Customer Incentives: 8 Steps to Boost Loyalty and Retention

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Why do so many businesses keep buyers through customer incentives? Modern consumers are very picky, and they give preference to companies that offer bonuses. Hence, if you don’t have a loyalty program or any other incentive program, your leads become more likely to leave.

This article should give you a better idea of customer incentive programs. You will learn what customer incentives to use, when to offer them, and steps to build your own program.


What is Incentive Marketing?

Incentive marketing is a marketing strategy based on using incentives to encourage customers to complete the desired action. The action may be anything from purchasing a product to leaving a review or bringing a friend.

The main idea behind such a marketing strategy is to enhance performance by motivating people with customer incentives. You tell them what best incentives they can get after doing what you expect them to.

Besides the effective customer incentive program, this marketing approach includes spreading the word about it. You add information on your website, send emails, advertise on social media, and use other channels to promote your program.


What are Customer Incentives?

Customer incentives are bonuses offered to customers to make them complete the necessary action or in response to the previous activity. The format depends on what product or service you offer. You may give customers a gift for reviewing your services or use customer incentives to move people through the tiers of customer reward programs. For example, free upgrades may be a good incentive when people become loyal users of your software by staying with you for a year.


What are the Benefits of Using Them?

Launching a customer incentive program requires investment and effort. So why would a business offer incentives to customers?

  • Increased customer loyalty: when you provide incentives to customers, they perceive it as a reward, not a marketing hack. Therefore, customer reward programs make people feel appreciated. They are ready to repeat purchases and stay with your brand for years, only to continue receiving pleasant bonuses. Besides customer retention, customer loyalty also turns occasional buyers into brand ambassadors. People more willingly leave positive reviews, invite friends and talk about your company.
  • More customers engaged: When a loyalty program is good enough, it can generate new customers. Suppose you have a section advertising your customer incentive program right on the website. It directly informs visitors that you will reward them once they join your customer base and reach specific customer incentive goals. If they like your offer, it may become the reason to place the first order with you.
  • Customer data collection: Before someone can join a customer incentive program, they usually need to share their email, name, and other relevant contact details. This information enables you to reach the leads on other occasions, not only to reward customers. You can later on use contact information to upsell something, promote new arrivals, ask to join you on social media, etc. Personal details are also essential to research your target audience and utilize the findings in future campaigns.
  • New user-generated content: It includes photos, videos, reviews, testimonials, and other content dedicated to your products or services. Unfortunately, people rarely give their time to mention your brand without customer incentives. Hence, adopting a rewards program for user-generated content is one of the ways to make people talk. Such marketing and business strategy is highly effective. As local influencer marketing is on the rise, consumers are more likely to trust a real person than your marketing message.
  • Increased revenue: Customer incentive programs boost customer satisfaction and nudge people into additional purchases. When a person hears that they will have a 10% forever discount after the fifth purchase, they rush to place an order. Bonuses for repeat purchases also increase the purchase frequency and, therefore, drive revenue.


When Should You Use Them?

Generally, customer incentives are relevant in two cases: when you want someone to take action; and when you respond to the completed activity.


To encourage an action

If you need a customer to do something, promise them a bonus in return. This increases the chance the person will do what you expect them to. For example, you can use this approach to:

  • Ask for feedback
  • Upsell products
  • Stimulate social media engagement
  • Generate more leads through an invite-a-friend-initiative


To respond to an action

Sometimes, you may want to thank the customer after they have already contributed to your brand growth. Or, you may need to apologize for a bad service on your side. These are some other situations when customer incentives are straight to the point:

  • Express gratitude after the review
  • Incentivize after staying with your brand for X years
  • Congratulate on your corporate anniversary or another holiday
  • Apologize for a mistake (late delivery, misdelivery, technical glitch, etc.)


What are the Most Popular Incentives Offered by Businesses?

Even though there is a wide variety of customer incentive programs, they all leverage the same means. Check out the list of top customer incentives to consider them for your company. You can use any of them or offer incentives as a combination based on your sales and marketing goals.

