Benefits and Drawbacks of Points-Based Incentive Programs

Whether for health and wellness, loyalty, channel partners, market research, or something else, there are many ways to set up incentive programs.

One of the more useful tools for incentive programs is issuing points as “virtual currency,” which allows participants to keep track of their earned benefits. Typically, users receive points for reaching preset benchmarks that reward them with a selection of different incentives, which can include:

• Prepaid Visa cards
• Gift cards
• Digital rewards
• Goods
• Services

A well-structured program provides motivation while fostering long-term engagement and continued loyalty. These programs are also highly adaptable, no matter what industry your company operates in.

Incentive point systems are a fantastic tool for market research, automotive, health, wellness, customer, employee, sales incentive programs, and more. However, there are disadvantages of points-based incentive programs that employers and business leaders should be aware of.

Below are a few of the benefits and drawbacks to help guide those considering developing their own incentive program based on points.

• Commonly used and easy for participants to understand
• Offers a significant competitive advantage as earnings and rewards thresholds are simple to adjust
• Because points are more flexible and targeted in a brand management solution, users perceive these types of promotions as more creative for select marketing schemes.
• It eliminates the need for price discounting, especially for promotions on product brands that do not allow discounting.
• It can be used to reward customers or employees.
• Virtual currency is resellable to vendors to help support your program.
• Points programs assist in collecting customer data for cross-selling and targeted promotional opportunities.
• Leveraging the difference between points issued and redeemed (breakage) can reduce marketing costs.

• The requirement of thousands of points to be earned to redeem for a reward can cause the “halo effect,” devaluing the points program concept.
• Ongoing program management is required to reduce program fatigue depending on the community of users. Your business can mitigate this potential issue by working with a rewards program administration company.
• Ongoing investment in redemption opportunities is a requirement for program success.
• Requires an upfront investment that can be more complicated to put together without the right technology.
• Currency management and customer service required
• Needing to put a contingency on the balance sheet for outstanding points
• It can be more expensive than a cashback program if you don’t use a self-selecting user marketplace to allow the selection of items lower than the cost of cash.

This type of incentive program is about much more than motivation. It can align with your company’s core goals. A well-designed incentive point system can deliver astounding results if your business wants to improve employee engagement, customer retention, revenue growth, or any other business metric.

For example, your business can use an incentive program to encourage repeat purchases if it aims to foster customer loyalty. But these programs don’t only have to benefit your customers—they’re also excellent motivators for your employees. Companies often use these programs to ramp up employee morale, boost productivity, and decrease turnover.

Additionally, points-based systems unearth critical insights into how your program’s participants behave (whether they’re your customers or employees). You can track when, where, and how people and companies engage with your brand. These qualities enhance your marketing efforts, letting your company fine-tune its points system to perfection.

As you work through the benefits and drawbacks of points-based incentive programs, you will discover that finding the right reward management solution provider is essential in driving a program’s success.

Partnering with All Digital Rewards (ADR) ensures your venture has access to strategic guidance and cutting-edge technology to keep participants engaged and motivated. We simplify program management so you can focus on other aspects of your business.

ADR is a leading technology company specializing in customer loyalty and promotions, program development, design, and implementation. We can help you navigate the pros and cons as they present themselves. When working with the All Digital Rewards team, you have a partner from beginning to end.

Let us help your company design a program that resonates with any target audience and aligns with your business goals. We’ll ensure each aspect of your point system is optimized for success. Working with ADR means never navigating the often complex world of incentive programs alone.

For more information on points-based incentive programs, call ADR at 866-415-7703 or click the button below to schedule a demo.