It’s phenomenal how offering reward programmes that benefit your customers, members or employees can help to build trust and engagement with your brand and lead to improved sales and repeat business.

As a result, reward programmes in Australia are growing significantly as businesses compete to attract and retain customers who have more choices than ever before. 

Rewards are becoming an expectation from customers, with more than 60% of Australian consumers making purchases that earn rewards or benefits at least several times per week, according to research by KPMG.

Likewise, research firm Gartner has found that 83% of companies saw a higher turnover rate in 2021 than normal, with staff looking for more benefits and recognition than ever before. 

If you're considering what type of loyalty or reward programme to offer, the three most common options in Australia are:

• Points-based programmes
• Cashback programmes
• Member benefit/discount programmes

1. Points-based programmes

These are the most common type of consumer loyalty programme, whereby customers earn points when they make purchases from your business or affiliate partners.

These points may be redeemed for rewards that are relevant to your business or your customers' interests, such as discounts on accommodation, travel, or other services.

Pros

• Free membership encourages sign-ups
• Encourages repeat purchases
• Low financial risk if reward goals are not frequently met
• Reach more customers through affiliate or coalition programmes

Cons

• Low engagement due to delayed gratification
• Don't attract more valuable customers due to perceived low-value rewards
• Less chance to collect data on customer preferences

2. Cashback programmes

Cashbacks reward customer loyalty by enabling them to build credit based on the value of their purchases.

This credit accumulates in their account until it can be redeemed as either cash or credit to be spent only at your store or affiliate stores. Common examples of cashback programmes are supermarket loyalty cards and airline frequent flyer schemes.

Pros

• The same advantages as a points-based programme, with the extra benefit of making additional sales if credit must be spent in your store.

Cons

• Like points-based programmes, delayed gratification and low-value cashback can lead to low engagement and doesn't incentivise customers to spend more on purchases.

3. Member benefit/discount programmes

Membership programmes offer exclusive perks to customers who sign up for your service. Most employee reward programmes work on a similar model.

Membership may be free or require a fee to access a premium scheme with more valuable rewards. Premium schemes can be especially successful for retailers who want to increase the loyalty of higher-value customers, Amazon Prime being the most successful example.

Pros

• Instant rewards incentivise higher-value customers
• More opportunities to collect valuable customer data
• Member fees provide an additional revenue stream or help to fund reward offerings
• Differentiate your business from competitors

Cons

• Higher barrier to entry means fewer sign-ups
• More pressure to provide valuable and engaging rewards
• Risk of demands or complaints from members

Managed reward programmes

A successful reward programme should be designed around your customers' needs and must be well-managed to avoid problems. While most businesses lack the expertise to set up and operate a reward scheme, the advent of digital platforms make it easier than ever to manage reward schemes through specialised vendors.

My Rewards International (ASX:MRI) is a global leader in providing white-labelled loyalty, reward and engagement programs for businesses and consumers.

They serve more than 100 leading corporate clients providing 4.6 million members with discounts and special offers from a network of over 4,500 individual merchants. These services are delivered through a self-managed cloud-based e-commerce platform.

For more information about MRI or loyalty and reward programs as a whole, subscribe to the My Rewards International Limited Chairman's List.