Why You Should Offer Rewards-Not Discounts-To Recover from the Crisis

By Theresa McEndree
VP, Marketing Blackhawk Network

As businesses plan for a new normal and evaluate how to recover in the wake of COVID-19, the marketplace will quickly become oversaturated with consumer promotions. Competitors will all be in the same boat—scrambling to recoup losses incurred during the crisis—and ensuring that your brand stands out in the crowd requires a carefully planned marketing strategy.

As you build your post-crisis marketing mix, consider that reward-based promotions can outperform discount-based promotions according to hundreds of American businesses¹. Reward-based promotions, like rebates, offer shopper incentives to encourage purchases or action; whereas discount-based promotions reduce part of the purchase price at point of purchase.

Several helpful insights for marketers planning recovery strategies, including the top benefits of using rewards instead of discounts:

Higher profitability per customer. Over time, organizations that offered reward-based promotions generated a 6% greater average profit margin per customer than those that offered discounts¹.

Encouraging spend-back. Consumer research from Blackhawk Network² 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; 65% of respondents reported they would purchase more often from the business giving them the reward.

Increased customer retention and loyalty. Consumer loyalty will be more difficult to maintain post-crisis, and reward-based promotions offer businesses the opportunity to keep shoppers coming back by regularly reaching out to them. 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.

Attractive to digital-minded shoppers. Rewards drive a high customer response rate because they offer deeper savings after redemption. Also, many rewards, like virtual prepaid and egifts, can be delivered digitally—making them perfect for consumers who will be emerging from isolation more digitally enabled than ever before. Digital rewards have a greater speed of delivery and ease of use online and in mobile wallets.

Providing valuable customer insights for the long-term. Customers typically are willing to provide information in the rebate redemption process. 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 that offer consumers reward-based promotions are more likely to experience greater success and profitability in the wake of COVID-19 versus those that offer discount-based promotions. The competitive recovery market will be a great time for marketers to try this promotional strategy.

This article was originally published in Target Marketing.

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1. ^{The “Next-Generation Promotions” research was a study conducted independently by Aberdeen Group on behalf of Hawk Incentives between February and March 2018. The sample size of 212 American businesses was comprised of companies with a self-reported average annual revenue of $4.5 billion, and included companies in the Fortune 500 and Fortune 100. A probability sample of the same size would yield a margin of error of +/-3%.}
2. ^{“Gift Card State of the Union” is an online survey conducted by Murphy Research on behalf of Blackhawk Network between February 4 and February 12, 2019. The sample size of 10,126 U.S. consumers was comprised of respondents between the ages of 18–75.}