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We all end up filling a membership form at some mall or outlet every time we shop, don’t we? They lure you with those tempting reward talk shops and all you gotta do is put in your information on a form and you’re set. Voila! They’ve converted you into their customer.

Now with that membership card in your hand, you will always ensure to check out the offers. You’ll look at the deals and rewards they’re currently running at least once, before making any purchase. This makes you a loyal customer.

The value of any loyalty program resides in its potential to bring a difference in consumer practices. The urge for a “gift”, no matter how small it might be, is enough to turn you into a loyal customer for any kind of business. That is the main purpose of reward programs. Retain old and loyal customers instead of making huge efforts to convert new ones.

Rewards act like reinforcements. This is one of the factors which influences the consumers to engage more with a particular brand. “Get the third gift free” basically pushes you to buy the first two when you initially intended to buy just one. Such deals tend to supersede the concept of “buying what you need”.

They try to convince you that you might need this product for the future and “the third gift free” adds as a bonus point to this deal. By including these “deal thresholds”, companies see an increase in customer engagement.

An ideal customer is the one who engages with a brand and frequently shops their “highest-margin” products. Rewards programs help to reinforce the “frequency” of shopping. And it is less expensive to invest in the “returning” customers than to acquire new ones. All this gives them a basic idea of their brand’s future revenue generation.

The reward programs function on the fact that the “closer you are to your goal, you will try to reach it faster”. If you are supposed to get the tenth coffee free and you already have purchased two coffees, the chances of you returning frequently for those remaining coffees are quite high.

Creating a loyal customer eliminates competition. The chances of a particular customer switching or deflecting from a brand that has been offering them rewards are quite less.

Social status also chimes in here. Being an elite member of a club drives the urge to join loyalty programs that can help attain the “platinum member” tag for you. This tag caters to the desire of being treated “specially”. And such “special treatment” influences other people to engage with the brand similarly, thus encouraging you to shop for those “lucrative” products. 

Perception of making progress is as important as actually making progress. This drives in the additional effort to reach one’s goal. It might be an illusion, but the fact that one person is “getting a head-start” accelerates the drive to reach the goal. Brands offering a “sign-up bonus” is one such example. It increases their engagement.

The most important takeaway here is- most of the reward programs out there are the same. Offering “more” rewards as compared to the competitors can backfire resulting in heavy expenditures ultimately affecting the business. They all have similar benefits with similar goals. The presentation might differ.

This is a big-brain moment. Take a seat. Process it. How many coffees are you away from that tenth free coffee?