Customer rewards: Moving prospects down the B2C sales funnel
By Jessie Torrisi|6 min read|Updated Feb 1, 2024
Customer rewards attract new consumers and deepen customer engagement thanks to positive reinforcement.
We’ve all tried it with our pets, our kids, even our partners. Praise them or lavish them with treats when they do what we want, whether that’s cleaning up their room or not barking at the mailman. After all, humans (and dogs) are wired to seek rewards and experiences that bring joy.
Positive reinforcement is part of the larger concept of operant conditioning. The theory underlying operant conditioning is simple: if, after a behavior, people are rewarded with a desirable or pleasant stimulus, it reinforces that behavior, making it more likely to reoccur.
So if we get a reward for something – be it a pat on the head, a 20% discount, or a free gift – we want to do that thing again.
Customer rewards motivate positive behaviors by rewarding someone for something they are likely already doing – using your product – which creates a virtuous cycle.
How customer incentives work
Customer rewards do a lot more than drive sales. They systematically move customers down the B2C marketing funnel from:
Awareness -> Consideration -> Conversion -> Activation -> Loyalty -> Advocacy
Before we dive into the funnel, here are two tips for using positive reinforcement to effectively drive action:
First: the sooner someone is shown a desirable stimulus after their action, the more likely they are to do it again. The more time that passes between the behavior and the reward, the weaker the association embedded in our brains becomes.
Second: frequency matters. There are five different types of reward schedules you can use – from rewarding a customer every time they take action, to once every few times, to making it time-specific. For example, offering the reward once a month or once a year.
While rewarding someone each time they take an action is best, it’s not always feasible budget-wise. Choose whichever cadence suits your budget, but stay consistent.
A person rarely becomes a customer the first time they hear about your product.
It takes a number of touch points to convince someone to subscribe, sign up, buy something, or book an experience.
Though not all customers go through all six parts of the funnel, your dream customers do.
Customer rewards are one of the best ways to get people to go from a first purchase to being loyal to your brand, and later to advocating for your business by telling others about it.
Below, we’ll walk through each stage of the funnel and outline which customer rewards are best suited to move prospects and customers forward.
This is your first touchpoint with potential customers. It’s what gets someone excited about your brand. Viral posts on Instagram or TikTok, ads on Hulu, Netflix, or YouTube, and other paid media help to familiarize people with your brand and product. Content marketing efforts, like blog posts, ebooks, white papers, and other collateral can also be useful in increasing awareness among prospects.
To generate awareness, try contests
A contest where people enter to win prizes by sharing TikTok videos, re-posting Instagram pictures, or entering a sweepstakes they see in an ad is a great way to incentivize and encourage people to spread awareness or engage more deeply with your brand.
Offering a reward to those who participate and create additional awareness can lead to exponential exposure. And the people who are rewarded for spreading awareness will be more inclined to engage with your brand in the future.
Awareness example: Show me the money
In 2012, Frito-Lay offered to make one lucky couch potato and chip-eater a millionaire overnight for coming up with a winning new chip flavor.
The contest grabbed the world’s attention as Frito-Lay’s customers came up with wild flavors from “spaghetti and meatballs” (well, maybe) to “cinnamon bun” (gross), and it was so successful they continued it for the next five years.
Lay’s invited customers to pitch their ideas with a photo or video. Snackers were motivated not only by the money, but by the thrill of having three flavors developed, produced, and put on grocery store shelves across America.
They also offered smaller $10,000 and $50,000 prizes for semi-finalists and finalists, giving customers more incentive to play.
The takeaway: Money motivates. But it’s also important for the contest itself to be a bit creative and fun, so everyone feels like a winner.
Consideration & conversion
Consideration and conversion are the stages of the funnel where you make a real effort to psychologically sway the potential customer.
Consideration is when a person is debating whether your product is the right fit for them. This is where online reviews, SEO, and performance marketing campaigns come in.
Reviews in particular are potent social proof. People pay attention to what others like them say and do, and they implicitly trust their peers’ opinions. Nielsen reports that 84% of people trust recommendations over marketing campaigns.
Conversion is when you convert a prospect to a lead, typically by getting someone to give you their email address or phone number. This often comes down to enticing welcome offers and freebies (themselves a type of customer reward) — anything that will make people try your product.
To drive conversion, try this customer reward
Provide some free service, offer an incentive, or give away a free sample of your product to people who provide their contact information or view a demo.
Some energy companies, for example, offer a $25 digital incentive to prospects who take a sales call. It gets people in the door.
Conversion example: Get prequalified for a mortgage for free with Rocket Mortgage
It takes about five minutes to get prequalified for a loan with Rocket Mortgage based on your financial information. Getting prequalified with Rocket Mortgage is fast and free, but users of the tool are required to input their phone numbers.
With the phone numbers of prospective buyers in hand, Rocket Mortgage agents have the information they need to relentlessly pursue leads.
