Do you know what they are? loyalty and incentive schemes? Do you know what sets them apart? We explain how loyalty and incentive schemes impact sales, as well as what other marketing techniques you can implement in your business!
Loyalty and incentive schemes, and sales support
Loyalty schemes These are long-term campaigns aimed at end consumers. As part of such campaigns, participants purchase the promoted products and services and, in return, receive prizes, discounts, partial refunds, etc. Incentive programmes, on the other hand, are aimed at businesses that specialise in selling these products (or that influence or facilitate their sale). They also reward purchases or sales, but additionally serve as a platform for education, communication and motivation. Would you like to find out more about this topic? Read the article below to discover how loyalty and incentive schemes can impact sales figures, as well as what other sales-boosting techniques are worth implementing in your business!
What are loyalty and incentive schemes?
Loyalty schemes are long-term initiatives. There are two types: those aimed at end consumers and those aimed at commercial intermediaries (distributors, shop owners, shop assistants, etc.). The latter type are known as incentive programmes, also referred to as B2B (from the English business-to-business). The term B2C (from the English business-to-consumer). It is worth being aware of the differences between them, as they are largely similar. They are long-term campaigns, sometimes running for many years, which offer rewards to their participants. However, B2C campaigns are more often run indefinitely, whilst B2B campaigns are typically run as time-limited editions.
What types of loyalty and incentive schemes are there?
Several types of incentive schemes can be identified. The first distinction relates to the target group. On the market, one can distinguish between schemes for distributors, sales representatives, shop owners, shop assistants and advisers. Examples of the latter target group include people who have a direct influence on decisions regarding the category and brand of products purchased, e.g. vets (who recommend pet food), painters (who recommend specific brands of paint) or architects (who use specific interior design elements), etc.
Another criterion for classification is based on the method used to collect data on purchases or sales made by participants. Based on this classification, we distinguish between incentive schemes that utilise system integration with distributors’ data warehouses, those that draw information from statements submitted by participants, and those that use individual codes, text messages, etc. An archaic but still commonly used method involves sending in packaging or parts thereof (e.g. barcodes), which serve as proof of purchase of the promoted product.
It is also possible to categorise programmes according to the type of rewards on offer. Currently, the most popular programmes are those offering cash rewards (paid into prepaid cards, bank accounts or in the form of vouchers) and non-cash rewards (comprising items directly related to the day-to-day work of a particular specialist or business owner).
Loyalty schemes, in turn, offer the opportunity to receive attractive discounts, refunds on part of the cost of products or services covered by the loyalty scheme, or points that can be exchanged for physical or financial rewards. For this reason, B2C programmes are mainly distinguished by the type of rewards they offer. There are various types of programmes: points-based (where you receive tokens in various forms for purchases), discount-based (offering discounts on subsequent purchases), points-and-discount programmes (combining several types of rewards) and cashback (guaranteeing a refund of a small portion of the amount spent). An interesting variation is multi-partner programmes, i.e. points-and-discount schemes in which not just one, but many entities participate simultaneously.
Why are incentive and loyalty schemes organised?
There are many similar products on the market that meet the same needs and are also available through the same distribution channels. Organisation of a B2B incentive scheme or a B2C loyalty programme enables a brand to stand out from the competition. Long-term campaigns are effective in drawing attention to the brands being promoted and in winning over loyal customers, whilst also serving as a platform for communication and education.
Why are loyalty schemes becoming increasingly popular?
According to statistics, six out of ten Polish adults are members of at least one loyalty scheme. Two in ten are enrolled in at least four such programmes. Loyalty programmes are growing in popularity because they are beneficial to both parties – that is, both the organiser and the participant – and thus effectively contribute to improved sales figures. With their help, organisers can build a database of their customers, gain a better understanding of their shopping habits, and effectively influence which products end up in their shopping baskets. It is also very important that such a programme significantly improves communication with participants at a relatively low cost. Furthermore, this communication is ongoing and genuinely tailored to consumers’ preferences.
Running a loyalty scheme helps to boost sales, as it leads to more frequent purchases and a higher average basket value. This means that customers start to buy more often and in greater quantities. This does not always lead to changes in household consumption levels, but it is of great significance to the programme organiser. The prospect of receiving a reward effectively encourages customers to travel even a little further to a particular shop to buy a product that they could also obtain elsewhere.
Loyalty schemes make it easy to build a database of end customers, as they must register to take part in a promotion. This process can take place right at the start of joining the scheme, whilst the scheme is running, or just before redeeming a reward. Nowadays, participation in a loyalty programme is most often linked to the use of a mobile app, so there is no need to provide information that might discourage participants from taking part, such as their home address, personal identification number or other details from their identity card. An email address and/or telephone number are entirely sufficient. Apps use geolocation, which is why they provide a good insight into participants’ behaviour. What’s more, they enable an understanding of a specific participant’s purchasing patterns.
Participants are increasingly keen to sign up for loyalty schemes, as the rules governing them have been significantly simplified compared with those in place two decades ago, when the first loyalty schemes began to appear on the market.
An interesting fact is that the biggest rise in popularity can be seen in money-back schemes. These schemes guarantee a refund of a portion of the amount spent in return for purchases, which is then transferred to a payment card, a bank account or a special account within the app.
What other techniques are there to boost sales?
A wide variety of promotional techniques have emerged on the market, which can be grouped into six categories. The most important of these are:
- Price reductions – these temporarily or permanently lower the price at which a particular product can be purchased. The promotion may be immediate or spread out over time. The first option involves purchasing the product at a lower price, whilst the second involves a partial refund at a later date. Price reductions may apply to a single product or an entire group of items.
- Free product samples – their purpose is to encourage customers to try out the product, with a view to purchasing it in the future. If a customer likes a particular item, there is a good chance they will return to the shop to buy it.
- Bonuses and freebies – this technique encourages purchases by offering added value attached to a specific product. Bonuses are items closely related to the promoted product (e.g. a reusable detergent measuring scoop included with washing powder). Gifts, on the other hand, are products unrelated to the item in question (e.g. a soft toy included with a pack of tea).
- Competitions, lotteries, games – these promotions encourage customers to buy the advertised products, as they offer the chance to win a valuable prize. If winning depends on chance, these are referred to as lotteries and games; if the customer’s skills or knowledge are what matter, they are competitions. The organisation of such campaigns is set out in detail in law, as participants and organisers are subject to specific tax obligations.
- Special offers – this option is most commonly associated with fast-moving consumer goods and is used to mark public holidays or other special occasions. The products are then put together in special sets or come in different packaging. This gives them a unique character, catches the eye and, through positive associations, encourages people to buy them.
- In-store displays – creating special displays makes it much easier for customers to access the product and also attracts their attention. This method is most often used as a supplementary measure alongside other techniques, which is the most effective way of boosting and accelerating sales.
