Reward Programs: Rewarding Customers and Employees Will Help Your Business Grow

By Arnold H. Light, CTC
(Featured in Westchester Commerce Magazine December 2003)

Corporate-sponsored reward programs -- in which salespeople or loyal customers get to cruise the Bahamas, watch their favorite TV programs on a new plasma screen, or receive logoed thank you trinkets such as hats, mugs or T-shirts -- are not just for big companies. Smaller and medium sized businesses can also use "Reward Marketing" to grow sales and harvest loyal customers. The best part is that these programs are self-liquidating and the return on investment can be easily measured.

According to recent research there's no doubt rewards work. But how you develop and structure the program is critical to its success.

A recent study conducted by Maritz Research indicated that out of 1,205 adults polled, 49 percent participate in some form of customer-reward program. Eighty percent indicated they do more business with companies because of reward programs.

Your staff may also need motivation to deliver the kind of service and quality of product your company represents. Michael Hadlow, president of SITE Foundation, said a recent study they conducted confirmed that tangible incentives increase work performance by an average of 22 percent.

So, if you'd like to explore how a reward program can help your business grow, here are a few points to help you plan an effective incentive marketing campaign:

• Select the target audience.
• Establish a program time frame.
• Determine the goals of the program and what participants must do to "win." Make sure goals represent a significant relationship with the objectives and are obtainable and fair.
• Develop the award structure -- how much payout for what action, percent of sales increase, or total volume, margin or percent of increase, etc. Reward customers for the value of their purchases. (This will keep them coming back.)
• Determine the type of reward -- recognition, gift certificate, merchandise, travel or a combination.
• Plan the program announcement, a communique that includes rules, regulations, tips on how to, and the just rewards.
• Create a theme logo to introduce the plan and make sure it appears on all correspondence and mailings.
• Program promotion -- on a periodic basis tell participants how successful the program is. This is a great way for your customer loyalty program to communicate to your customers how they can benefit by using more of your services and products and what rewards they will receive for doing so. Most important to you, is that by joining your program your customer gives you permission to market to him/her.
• Administration of the program -- develop a tracking and measurement system for awarding of points or display of goals reached during the campaign.
• Develop a time line for program conception, creation, implementation and close.

A reward can be anything, even a logo-imprinted mug. According to the Incentive Marketing Association in Naperville, IL, the top merchandise items include: electronics, apparel, gift certificates, house wares and tools. Travel is also in great demand.

Budget is always an issue. However, if you design the program correctly, the entire expenditure should self-liquidate as a result of increased sales, improvement in productivity or increase in customer spending. The Incentive Federation suggests the following guidelines when formulating your budget:

• Awards: 80%
• Communication/Promotion: 10%
• Administration/Training: 10%

You next concern is how to implement and operate the program. You can manage a basic, small-scale program in-house, perhaps with a helping hand from an incentive marketing company. You will need assistance from your company's technology department to establish a database and a person to administer the program.

For more complex programs, consider calling on the expertise and technological capabilities of an incentive marketing company. Running the program entails:

• Registering participants to gather necessary information, then use the information to create a database.
• Designing, printing and sending out mailings to promote the program.
• Tracking progress within the database.
• Fulfilling the earned rewards.
• Issuing progress reports to participants and management.

Many companies have their incentive programs online. The cost is far less than conventional programs in terms of communicating, reward catalogs, tracking and flexibility, and they are exciting and challenging.

Kristin Stoltenberg, Webmaster for CyberCentives.net, a division of The Light Group, Inc., in White Plains, explained, "When an incentive participant has their own home page displaying their account status, participation in the program increases dramatically. A properly administered program should accomplish your goals whether they increase sales, market share, profits, develop customer loyalty or improve customer service. The SITE Foundation study also pointed out that 92 percent of corporations surveyed reported objectives were surpassed, were met or at least partially met. A pretty good track record!"

Now the decision is up to you. Do you think you can grow your business using rewards?