When you’re planning your rewards program, you’ll likely want to use an incentive to encourage your customers to participate. (For more information on incentive structures, check out our article here.) Your incentive needs to be enticing enough for it to be worth your customers’ while to go out of their way and refer your business to people they know. Check out these classic customer incentives.
However, the incentive obviously can’t be so extravagant that it bankrupts your business. Here I’ll list a few tried and true options that you can consider when choosing an incentive for your program.
Cash rewards are great because practically everyone can find a use for them. You’ll be hard-pressed to find a person who refuses to participate in your program, solely because they have no interest in receiving money.
Cash is simple and universally desirable, but make sure you know how much a new customer is worth to your business. Using a cash incentive is basically setting how much you’re willing to pay for a new customer, so make sure you’re not paying more than their value to your business.
Ex: an accounting firm offers $100 cash back to customers if they refer the business to a friend who becomes a client.
Gift cards are almost as good as cash, in that you’re setting a price on how much you value new customers. Gift cards also offer added convenience, as you can purchase many of them at once and distribute them easily. However, you run into the issue of them not appealing to certain customers. Not everyone is interested in getting coffee from Starbucks, and not everyone buys their music off of iTunes. If you use a gift card reward, be sure to offer different options, or pick a gift card that applies to the largest variety of people.
Ex: a yoga instructor offers $25 Amazon gift cards to customers for each successful referral.
Discounts to your own business are the most complicated. On the plus side for you, if a customer has a discount or coupon for future goods or services, they have another reason to return to your business. However, some customers will recognize this and view it as a negative reflection on your business. They could see you as the one really being rewarded. As you gain a customer coming back and spending more money they wouldn’t have necessarily spent otherwise.
Discounts can work, but you have to be wary of how it looks for your business. Maybe offer the discount on a service they already paid for. Rather than one they might not need in the future. Or, you might be okay offering discounts for a future service. If the service is something that people tend to pay for repeatedly, like haircuts.
If customers are going to be spending money with you anyway, they can see that as money they get back. Like if it’s a service fee you pay per month to an accountant or the dog walker. A discount can work well for a recurring business.
Ex: a lawn care company offers 50% of the next lawn mowing to customers who refer a friend.
Before you choose what incentive to offer with your rewards program, ask a client what they think before you put it in place. You can always test the response, by asking a few customers.