Customer Rewards Programs: Do They Work?


The short answer is “yes.” The long answer is “yes, but…” As in, yes, customer rewards programs work, but they often aren’t working up to their potential. This means businesses could be missing out on the rewards that loyalty and incentive programs could bring.

There are currently many popular customer rewards systems. Some of the most popular are: 

  • Cashback/Rebate Programs. In this system, a percentage of purchases gets credited to the buyer, which they can access once they’ve achieved a specified dollar amount or time. Example: JC Penny 
  • Discount Programs. With these programs, members are given discounts at the register for either all or some products. Example: Costco 
  • Frequency Programs. Often implemented via punchcards, frequency programs track how often customers come and dole out rewards once they reach a certain number of visits. Example: Dutch Bros. Coffee 
  • Points Programs. With points, products and services are awarded points (often the dollar amount they’re worth), which can then be traded in for other products and services. Example: Walgreens 
  • Tier Programs. This system allows a business to customize its incentive program by creating levels customers can achieve via their many purchases. Each level gained provides them with access to goods and services denied to regular shoppers or those still on lower tiers. Example: Wyndahm Rewards

All five of these are in use across most retail businesses today from Amazon to Sephora to Ford. Some use cards and others use apps, but the goal is the same: Build customer loyalty. It costs less to retain a good core group of customers than to court new ones. Even better, an avid customer is one who will convert others for you, saving you even more in advertising and gaining you more in profits. 

Making it Realrewards

The most significant area where loyalty programs fall short is that they just aren’t tangible enough for today’s customer. Cashback/Rebate and points programs like those found in many grocery stores usually fall prey to this shortcoming. While these systems are all good at generating data for the business and for customizing the ad experience for shoppers, the rewards are harder to feel in a constant real way.

The 21st-century shopper expects a lot more from a loyalty program. They want connection, interaction, and excitement. Frequency programs, like those punch cards given every time you buy a coffee or ice cream at a local shop, are a little more experiential but even they could be brought up a notch.

Take, for example, Sephora’s tiered system where climbing levels doesn’t just mean unlocking free shipping. For a Sephora customer, a higher level could mean a monthly gift, a beauty consult and invites to exclusive VIP events. These all make being a member something exciting and about more than just the shopping moment.

A good loyalty program focuses on making the brand part of the user’s life and lifestyle. It seeks to engage members in activities that make long-term memories and impacts. Like Coke connecting their brand to happy moments, an effective incentive program will attach itself to something unique and memorable for the shopper.

Dealerships can make special showings of new stock for members who’ve unlocked levels via frequency. They can give out club decals for special occasions, making collectible bumper magnets that are given out every month to program members. If they stick with a basic cashback or points service, make sure to have employees highlight on receipts how much was saved up, or find other ways to remind customers they’re racking up points.

Whatever the program is though, the crucial question to ask is how can dealerships make the system real to customers when they use it. Then follow up that question with how can that be made even more so?