  • Bonus points
  • Free gift incentives
  • Cashback
  • Discounts
  • Store credits
  • Buy one get one free offers
  • Free shipping
  • Sales VIP access
  • Free product or service upgrades
  • Promotional products
  • Gift cards for partnering businesses
  • Exclusive access to features/new arrivals/etc
  • Company swag
  • Invitation to events

If you want to learn more about what your target audience expects from a customer incentive program, view the chart below. The data featured by Shopify shows that apart from free shipping and discounts, customers want early access to sales or new products and tailored recommendations the most (based on that, we’ve gathered some interesting information about how to increase sales on Shopify on this article).

The graph also shows that consumer interest in freebies only grows. Hence, customer incentive programs are becoming somehow essential. If you don’t adopt any loyalty program in your company, you may start losing to competitors.


What are Some Types of Incentive Structures Out There?

You won’t have to reinvent the wheel if you are about to launch customer incentives. Market leaders have already invested in market research and testing various approaches to develop the most effective loyalty programs (learn more about its different types here). You can use one of the basic structures and adapt it based on your business needs.

The most widespread structures of customer incentive programs include:

  • Points-based: people accumulate the points they earn by purchasing or completing another conversion to exchange them for something valuable later.
  • Tiered programs: people move from one level of a rewards program to another to enjoy better incentives and usually know what they will get. The higher the loyalty program tier, the more advanced bonuses a person can have.
  • Cashback: Buyers get the set amount/percentage of the money they spend back.
  • Loyalty: Although the look of loyalty programs greatly varies (from loyalty cards to referrals), they share the same fundamental idea. Once the customer proves loyalty to your brand (through staying with you, purchases, inviting friends, etc.), they become entitled to great incentives.
  • Referral: Existing leads invite potential customers through a special link they can copy on your website or their profiles. It moves them to the next loyalty level, brings a bonus, etc.
  • Omni-channel: Customers get rewards through multiple channels. It may be something as simple as personalized product selection or early access to sales through an app.
  • Gamified: The loyalty or rewards program looks like a game where moving from one level to another is fun and engaging. It often includes progress bars, ranks, achievements, and leaderboards encouraging people to compete.
  • Free-based: Customers pay a subscription fee to join a premium club and benefit from freebies like free shipping, samples, content, gifts, etc.
  • Partnership: People joining the program can get bonuses from the business offering it and its partners.


8 Steps to Create an Attractive Program

Now that you know the theory, it’s time to discuss the practice and launch your own program. Follow these steps one by one:


1. Decide on the goal

Before doing anything, you need to know what you want to achieve. You may aim to grow sales, increase purchase frequency, collect customer data, get more loyal customers, etc. These goals require different approaches to building the program and offering incentives.


2. Understand your budget

You will need to spend on implementing a loyalty program and marketing it to your existing or potential customers. It’s a long-term investment you must carefully calculate. Therefore, you must estimate how much you are ready to allocate for the program and what ROI you await.


3. See how others do it

You don’t need to copy other companies. Learning from competitors is an excellent way to research the market and test how your competitors use incentives.

Go to their website or store and join a loyalty program to see how it works from the inside. It will allow you to spot the strong sides and the weaknesses to avoid.


4. Understand your customer

Analyze your target audience and create a customer persona to understand what incentives can make them convert. While some people are more likely to appreciate rewards points, others prefer free shipping.


5. Choose customer behavior and incentives

Decide what action you want people to complete and choose the most suitable customer incentive to trigger it.


6. Pick the software to implement the program

Research the available platforms for customer loyalty program implementation and pick the one that covers your needs. Modern customer incentive programs are highly digitized, so you won’t be able to adopt them without software.


7. Find ways to promote the rewards program and engage customers

After launching incentives, you will need to convince people to pursue them. Use various marketing channels to promote your program (e.g., send emails about it, add website banners, etc.).


8. Track the results and improve

Monitor the customer metrics to see how the implementation of the customer incentive program has contributed to your business growth. The types of metrics to track will depend on what KPIs you’ve set while launching customer incentives.



If you want to engage customers and nurture their loyalty, customer incentives can be an effective tool to achieve better results. They nudge customers to convert and grow their satisfaction at the same time. It’s a win-win approach both for consumers and businesses.

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