase of 36% that can be attributed to reward-based promotions as opposed to 28% percent attributed to discounts.
• Overall, compared with discount-based promotions, the companies surveyed that offer reward-based promotions generate a six percent greater average profit margin per customer (24% for rewards-based promotions versus 18% for discounts).
• Businesses use reward-based promotions to achieve specific business goals. When selecting between reward- and discount-based promotions, businesses choose reward-based to foster customer engagement (58%), drive purchase intent (48%), drive sales lift and/or purchase frequency (45%) and minimize lost revenue potential due to discounting (44%).
• Companies use reward-based promotions to elevate brand image. To create the impression of a premium brand image versus one that consistently discounts prices, 43% of companies surveyed consider using reward-based promotions. When directly competing with a rival on brand image, 44% of companies prefer to use reward-based promotions.
• Marketers measure rewards- and discount-based promotion success differently. Of the marketers surveyed, 67% gauge reward-based promotion success on increases in customer retention and loyalty, as opposed to 55% of those that sponsor discount-based promotions.
“Businesses have plenty of choices when determining marketing strategy, but reward-based programs stand out as incredibly impactful options to achieve business goals and drive effectiveness,” said Theresa McEndree, VP of marketing, Blackhawk Network, a provider of rewards and incentives to organizations around the globe. “These promotions enable businesses to encourage consumers to buy products while creating engagement that makes them more likely to make repeat purchases in the future.”
“Consumer loyalty can be fleeting, but reward-based promotions offer businesses the opportunity to keep shoppers coming back while also encouraging revenue growth and building brand reputation,” she added.