Are customer incentives effective for growing your business or just useless gimmicks?
First, some numbers to consider:
- 75 percent of customers favor companies that offer rewards
- Around two-thirds of a company’s business comes from existing customers
- Increasing customer retention by five percent can boost profits by 25 to 95 percent
Second, consider that well-loved brands like Amazon, The North Face, and Sephora Beauty use incentives to bring in new and repeat business.
“But those are HUGE companies.” Fair enough. Still, that doesn’t mean customer incentives are strictly for large companies. Small retail businesses of all kinds can use incentives to boost profits as well.
In this post, we’ll dive into what makes a great customer incentive, as well as customer incentive ideas for both new and existing customers. Finally, we’ll discuss how the right retail point of sale (POS) system helps you make the most of your customer incentives.
While it won’t be a comprehensive list, you’ll come away with several ideas to attract new customers or increase repeat business.
The Strategy Behind a Winning Customer Incentive
A loose definition for a customer incentive is anything that brings additional value to a product or service being purchased or that has already been purchased.
For example, McDonald’s famous Monopoly-themed incentive rewards customers who’ve purchased qualifying menu items with Monopoly board pieces to redeem for free or discounted food and other prizes.
Now, that’s a multi-billion dollar company. How can customer incentives be useful for smaller retailers?
We’ll dive deeper into that question as we go, but the biggest benefit to customer incentives is their potential to win new customers AND increase repeat business from existing customers.
There are a number of considerations for creating a winning customer incentive idea:
- Understand your target audience and current customers’ needs and desires.
- Define the exact goals; what are you hoping to get out of this incentive?
- Specificity is key to success, so segment your customers.
- Identify the promotional channels you’ll use to communicate your incentive.
- Test, measure, improve, and test again!
Customer Incentive Ideas for New and Existing Customers
Why should you treat potential and existing customers differently? It all comes down to context and relationships.
Existing customers have made a purchase from you. They know the quality of your products, have either experienced happiness or disappointment with a previous purchase, and have a relationship with you.
On the other hand, potential new customers don’t have the same experience. Therefore, the strategy and types of incentives used have to differ slightly depending on which audience you’re targeting.
5 Customer Incentives to Reward Existing Customers
- Purchase points: each dollar from a purchase equals a certain number of points that can be redeemed for discounts on future purchases. Your point of sale system can track the points itself (or integrate with an app) and apply the points’ dollar value to future transactions.
- “Sneak peek” access to new products or services: send emails or text messages to existing customers for exclusive offers before the general public. Your POS system can help you segment customers and generate promotional hotkeys for staff to use when ringing up customers.
- Referral discount or reward programs: reward customers with a percentage or dollar discount, or a free product, for referring people who become new customers. Your POS software can help you set up this loyalty program.
- Rewards for leaving an online review: reward customers for spreading the word about your store. An e-commerce discount code or barcode can be generated using your POS system.
- Punch cards with a free or discounted item once the limit is reached: give customers a percentage or dollar discount, or a free item, for making a specific number of purchases with you (works best with smaller dollar products). Hotkeys for punch card promotions can be created in your POS system for easy use by your staff.
4 Customer Incentive Ideas for Acquiring New Customers
- Free samples or small products: attract potential customers with free samples or free low-cost products. You can generate hotkeys or specific barcodes for these items to track how many you gave away vs. sales made to see if the incentive was worth it.
- BOGO offers: turn browsers or window shoppers into customers by offering BOGO for new customers (tracked with an email address). Your retail POS software can help you set up this discount, whether the second item is free or discounted a certain percentage.
- Bundle offers: make product bundles too good to pass up for potential customers by bundling products or goods together with a discount. Modern point of sale systems have the ability to create product bundles easily.
- Free bonus item with purchase for first-time customers: who doesn’t love a free bonus just for making a purchase? You can create a hotkey or promo code with your POS software to track the free items.
Your Point of Sale System is Pivotal to the Success of Your Customer Incentive
To take advantage of the ideas in this post and create relative, enticing incentives for your customers and prospective customers, you need to have the ability to collect and access POS data. The ability to create coupons or codes within your retail POS system makes tracking sales easier.
Plus, tying into or integrating with e-commerce stores and marketing functions is key to easily managing a specific promotion.
If your POS can’t do that, you’re probably leaving money on the table. So where do you go from here?
A great next step would be to schedule a demo with a POS Nation product specialist. They’ll show you all the powerful tools for creating and managing customer incentives and the other business-critical abilities of our POS system.