In loyalty programs, there are two main types of rewards—financial rewards and non-financial rewards. As the names suggest, the former provides monetary benefits to members and the latter provides non-monetary benefits.
Examples of financial rewards include special offers, discounts, bonuses, cashback, freebies, and more. No doubt, they are extremely effective at driving sales and giving customers a great experience while shopping. But a study also revealed they can harm a brand’s perceived value! Financial rewards may attract price-sensitive customers but can’t retain them for long.
But meaningful non-financial rewards, on the other hand, can appeal to customers’ emotions and keep them loyal for good. At LoyaltyXpert, we have helped many of our partners leverage the power of non-financial rewards and enjoy enduring loyalty from their customers. In this blog post, we discuss how non-financial rewards can benefit your business and some of the most common types of non-financial rewards.
Benefits of non-financial rewards
Even though non-financial rewards don’t give any immediate monetary benefits, they provide many long-term benefits not just to loyalty program members but also to businesses. Here are some of those:
Financial rewards, by the very definition, requires you to spend money. Whether you give cashback, discounts, or gifts, you have to part away with a portion of your revenue. But non-financial rewards don’t put a huge dent in your profit margins or earnings. By providing non-financial rewards you will not only reduce your customer acquisition costs (CACs) but also reduce the costs of retaining them. Also, non-financial rewards eliminate the logistics costs that are involved in procuring and supplying financial rewards.
2. Emotional connection
Non-financial rewards are extremely effective in connecting with customers. One recent study revealed 84% of customers said that they would prefer non-financial rewards in loyalty programs if the rewards are meaningful to them. A quarter of them would love to share the rewards with their family members and friends.
3. Competitive advantage
Just imagine you are visiting a shopping mall and you see “20% OFF!” on every storefront. But one shop stands out from the rest. It offers its premium customers an invitation to an exclusive event scheduled for next week. Which one would you choose? Chances are high that you will visit the store that stands out from its competitors and check out what’s special about the event. That’s the power of non-financial rewards!
4. Relevant to every stage of the customer journey
It’s unfeasible for companies to provide financial rewards to prospects and customers at every stage of the customer journey. But it’s extremely feasible to give non-financial rewards to customers as they progress from one stage to the next. Many companies offer e-books and other valuable resources to get customers into their funnel. After that, they give personalized newsletters, exclusive bundles, and many non-financial incentives over time.
5. Customer Advocacy
No doubt, financial rewards can satisfy customers. If they are substantial enough, they also can delight customers. But suitable non-financial rewards can transform customers into brand evangelists! Customers who are emotionally connected after getting meaningful and valuable non-financial rewards are more likely to remain loyal to the brand for a long time.
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Examples of non-financial rewards
Here we have listed seven extraordinary non-financial rewards that many successful international brands use. We have also included some real examples so that you can take a leaf out of some global industry leaders’ books.
1. Exclusive access
“Exclusive!” This nine-letter word is the secret key to long-term customer loyalty. As per a new stat, 94% of Americans said that they would prefer exclusive deals and offers. Another data found that eight out of every ten respondents said that they would be more loyal to a brand if they are provided with exclusive benefits.
When loyal customers get exclusive access to new products, services, promotions, or deals, they feel valued, and that fosters loyalty. Exclusive access can also create a sense of excitement and urgency among early adopters and entice them to make purchases and be members of the loyalty program.
2. Exclusive events and workshops
After exclusive access, exclusive events and workshops come second on our list. Let’s revisit our example in which we mentioned how a shop can stand out from its competitors by offering loyalty program members invitations to an exclusive event. The discount of 20% looks low-value in front of the exclusive invite.
Apart from exclusive events, exclusive workshops offer loyalty program members a chance to learn new skills, interact with industry experts, and gain valuable insights. Apart from that, these events and workshops also help brands build strong communities. One of the best real-life examples of this is Sephora’s Beauty Insider, which invites members to monthly events where they can interact with beauty and wellness experts and influencers.
3. Access to exclusive content
We have already discussed how non-financial rewards in loyalty programs provide relevance to every stage of the customer journey. Many brands use exclusive content not just to enable customers to navigate through various stages in their funnel but also to provide them with valuable insights and keep them engaged.
Exclusive content such as e-books, webinars, interviews and podcasts, behind-the-scenes footage, and more such members-only content are the ones that provide customers with a wealth of information and entertainment.
4. VIP customer support
Just imagine customer support exclusively for VIP customers! That’s right; some brands are providing this non-financial service to retain their most valuable customers. As the name suggests, VIP customer support is providing quick and effective customer service to special customers during critical or unprecedented moments. Under the service, the companies that don’t provide 24/7 customer service to regular customers make the exception for their VIP customers.
A good example is British luxury fashion brand Burberry, which joined hands with tech behemoth Apple to provide a service called ‘R Message.’ Under it, it enables its VIP customers to chat with assigned customer service representatives in real time by using the Burberry app. They can also make an in-store appointment using the app.
5. Personalized recommendations
Another effective non-financial reward is personalized recommendations, which recommend tailored bundles and packages based on members’ shopping history and preferences. This is extremely effective to cross-sell and up-sell products. Apart from enhancing the shopping experience, personalized suggestions show that the brand understands and cares about members’ individual needs.
One of the best examples of a brand that uses this non-financial reward for its loyalty program members is The Body Shop. Its product bundles, called ‘Lucky Bundles,’ not only recommend tailored bundles but offer extremely attractive discounts that entice non-members and new customers to join its loyalty program.
Gamification loyalty programs are one of the best non-financial strategies that enable brands to keep their members engaged without spending anything extra. It not only gets the members hooked to the gamified loyalty programs but entices them to open the app more frequently. The game elements can be as simple as quizzes to as elaborate as treasure hunts.
One study found that brands that gamify their loyalty programs witness a 15% rise in brand awareness, a 22% surge in brand loyalty, and a whopping 47% increase in engagement. Another research revealed that brands that gamify their websites see a 30% rise in browsing time.
7. ESG-related rewards
Many brands and customers are focusing more on ESG (environmental, social, and governance) causes. They reward their customers with points for taking certain actions or contributing to noble causes. A McKinsey study revealed that more than three-fourths of American customers value a sustainable lifestyle. And a SalesForce study found that almost two-thirds of respondents stopped purchasing from brands whose values don’t align with theirs.
Keeping that in mind, more than half of brands are planning to reward responsible behaviours and purchase ethical products. As per McKinsey, brands with ESG-related products enjoy a repeat purchase rate of 32-34%.
Even though monetary rewards play a huge role in increasing sales and attracting new customers, they are not enough to retain customers. More often than not meaningful and relevant non-financial rewards prove to be extremely useful in enhancing customer loyalty and transforming loyalty program members into brand advocates.
At LoyaltyXpert, we have a proven track record and years of experience in designing non-monetary rewards for all sizes and types of businesses. If you want to leverage tailored non-financial rewards, contact us today to book a free demo.