Discounts or bonuses: which loyalty program to choose for your business?
Discounts and bonuses are two of the most common forms of customer incentives. They motivate consumers to buy more and more often, and also form an emotional attachment to the brand. But which of these programs is more attractive to businesses?
Differences between discounts and bonuses
The main distinguishing feature of discounts is that they provide a benefit to the client here and now. It works like this: you set a percentage of the discount, launch an advertisement and attract a significant traffic of buyers who, of course, do not mind saving.
On the face of it, everything looks attractive, but discounts have a drawback - the business is left with no tools to attract repeat sales, so they do not bring much benefit to the company in the long run. Things are different with bonus loyalty programs.
They work in the format: "bought today, received a discount tomorrow", and are more designed for the long term. Accordingly, the company receives not a one-time increase in traffic, as in the case of discounts, but a stable flow of loyal customers.
Although bonuses do not provide immediate benefits, they still look more attractive to most consumers. This is due to the fact that discounts are always set unilaterally by the business, and for a limited pool of goods. But the client can spend the bonuses at any time, and that one on the product that he really needs.
Advantages of discount and bonus loyalty programs
The discount system has three main advantages, namely:
- Ease of launch . It is enough for the business to calculate the optimal size of the discount, replace the price tags, and you can start attracting traffic.
- Transparency of customers . The consumer immediately sees his benefit, which motivates him to make a purchase.
- High probability of collateral sales . Quite often, customers come to the store looking for a specific item on sale, but in fact also buy many other products that are not on sale.
Launching a bonus program is more difficult from a technical point of view, as here companies need to carefully consider the percentage of accrual, the amount of write-off, the terms of burning bonuses and many other parameters. These numbers should be directly related to the frequency of purchases and the size of the average check.
At the same time, the introduction of bonuses gives brands significant advantages:
- Motivation to resell. As we have already said, bonuses do not provide immediate benefits, which encourages customers to return to the company again and again.
- Unused bonuses . After a certain time, accrued bonuses have the property of "burning off". On the one hand, it forces consumers to hurry with the next purchase, and on the other hand, it allows the company to save.
After all, if the customer was a one-time customer and did not return, the business does not lose anything, since the sale actually took place at full price.
- Bonuses are linked to inflation . It makes a big difference for a business whether the client writes off the bonuses now or in a few months. This is with the concept of the discount rate — that is, the inflation rate. Every year, the cost of similar goods increases, but the bonuses accumulated by the buyer are not indexed in any way, which allows for significant savings.
- Reconstruction of competitors . With the use of discounts, the company becomes dependent on the offers of competitors. For example, if you offer a 10% discount and the store across the street is 15% off, customers are more likely to go there. Accordingly, there may be a need to resort to dumping, even if it is financially unprofitable. There is no such problem with bonuses, because they are calculated for all products, and not for specific items, which gives the client significant benefits, but in the long term.
- Better emotional attachment . As the number of accumulated bonuses increases in the client's account, his trust in the brand grows. Such a connection with the audience is much stronger than a one-time discount.
Result. What is better to use - discounts or bonuses
If you look at the question in the context of "one or the other", bonuses definitely win . They allow you to build long-term trust relationships with the audience , and are generally more profitable for business.
At the same time , discounts, due to their simplicity and transparency, are an excellent tool for attracting attention to the brand, which is useful for expanding the customer base.
Therefore, the smarter decision here would be not to choose between these options, but to combine them to get the maximum result.
So you can first get new customers with discounts and then connect them to bonuses to motivate them to come back again.
