How open-loop incentives drive merchant ROI and transform customer loyalty
Author: not specified
Source: Retail Dive
Consumer incentives have long tempted shoppers with extra perks, while arming retailers with ways to drive sales and customer loyalty. Now, findings show that certain categories of incentives more effectively deliver the return on investment merchants need to stay competitive.
In Wirecard’s 2019 Consumer Incentives Survey, we asked customers how rebates, rewards, and loyalty programs factored into their shopping decisions — and what they wanted out of the incentive experience. Our goal was to find out how retailers could improve their ROI by tailoring their rebates and rewards programs to customers’ preferences. What resulted was a clearer picture of what more strategic incentives looks like for both retailers and consumers.
Digital cards: the clear winner
Incentives run the gamut from gift cards and rebate checks to promotional giveaways and loyalty points traded for free pizzas. But customers were clear that they valued flexible incentives, the most. When it came to popularity, digital prepaid cards won the plurality, with 45% liking this payment method the best. Prepaid cards can be used like cash, giving users their choice of where and how to spend.
Contrast these open-loop cards with their less flexible cousins: closed-loop gift cards, an incentive option that’s low on versatility in spite of being a go-to choice for incentive program buyers. Merchants tend to offer gift cards for brands their customers are likely to be fans of — whether or not that ends up being true. (About $1 billion in gift cards go unspent every year.)
Open-loop cards, on the other hand, don’t rely on assumptions about where customers want to spend their incentives. They can be used on splurges or necessities from pretty much any merchant, across any channel, offering the freedom of cash with the convenience of digital.
Giving customers their choice of incentives isn’t just a nice touch; it could help strengthen loyalty or prompt desirable buyer behaviors. Our survey found that incentives even had the power to sway customers to buy from brands they weren’t loyal to. Nearly 18% of respondents said rewards or rebates “always” swayed them to buy from one brand over another — regardless of where their loyalties previously resided.
Some even argue that loyalty was always more about ingrained consumer habits than strong emotional ties to a particular brand. So, could winning more devoted customers be as easy as changing their habits with a targeted incentive strategy?
Mobile telecommunications companies have had success using prepaid card incentives to win new customers. And, a study on winback strategies found incentives to be useful when customers have switched telecom companies but would consider returning to a former provider. Leveraging their rich customer data to determine who is likely to return, telecom companies can target the right consumers and tailor incentives to their preferences. That, in turn, drives winback — part of today’s ever-more-complex picture of loyalty.
With the right incentive, several opportunities converge. For one, an effective incentive program has the power to drive initial purchases. Take automotive manufacturers, which successfully use rebates or prepaid card incentives to convince customers that a certain model should be their next set of wheels — helping to move dealer inventory.
But incentives can do more, like forge ongoing customer loyalty and drive secondary purchases. Branded, open-loop gift cards achieve just that. For instance, a customer may use her branded automotive rebate card to snag new floor mats and a steering wheel cover from the same dealership where she bought her car. Enticing customers to visit brick and mortar locations for fun extras enhances the sense that they’re connecting with the brand on a personal level. That drives spend far beyond the rebate’s value.
Cost-efficiency is another top merchant priority. In the case of open-loop cards, advantages abound from the moment the incentive is issued. Again, open-loop cards are as flexible as cash — or more so, since they can be used electronically and added to mobile wallets for on-the-go spending. Yet, they cost less to issue than other, less versatile payment forms.
Finally, prepaid card incentives offer benefits retailers won’t get from gift cards and rebate checks. That includes data on consumer spend, which makes it possible to analyze how customers use their rebate cards, and how much retailers recoup in spend-back. The bottom line is that today’s retailers can ask more from their incentives programs while paying less to execute them.
Far from a simple gift, the right incentive can shift the power balance in the customer loyalty game and net retailers the ROI they’re looking for. Want to learn more about building a cost-effective incentives program that keeps customers coming back? Grab your free copy of the report, 2019 Consumer Incentives Insights: The Digital Transformation of Rewards, Rebates, and Loyalty