The Difference Between Customer Loyalty and Incentive Programs

Find out what sets the two apart.

Customer loyalty programs and sales incentive programs are commonly used within businesses across the world to change behaviour. Though, sometimes the differences between the two concepts can become blurred, that’s why we have uncovered the meaning behind loyalty, incentive and rewards programs.

When considering what strategy will work best for your business, it is important to know what separates the two and which will be the most effective for your company to reach their desired outcome. Loyalty programs are targeted at customers who are already doing business with you and are rewarded for each transaction.’

The program allows the business to reward them for their loyalty, but it also helps protect customers from being poached by competitors. An incentive program’s primary objective is to deliver sales growth upon a customer achieving a target. If a customer achieves X, they receive Y. Recent research has shown that over half of Australians are inclined to spend more money with a company if they have a loyalty program in place.

Nielsen’s 2017 survey found six in 10 individuals are more likely to return to the business if they operate a loyalty program. Where, close to half will spend more with the company because they know they will be rewarded for their purchases. Megan Treston, director of retail services at Nielsen explained: “Done well, loyalty programs can also help drive more frequent visits and heavier purchasing”.

Incentive programs are a way for businesses to give more in order to get more from their customers. Instead of rewarding clients with a gift card or discounts, like a loyalty program does, incentive rewards programs usually presents them with a more valuable reward.

Your incentive marketing strategy could either be merchandise or a travel experience – but it is important to remember that cash-rewards are not always the best incentive. Recent research has found that individuals who were rewarded cash bonuses spent their extra earnings on financial commitments, such as bills and credit cards. Customers who received non-cash incentives, such as a paid-for dinner or a weekend away, were more grateful and formed an emotional attachment with the brand/business.

In conclusion, the difference is that in a loyalty program, the customer is rewarded for every purchase, whereas, with an incentive program, a customer is only rewarded after achieving a sales target or sales goals. Therefore, costs are relative to the sales growth because if a client does not achieve growth, they don’t receive the reward. The real difference about each program is that loyalty protects customers and incentives drive growth.

At Incremental, we don’t just create and implement sales incentives and customer loyalty programs, we are a B2B marketing agency focused on delivering results.