Customer acquisition and retention can be costly without the right long-term business strategy.

Marketing and ads can attract leads but the secret to sustainable growth is an ability to consistently convert new business and maintain a loyal customer base. Recurring revenue sources contribute to the runway your organization needs to innovate continuously and introduce new products and services.

Incentivizing and rewarding customers for their patronage can play a vital role in growing your business.

The Correlation Between Gifting and Incentivizing

The right gifts incentivize customers. What follows are some of the psychological elements that make incentives and rewards so effective for building long-term customer relationships:

Reciprocity

Reciprocity is the natural inclination many people have to return a favor. In business and sales settings, “favors” can include something of tangible value, like a gift card or future purchase discount. Whether consciously or not, a desire for reciprocity can encourage customer behaviors including repeat purchases, positive online reviews, or brand referrals. 

Positive Reinforcement

Positive reinforcement can take many forms in a business or sales environment. While customers make decisions for their own reasons, external signals that indicate those decisions are right can help encourage repetition. For example, if a customer leaves positive feedback and is rewarded in some way, they may feel encouraged to give another good review down the road. 

Emotional Connection

Receiving gifts of any kind creates powerful emotional responses — especially when a customer gets something unexpected from a business. Customers can feel like they’re valued for more than their purchases which helps make the brand more personable. 

Different Types of Business Gifts and Incentives

There are many ways to thank your customers for their continuous support of your brand. Let’s take a look at some of the most popular types of business incentives:

• Value-added gifts: Free value-added gifts — either after a customer makes a purchase or during the purchasing process — are a great way to improve the overall brand experience. Whether it’s a free accessory or a complimentary service, these little extras can leave a big impression on customers.
  

• Experiential rewards: Although gift cards and other monetary gifts are always a good choice, you can also offer certain experiential rewards. These could include access to exclusive VIP events or invite-only promotions that make customers feel more valued as loyal business supporters.
  

• Loyalty programs: Loyalty programs help businesses encourage repeat transactions from their customers. Luckily, there are many different ways to structure these programs — whether it’s offering tiered rewards based on accumulated purchase points or providing discounts based on total spending, companies can choose a model that makes sense for their brand.

How to Design an Effective Incentive Program

Once you’ve selected an incentive program, it’s important to define the strategy to implement it. Let’s explore some foundational steps in developing your program, regardless of the type of incentives you want to offer to customers:

1. Set Clear Objectives

Before you launch an incentive program, lay out any specific objectives you’re hoping to achieve. Depending on whether the goal is to retain more customers, increase your review count, or generate new leads, the approach will vary. 

Once you have a high-level goal in mind, create smaller objectives to track over time that will help determine the success of your incentive program. 

2. Know Your Audience

Your target audience should influence the types of incentives you introduce. It can be tempting to assume that every customer would appreciate a gift card or purchase discount  but a one-size-fits-all approach doesn’t always yield the best results. 

Consider the demographics of your customers and what’s likely to motivate desired actions. Tangible rewards may be ideal in some cases and in others, it could be more impactful to send personalized thank-you notes or other forms of appreciation.

3. Keep the Program Simple

Customers need to understand how your incentive programs work in order to appreciate their value. This is why it’s vital to keep the program simple when setting it up. 

Communicate the rules clearly and effectively to avoid confusion and upset, especially for customers who are not eligible for rewards.

4. Measure Your Success Over Time

Once you’ve implemented an incentive program, you’ll want to monitor relevant KPIs (Key Performance Indicators) to ensure the program is meeting objectives.

Relevant metrics could include customer retention rates, number of referrals received, average order values, or discount redemption rates. You may consider segmenting results based on the customer type to determine which groups tend to use incentives more.

Check in on these metrics regularly to track how your program is doing. By taking the time to measure success, you’ll be able to ensure a positive ROI (Return on Investment).

Start Creating More Loyal Customers

Establishing long-term customer loyalty is critical for modern businesses. Considering the competition organizations face across industries, knowing how to keep customers happy (and coming back) is vital for success.

Incentives are a great way to show your customers how much their patronage means to your brand. High-value incentive ideas and a robust customer loyalty program ensure customers will continue to value your business long into the future.