Why You Should Offer Rewards, Not Discounts, This Holiday Shopping Season
If you haven’t already, now’s the time to hustle to finalize your plans for holiday promotions. Competition is notoriously fierce during the holiday season and ensuring that your brand stands out in the crowded marketplace requires a carefully planned marketing strategy.
As you finalize your holiday marketing mix, consider that new research has found that retail reward-based promotions can outperform discount-based promotions according to hundreds of American businesses. Reward-based promotions are those that offer shopper incentives to encourage purchases or action; discount-based reduce part of the purchase price at point of purchase.
The research provides helpful insights for consumer electronics marketers heading into the holidays, including the top benefits of using rewards instead of discounts:
- More annual revenue. Marketers want to drive spend during the holidays, but businesses that are looking at the bigger picture adjust their promotions to encourage long-term profitability as well. Companies that offered retail rewards instead of discounts experienced an average of eight percent higher year-over-year revenue growth, which adds up quickly!
- Higher profitability per customer. Over time, organizations that offered retail reward-based promotions generated a six percent greater average profit margin per customer than those that offered discounts. Using rewards enables businesses to create touchpoints that engage consumers and encourage them to buy from your brand repeatedly. Discounts last only as long as shoppers are at the register, and offer no ongoing customer communication.
- Elevated brand image. Retail rewards create the impression of a premium brand versus one that consistently discounts prices. In fact, 43 percent of companies who use reward-based promotions do so for this exact purpose. Additionally, when directly competing with a rival on brand image, 44 percent of companies reported that they prefer to use reward-based promotions to elevate their perceived image.
- Increased customer retention and loyalty. Consumer loyalty can be fleeting, but reward-based promotions offer businesses the opportunity to keep shoppers coming back by regularly reaching out to them. When given retail 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.
- Targeted results. Businesses can use reward-based promotions to achieve specific business goals. Retail rewards foster higher customer engagement, drive increased purchase intent, drive sales lift and minimize lost revenue potential due to discounting. Why bother with discounts?
Companies that offer consumers reward-based promotions are more likely to experience greater success and profitability versus those that offer discount-based promotions. The competitive holiday shopping season is a great time for consumer electronics retailers to try this promotional strategy.
More details about how reward-based promotions outperform discounts are available in this infographic.
Theresa McEndree is the Vice President of Marketing at Hawk Incentives, a Blackhawk Network Business delivering incentive programs that build relationships with easy-to-use platforms, global rewards and comprehensive service and support.