It’s a simple way to solicit contact information from their target demographic. This marketing tactic works well for the lender. As of Q3 2022, Rocket Mortgage boasted a servicing portfolio of $531 billion and a client base of around 2.5 million.
Activation and loyalty
Activation is the moment we’ve all been waiting for: when a customer makes their very first purchase.
Next comes loyalty. This phase of the funnel is focused on getting activated customers to make repeat purchases in the future. Incentives are particularly crucial at the loyalty stage.
To drive activation and loyalty, try this customer reward
Offer free products or giveaways to first-time purchasers to turn prospects into customers. Then, entice new customers with valuable rewards to secure their long-term loyalty and encourage repeat purchases.
Cashback offers or rebates are a great way to drive both first purchases and long-term loyalty: Evolus offered first-time customers a $75 Visa prepaid card through Tremendous to try their new product, a competitor to Botox, and catapulted to #3 market share position in just six months.
Fostering loyalty is key. An Acquia study revealed that 59% of American consumers say once they’re loyal to a brand, it’s for life.
Further research shows it takes the vast majority of customers (88%) three purchases to become loyal, so it pays to incentivize repeat customers.
Plus, customers who join loyalty programs are 30% more likely to spend more money with a brand than customers who don’t.
Activation example: Free iPhone anyone?
To lure new customers, T-Mobile now offers as many as four free iPhone 15s to anyone who trades in an eligible phone and switches phone carriers for a $25-a-line fee. Given that the phone retails for roughly $800, it’s an almost too-good-to-be-true offer for families or small businesses.
Competing carriers Verizon and AT&T swiftly followed T-Mobile’s offer with their own iPhone-centric promotions. Giving away a free phone has become standard practice among the largest carriers as a way to persuade prospects to switch over from competitors.
Of course, these companies make their money back and more by requiring interested customers to sign up for service plans with features, data packages, and streaming service subscriptions that all come with added fees.
Loyalty example: Enviable rewards for lucrative customers
Offer money back for big spenders.
American Express touts one of the most attractive and elite loyalty rewards programs thanks to its versatile rewards and high cashback percentage rates. With the Blue Cash Preferred Card, for example, customers earn 6% cash back on up to $6,000 in purchases at supermarkets, streaming subscriptions, gas stations, and transit. They also get 1% cash back on all other purchases.
Meanwhile, holders of the AmEx Platinum Card get five membership rewards points per dollar on up to $500,000 in flights reserved through airlines, or with AmEx travel, every calendar year. Spending on prepaid hotels booked through AmEx also gets five points per dollar.
Membership for the Platinum card is expensive at $695 annually, but the rewards speak for themselves.
Big spenders are the most lucrative assets for American Express. AmEx card members spend 3x as much as non-members. Because their customers spend so much more than the average consumer, AmEx can charge a premium to merchants who accept their cards.
The takeaway: The more customers save, the more they spend. Cashback, free products, and rebates are popular customer rewards, as we’ve discussed before.
Advocacy is about getting your existing customers to bring in new ones.
Consumers stick with brands they feel passionate about, and companies who find a way to harness their customers’ passion into action see success.
To drive advocacy, try this customer reward
Sponsoring posts on social media or setting up a referral program with digital rewards go a long way toward expanding your current pool of customers to include their friends and family. Rewards platforms like Tremendous allow recipients to redeem their payout however they want. We give recipients the option of over 1,700 redemption options, including Venmo, PayPal, Amazon gift cards, Visa prepaid cards, and direct bank transfers.
Referred customers deliver exceptional value for your company – they spend 200% more than non-referred customers.
Advocacy example: Refer a friend
Dropbox rewards their customers with extra storage when they get a friend to sign up.
It’s a win-win, because the new customer gets a bit of free storage, too. This reward, which comes at very little cost to Dropbox, may be just the thing that gets someone to choose them over the dozens of other cloud storage companies in the digital backup space.
Dropbox's extra storage promotion has seen massive success. The company grew by 3900% in just 15 months. it's a bonafide viral referral promotion that's helped Dropbox keep pace with its behemoth competitors, which include Amazon Web Services, Google, and Microsoft.
Takeaway: Make refer-a-friend programs a win-win for both your existing and new customers, and make it clear and easy to figure out how to sign up.
Customer rewards are a psychologically-backed strategy for moving prospects down the B2C sales funnel.
Creative contests are a fun way to gamify spreading awareness
Free services, products, and digital incentives drive conversion and open avenues for conversations with prospects
Cashback and rebates after sign-up and for repeat purchases are helpful for driving activation and loyalty
Digital incentives motivate customers to become advocates and share posts online, post reviews about your product, or refer friends.
If you want to know how to set up a simple customer rewards program, talk to our team. Tremendous is the simplest way to send hundreds (or thousands) of customer rewards in minutes, at scale.
Published February 1, 2024
Updated February 2, 2024