At Incremental, our specialty is delivering sales growth and solving business pain points through tailored programs specific to your business. The tools we use are sales incentive programs and customer loyalty programs. While they may feel interchangeable, they are anything but.
These programs are both capable of delivering growth and results. They both provide value and emotional connections to customers. However, they have individual uses that excel in differing situations for B2B companies seeking sustainable growth and market advantage.
The results are clear from the 81% of Australia’s top-performing B2B companies who utilise programs that provide non-cash rewards to their customers – here are some of the similarities that you may want to know:
- They both empower sales functions to be consultative, not order-takers. There is a sales outcome, a chase, a mechanism to drive growth and customer advocacy or loyalty.
- Up to 45% more value goes back to customers when compared to rebates.
- They influence key decision-makers and influencers within a ‘customer’, not just the owner/manager. These are the people who determine your success.
- Both programs provide valuable emotional connectors through deeper emotional engagement, leading to more loyal customers and greater profitability.
- Getting a customer is only the first step, so finding ways to keep them is crucial. Low prices and quality of service are great, but competitors can both beat these. Maximising engagement and share of wallet by providing additional value is the way to stand atop the market.
We can help you find what works best for your business.
Which Program Design Will Deliver for You?
Customer loyalty programs and sales incentive activities are valuable for B2B companies seeking sustainable growth and market/competitor advantage. Two distinct types of B2B programs exist: customer loyalty and sales incentive programs. This blog will provide you with a guide so you can understand the differences that will benefit your business and channel.
No two programs are identical – each has to cater to unique channel aspects and industry pain points to connect with audiences fully. While both categories may meet customer loyalty and sales incentive outcomes, thinking about the intricate world of planning and launching your program to drive growth is essential. While both program types use the same principle of “fulfil x behaviour to receive y rewards”, they do so in different manners and under various conditions.
Sales Incentive Programs – Drive Growth and Competitive Spirit
Sales incentive programs (“target programs”) operate on a strict timeframe. They work towards a definitive goal for the customer who participates and the business itself. These goals are typically related to sales or purchase targets.
Well-designed sales incentive programs will factor in customer behaviours to move their share of wallet from competitors and go beyond the essential customer/vendor relationship demonstrated with your business to date. Your program expands on this with an additional value exchange, incentivising them to consider extending the relationship.
Accurate target-setting is critical to ensuring that your program achieves its success metrics. Accurate targets must clearly demonstrate what the customer will achieve and how they will be rewarded for their achievement. Suppose the target is out of reach or they are already giving the business 100% of their spend. In that case, negativity will result, souring the potential emotional connection.
Sales teams leverage sales incentive programs to contribute to a financial year’s performance directly. If all customers grew by 13% and the business gave 3% back as a reward to customers, 10% growth on last year’s baseline revenue could be achieved.
The aforementioned growth in margin can be used to reward the customer’s ‘above and beyond’ behaviour. This ability to self-fund rewards is a major driver for sales incentive programs, but a potential negative is the lack of rewards or engagement in the immediate aftermath after the customer passes their ‘baseline’ and reaches the target. This lack of consistent engagement is one significant difference compared to a customer loyalty program.
Closed budgets are commonplace in sales incentive programs, resulting in program designs built around targets and leaderboards. At the end of the period, the top-ranked customers earn their rewards. This creates an emotional response in terms of competitive spirit, pushing engagement for the participants and resulting in increased sales.
Consideration must also be given to the reward value each customer segment can earn in the time period. Can small and medium customers earn enough reward value in a pre-defined time? Customers who feel insufficient value in the program may lose engagement before changing their buying behaviour.
Modelling is vital in these types of programs. The effort-to-reward ratio needs to be positive across small, medium, and extensive customer groups, even if it means extending the duration of the incentive program.
Customer Loyalty Programs – Reward Continued Loyalty Through Continued Value
Customer loyalty programs are considered ‘always-on’ and reward customers for all dollars spent with your business. They lack time sensitivity, as they reward continued loyalty over an extended period. However, this doesn’t mean customer spend is the only ‘behaviour’ driving a customer loyalty program’s status or reward points.
A well-designed loyalty program allows users to earn reward value through other ‘valuable’ behaviours, such as training, channel compliance, payment terms, specific category or product purchasing, online ordering, and more. Adhering to these ‘rewarded’ behaviours may not result in reward value alone. It can result in a customer moving up tiers, earning more significant benefits and reward values.
B2B vendors use customer loyalty programs to target and nullify multiple pain points among customer segments. This is compared against sales incentive programs, which have a narrower focus on driving sales and increasing customer retention.
In a customer loyalty program, there is a baseline reward value for dollars, e.g., 1 point per dollar spent. In addition to that base reward, additional rewards are earned for specific tier-based or customer-based behaviours, rewarding customers for going beyond the expected behaviour.
Sometimes, customers are aware of their tier status. However, program managers often use tiers in data segmentation to communicate, reward, and recognise different customers in personalised customer segments to make them more valuable customers and make the communications carry additional impact by speaking directly to relevant customer behaviours.
Businesses that use loyalty mechanisms and programs well can quickly identify what a great customer looks like. Including factors such as annual turnover, sales channel, or product preference, these businesses will design a customer loyalty program with multiple mechanisms and layers to change the behaviour of all customer types, ensuring they become a better customer and eventually reach the top status. This is considered the ideal customer who gives the vendor 100% of their share of wallet over an extended period and sees them as a partner, not a vendor.
Whether you plan a sales incentive or customer loyalty program in your B2B sales channel will depend on multiple factors. Do you want to drive sales or solve business pain points?
No matter the problem or sales channel, a customer loyalty or sales incentive program will deliver results. It’s where the best conversations start, and we are always looking for more chances to help businesses succeed.