Customer Loyalty Programs – Gift Cards Versus Rewards

The battle of the rewards comes to a head

If customer loyalty programs are meant to incentivise businesses to perform better, why do many plans struggle to achieve their main objective? In this article, we will analyse the cash or non-cash dichotomy to motivating your channel partners in order to promote the highest level of partner engagement and performance, with one crucial goal in mind – sales growth. By the end of this blog, you’ll know where your brand should sit in the fight of gift cards versus rewards.

It is important to recognise that incentive programs can be designed for three different groups.

Channel partners (i.e. owners and senior management):

A program may be intended to motivate the behaviour of a channel partner, as a way to encourage them to achieve revenue targets, penetrating new markets, increasing market share, or “soft” goals.

Channel partner employees:

This group need to motivate the channel partners’ employees to reach certain goals or objectives. In addition to the sales force, this may apply to employees such as marketing, engineering, and IT personnel. Channel partners may not always allow vendors to include their employees in an incentives program since the partner wants to control his/her staff and have them focus on achieving their own company’s objectives.

However, if employee rewards are integrated with those which the partner considers essential in achieving his/her overall business goals, and they are designed to achieve the same objective, the partner will often agree to allow employees to participate.

The Psychology of Engagement

An ongoing discussion within the field of rewards revolves around the question of which types of rewards are most effective for motivating channel stakeholders. There is a whole host of different things that make B2B professionals – distributors, resellers, and marketers – feel successful and fulfilled, and financial stability is just one of them. Social standing, fun, relationships, and peace-of-mind are all important facets of overall satisfaction and can be targeted more acutely by non-monetary rewards.

Managers of loyalty programs are sometimes sceptical that a non-cash reward can improve performance more than a cash equivalent reward such as gift loyalty cards and gift certificates or vouchers. However, research demonstrates that non-cash rewards are stronger motivators and are an essential element of best-in-class organisations’ incentive strategies.

A study run by Australia’s Red Balloon found individuals are five times more likely to stay with a company if their workplace recognised their efforts with family and friend experiences rather than cash and time off. International author, Daniel Pink’s novel, Drive, also discovered that cash rewards were, in fact, doing more harm than good for the general household.

Where cash falls short

There is much discussion about the “Cash is King” concept surrounding these programs. Research suggests that to increase levels of employee engagement, individuals need the ability to make choices even about the rewards that they earn. Program stakeholders are often concerned that only cash can drive behaviours, yet it is proven that when a cash incentive is paid out in a participant’s paycheck, it loses its value and connection to the incentivised behaviour.

A study suggests that 18 per cent of cash recipients could not recall how they spent their cash incentive, and another 40 per cent used the cash to pay for bills and household items. Cash as a special incentive is often used to pay for daily needs and is not considered to be a true reward. There is no emotional connection to a paycheck and no associated memories to share, leaving cash rewards to be spent and then forgotten.

A 2013 report by Harvard Business Review challenged the traditional thinking of cash as the best motivator but found those in favour of non-cash motivators were three times more invested in their workload.

Here are some of the study’s findings:

• More than two-thirds said rewards and incentives are paramount to their job satisfaction.
• More than 75 per cent of managers, owners and sales professionals report manufacturer-sponsored reward and incentive programs have a high influence on their willingness, interest and energy to sell that manufacturer’s products and services.
• More than 80 per cent agree that the opportunity to earn rewards and incentives from manufacturers strengthens their ongoing relationship with the sponsoring company.

Non-cash rewards: the influencer of choice

What makes non-cash rewards so attractive?

• Easier to talk about – People tend to feel a little uncomfortable when talking about money; however, it is easier to talk about a trip or new flat screen TV.
• The value of the “experience” – While cash is useful, it’s not something that can be used to make a visceral bond. A buck is a buck, but to a sports fan, a chance to watch their favourite sport’s team live is truly priceless. The emotional ingredients of non-cash rewards make these items resemble a higher value than cash in the participant’s mind.
• Easier to connect back to the source – Cash is easily “lost in the shuffle” because it may get spent on bills or routine expenses, with no long-lasting association to the program, the behaviour that earned the reward or the company that sponsored it.
• Symbolic and trophy value – Non-cash rewards last for a long time, (whereas cash does not) allowing people to brag about gifts.

The key is the experience

If you were to ask someone to think back on a time when they might have received cash versus a palpable reward, you will often notice a difference in their reaction. While how they used the cash is seldom remembered, their faces light up when they recall the excitement of visiting exotic locales, turning on their new HDTV with friends, or dining at a favourite restaurant “on the house.”

Ultimately, it’s that “wow” factor that delivers the highest return on your recognition and dollar.