Why Incentives Drive Customer Engagement and Loyalty Program Participation

A compelling loyalty and rewards program can be a significant differentiator in the competitive financial services landscape. These programs can improve customer retention at neobanks, add more value for existing customers and drive new revenue streams for banks. Or payments startups can leverage loyalty programs to encourage specific user behaviors. In many cases, offering a loyalty/rewards program can be a cornerstone strategy for meeting KPIs.

However, simply having a loyalty program isn't enough. But take heart. One tactic that can separate thriving programs from those that slow-burn is the strategic use of bonus incentives and strongly marketing them to actively drive participation and engagement.

Think about it: bank customers are bombarded with choices. Why should they take the time to enroll in your loyalty program? The answer, more often than not, comes from offering a tangible benefit – an incentive that makes the desired action immediately rewarding for the customer.

Why incentives are used so widely

It's worth noting that offering trigger-based bonuses is a strategy already employed by other successful rewards programs, including Rakuten Rewards and Capital One Shopping. This is a tell for their effectiveness in driving user behavior. So why should you even consider offering bonus incentives? In addition to their widespread use in the rewards industry, data suggests they are incredibly effective. 

A brief case study: one of our clients conducted an experiment using incentives in their marketing to encourage browser extension installations. The marketing program with incentives saw a 356% improvement in the conversion rate from click to install compared to the control group with no incentives. This highlights the power of giving people a little extra something for taking the steps you want them to. 

By strategically rewarding desirable customer behaviors, banks can significantly increase the key metrics for their programs. 

How to decide what to incentivize

What kind of actions should financial institutions offer bonuses for? There should be a solid strategy on when and where  to apply incentives in rewards program marketing, but keep in mind they shouldn’t simply be generic rewards. They should be strategically designed to address particular business goals. 

A few ideas to start:

• Encouraging people to join loyalty programs: Offer a special bonus simply for installing any program tools (such as a browser extension or mobile app) and/or completing the enrollment process. This helps increase the number of users in the rewards ecosystem right from the start. 

• Driving that crucial first purchase: Once someone has signed up, offer an additional reward to motivate them to make their first purchase in a limited time period. This can turn new members into active, transacting customers faster.

• Expanding the use of different program platforms: Some programs have multiple “surfaces” where a customer can participate; for example, a Chrome and a Safari desktop browser extension as well as a mobile app. One action to be rewarded might be to encourage mobile app-only users to install and use the desktop extensions. This can lead to deeper engagement across the entire loyalty offering. The added bonus here is that with multiple surfaces to purchase from, customers can earn more rewards and become even more active participants.

• Reactivating enrollment “abandoners:” If customers begin the program enrollment process but don't complete it, a bonus can encourage them to come back and finish. This recaptures potential active users and helps get them over the hump.

Don’t forget to market the incentives

Also remember, while planning and launching specific incentives is important, don’t forget the most critical part: marketing incentives effectively. It’s not optional - you simply must build a comprehensive marketing plan and use all the available marketing channels at your disposal to let your target audience know about these opportunities. 

Without marketing, there’s no “incentive.” It’s just “rewards.” 

The benefits of incentive programs

Thinking about the bigger picture, using triggered reward incentives can lead to several key benefits for bank loyalty programs:

• Faster adoption: Incentives can make joining programs more appealing, leading to increased enrollment rates.

• Quicker engagement by new members: By incentivizing that first purchase, you can accelerate the path from just a program member to an active user.

• Increased overall engagement: Rewarding different actions encourages users to interact more deeply with your program and the different ways they can engage.

• Potential for re-engaging inactive users: Targeted incentives can bring back users who haven't been active recently.

By implementing well-planned and effectively marketed action-based bonuses, financial institutions can significantly influence customer behavior, drive key performance indicators for rewards programs, and build stronger, more engaged customer relationships. Incentives are about providing that extra motivation at the right moments to encourage the actions that lead to more participation, and a more successful loyalty program.