An Overview of Incentive Marketing and B2B Loyalty Programs

An incentive marketing strategy is usually very simple: “buy this item or take this action and we’ll give you something.” Incentive marketing has been around for as long as businesses have tried to sell their products to customers or motivate employees to do certain things or reach specific goals. 

Because this arrangement is performance based (if there is no purchase or action, there is no incentive awarded), marketers prefer the transparency of the transaction relative to other types of marketing campaigns, such as paid advertising, social media or public relations. 

It is easy to measure the incentive’s ROI, which should always benefit the marketer – assuming the incentive’s value or cost is much smaller than the margin realized by the customer purchase or employee action.

Are loyalty programs a form of incentive marketing?

The short answer is, absolutely!

The more informed answer is, loyalty programs are incentive programs on steroids – or at least, they should be.

As mentioned above, many incentive programs are very simple interactions: “buy-get” or “do-get.” Seldom do businesses take full advantage of historical customer data to drive sales, resulting in lost opportunities. This is where a loyalty reward program, whether B2B or B2C, can make a huge difference. A reward program offers the same type of transparent performance but leverages historical sales data to make the incentive ROI much, much greater for the company using the program. It doesn’t matter what sort of relationship is being targeted; a reward incentive program that uses data to identify purchase behavior insights, should provide much richer results. 

That being said, the type of data available to drive the reward incentive program will vary by type of company offering the program:

Manufacturer Reward Programs – Manufacturers will have different data available depending on how they go to market. If they use distributors or retailers to sell to the downstream customer (such as a retail store owner or a consumer), the manufacturer probably doesn’t know who the downstream customer is, so they have limited options. With a loyalty program they can:

• Reward the distributor and incentivize them to buy or stock more product;
• Reward their sales reps for selling to the distributors (with a sales incentive program);
• Reward the distributor sales reps for selling more product to the downstream customers;
• Reward the downstream customer (such as the retail store owner) by using shared distributor data or by having the downstream customer submit a claim;
• Reward the consumer for purchasing their brand and submitting a claim or warranty;
• Reward their non-sales employees for a myriad of performance-based behavior.

Distributors & Wholesalers – Distributors typically have the most robust transactional data; they know who bought what, when and for how much. As such, they have a lot of reward options. They can:

• Reward their customers (retail store owners, contractors, other business accounts) for purchasing;
• Reward their sales reps for selling to their accounts;
• Reward their non-sales employees for a myriad of performance-based behavior.

How a loyalty program works

Incentives can be created for any sort of general or strategic sales goal the organization has. Regardless of the type of program or the target audience, the process to develop a loyalty program is generally the same:

1. Set clear program goals by determining:
2. What purchase or sales activity are we trying to achieve?
3. Ongoing purchasing/sales;
4. New product introduction(s);
5. Increased purchase frequency;
6. Larger transaction amounts;
7. Increased purchase volume (year over year/quarter over quarter);
8. Category expansion;
9. Product bundling;
10. For how long?
11. Who is our target audience?
12. What are the volume targets (dollar values or units)?
13. Build the program:
14. Develop the target audience touch points, such as:
15. A reward website for the target audience to enroll in the program, check offers, view their account balance and redeem points;
16. A regular reward email statement, to keep the target audience engaged and motivated;
17. Program introduction materials for the target audience, to get them engaged and involved.
18. Develop the program tools for the sales team:
19. Program introduction materials, so they use the program correctly when interacting with customers;
20. A reward program portal, so they can see each customer’s reward status. (The number of points earned/available, and any applicable reward offers/bonus offers.)
21. Create data-driven offers:
22. Reward the customer for all their purchases – a Thank you for their ongoing loyalty. This is called a base offer and is usually modest in value (0.5-2% depending on the associated margins);
23. Incentivize customers to increase spending versus the previous month/quarter/year by using historical sales data. Growth tiers are a common way to encourage this behavior. You reward customers more richly as they climb each tier;
24. Use historical sales data to identify purchasing gaps – What are customers not buying that maybe they should be? Reward them when they do. Incentives should reflect the value to the different types of purchases/sales, where you offer richer rewards for high margin transactions, etc.
25. Identify customers whose purchasing has slowed down or become inactive and target them with incentives to reverse those trends;
26. Reward customers for buying online;
27. Grow your bottom line and profits:

A reward program is supposed to be a profit center for the business offering the program. It’s a sales tool with performance-based costs – if you are rewarding customers or sales reps, the business is also being rewarded, through delivery on the sales goals;

1. Ensure the incentives being used make economic sense for your company and adjust the reward offers so you always benefit economically;
2. Experiment with limited time bonus offers of very targeted sales objectives and then measure the ROI on each offer (cost of the rewards ÷ dollar margin of goods sold). Repeat the offers with acceptable ROI and discontinue or refine the offers that don’t;
3. Focus on your share of market with existing customers. Remember, you probably aren’t capturing 100% of their total spending. Increasing your share of market with existing customers is usually very profitable;
4. Acquire new customers. Keep in mind the potential lifetime value of a loyal customer. What is it worth to your organization to acquire a new customer? Ensure they become engaged reward program participants and start the lifetime relationship on a positive and profitable note.
5. Develop special bonus offers to attract new customers who open an account and place an initial order of a minimum size;
6. Reward them for their next purchase as well;
7. Reduce your cost of sales. Calculate the total cost of expensive discount or rebate practices.
8. How much did you give away in total discounts/rebates in the last fiscal year? Just because you didn’t get an invoice for the discounting you did, doesn’t mean it didn’t cost something. If your gross margin on an item is 40%, then a 10% incentive cost is too great, consuming 25% of your margin. Most reward programs use reward costs of less than 3%, including bonus offers, and deliver even better results than discounts or rebates.

Lift & Shift offers a powerful B2B reward platform that can help your company leverage its sales data to drive incremental purchases with customers and channel partners or motivate sales staff. We work with manufacturers, distributors and service providers to analyze sales data, identifying purchasing gaps and other valuable targeting opportunities. 

We create and deliver highly relevant offers to customers, in-house sales staff or sales associates, motivating your target audience to respond, using a wide array of appealing reward options as influencers. Our performance-based reward structures deliver an unparalleled return on investment, with absolutely no wasted budget. 

Our customizable reward platform enables clients to easily benefit from a robust loyalty reward program. It's affordable and includes Lift & Shift’s turnkey professional program administration. We take care of everything so you can focus on your key initiatives.