Promotional Marketing Should Include Rewards-Based Promotions

Promotions are important. Not only do they accommodate a variety of objectives, but they can boost revenue, loyalty and repeat spend.

The ROI benefits of promotions can be significant, specifically for rewards:

  • Companies surveyed that used rewards-based promotions (typically offered as rebates) experienced an annual company revenue increase of 36% YOY versus the 28% increase for those using discounts.
  • Average profit margin per customer is 21% for companies using rewards-based promotions vs. 20% for those using discounts.
  • Rewards without validation enjoy 24% average profit margin per customer.

You know that financial results are important, but getting more bang out of your marketing bucks requires a strategy that considers all marketing objectives. Let’s look at how marketers build successful promotions from the ground up.

Criteria in choosing a marketing promotion

What’s important to other marketers when evaluating different promotional types? The Aberdeen study highlights the top four criteria marketers evaluate:

  • Foster customer engagement (58%)
  • Minimize lost revenue potential due to discounting (44%)
  • Create the impression of a premium brand versus others that are consistently discounting prices (43%)
  • Drive buyer purchase intent (35%)

Naturally, fostering customer engagement is most important. Minimizing lost potential revenue ranks second, which is directly connected to the fourth-ranked factor: driving buyer purchase intent. It’s the classic trade-off: discounting means sacrificing potential revenue in order to create more demand.

Some brands maintain a premium image by rarely—if ever—discounting products. Ranking third in marketers’ criteria, the careful balance between increasing sales and maintaining brand image is an essential consideration.

When to choose rewards-based promotions as your marketing strategy

So, when do rebates win out over discount-based promotions? Marketers told us their priorities:

  • Drive purchase intent attracting conscious customer spend in favor of purchasing your product/service now (48%)
  • Improve program performance driving sales lift and/or purchase frequency (45%)
  • Compete on perceived brand image vs. competitors (44%)
  • Compete on price (41%)

Simply put, rebates beat instant discounts when you want to drive purchase urgency, improve sales lift, maintain brand image and offer competitive pricing. How do rebates deliver these benefits?

  • Rebates encourage shoppers who have considered buying a product to purchase during the limited-time rebate offer
  • Rebates drive sales lift and purchase frequency with attractive net-priced advertising
  • Rebates maintain brand image because the product is still sold for “full price”
  • Rebates offer deeper discounts than instant discounts do

Create more value through additional touchpoints

If you use rewards-based promotions, you can choose to require validation (like rebates) or not (think buy one, get one). When requiring validation, marketers surveyed said their top reason (39%) was to collect more customer data to enrich account data. Why? With more data, companies can flesh out buyer personas, better understand purchasing habits and personalize future interactions. Other reasons marketers opt for validation include:

  • Minimize loss of potential revenue by eliminating ineligible claims (21%)
  • Use the redemption process to cross-sell/up-sell (20%)
  • Offers the ability to remarket to encourage repeat or other product/service purchase (16%)
  • Compliance and the ability to document the cost of sales related to redemptions (5%)

Ultimately, the validated rebate provides opportunities for additional customer touchpoints. “We’re processing your reward request” and “Your reward is on the way” emails deliver proactive updates that help keep your brand top of mind. And, when the reward is also branded—either a Mastercard prepaid card or your own gift card—that’s just another way to encourage a repeat purchase.

Rebate marketing is a powerful option

Understanding how effective marketing promotions campaigns are built from the ground up doesn’t have to be complicated. The financial benefits are pretty straightforward. From there, it’s up to marketers to decide what matters most in terms of preserving brand image, meeting customer expectations, competing on price and increasing sales lift. Priorities may shift from program to program, but it’s clear that rewards-based promotions—and their benefits—certainly have an important place in a marketer’s toolkit.

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