For Retail Promotions, Rewards Beat Out Discounts

To create sales lift and purchase intent without the negative brand effects of discounting, Aberdeen Group, which was created for Blackhawk Network’s Hawk Incentives, discovered that promotions based on rewards can be more effective than discount offers. More specifically, companies had year-over-year revenue growth of 36 percent due to reward promotions compared to 28 percent from discount promotions, Chain Store Age reported

“Businesses have plenty of choices when determining marketing strategy, but reward-based programs stand out as incredibly impactful options to achieve business goals and drive effectiveness,” Blackhawk Network Marketing VP Theresa McEndree said in a press release. “These promotions enable businesses to encourage consumers to buy products while creating engagement that makes them more likely to make repeat purchases in the future.”

Companies have certain business goals in mind for rewards-based promotions. Fifty-eight percent of businesses turn to rewards for customer engagement, while 48 percent choose rewards for purchase intent and 45 percent use them to drive purchase frequency and/or sales lift. Forty-four percent of businesses utilize rewards to minimize revenue lost to discounting.

Target, among other retailers, is beginning to experiment with a new rewards program. Dubbed “Target Red,” the program will not be linked to a debit or credit card, The Star Tribune reported in March. Joshua Thomas, a Target spokesman, told the newspaper, “We know not everyone wants another credit card. So, we want to find a way to grow our relationship and affinity with those guests.”

Originally, Target was offering a 5 percent discount on purchases through its REDcard program, along with shipping benefits on its eCommerce website. As a result, almost a quarter of all Target purchases are now made with a Target REDcard.

However, through the free new program available in the Dallas-Fort Worth area, shoppers can take 1 percent off purchases and put it toward future visits at Target, without having to use a Target-branded credit card. In addition, members of the program can waive the $5 charge for Target Restock. They also can receive 50 percent off the first year of a Shipt membership.