THE 2016 CONSUMER REWARDS REVIEW November 2016 Introduction

THE 2016 CONSUMER REWARDS REVIEW November 2016

Introduction Rewards and benefits can be used to not only increase brand loyalty and encourage repeat custom, but also to inspire action. This is not limited to the workplace. Consumer-facing businesses around the UK are increasingly making use of rewards and incentives to win their custom. Here at One 4 all Rewards, inspiring action through rewards and gifts is our business, and as such we wanted to investigate just how many businesses are now making use of this form of marketing and how consumers really respond to it. We have commissioned a survey of 1, 004 British consumers to lift the lid on B 2 C incentive marketing. We hope you find the results insightful. Declan Byrne, Managing Director at One 4 all Rewards

Consumer Rewards In the UK business to consumer market, the scale of rewarding purchases is huge - according to the data, a staggering 73% of the UK’s 61 million adults have in some way been rewarded or incentivised to make a purchase in the past. And given 20% feel this practice is on the increase, it is not surprising that 25% now expect to be rewarded for their loyalty to a company or brand. On average, British businesses are offering consumers benefits to the value of £ 21 per head, in exchange for a purchase of an item or service worth £ 312.

Do they work? The study shows that consumer rewards can be an effective marketing tool that not only inspires loyalty – and therefore repeat custom – but also increases sales. 1 in 4 (24%) consumers feel that if they are offered a reward for using a brand’s services, they will be more likely to stick with that brand over a competitor who does not. 24% expect a reward for renewed loyalty to a company or brand. In fact, a pocket of ‘reward-shoppers’ exists within the UK consumer market, as 5. 18% will not buy certain types of products or services unless they are offered a reward or incentive for doing so – and so in certain industries, there is a very real section of potential customers who are directly motivated to purchase as a result of rewards and incentives. The types of companies that are the most penalised by consumers for not offering consumer rewards – and therefore would see the biggest gains from introducing them – include banks, building societies and other financial services businesses, where sales could be increased by 7%. Furthermore, food and drink manufacturers, insurance providers and travel companies such as airlines/hotels/travel agents stand to gain a 6. 57% increase from consumers choosing to buy to unlock an incentive. Mobile phone, TV & internet providers and vehicle manufacturers or dealerships could achieve sales increases of 6%.

Who stands to lose the most? Which types of companies would you not buy from if they didn’t offer you a reward or incentive for buying their products or services?

The key to generating sales The types of rewards companies are offering consumers in the hope of driving sales are very close to what consumers say would motivate them the most. Ultimately, all the majority really want in exchange for spending their money is more buying power, i. e. cash (21%) or gift cards (14%). Indeed, more selfless rewards – such as charitable donations – had amongst the least impact on the purchase decision, with just 1% reporting that these would influence them to buy a product. This perhaps explains why just 5% of consumers report having been offered this more selfless type of incentive. Happily, many are getting exactly what they want – 24% report being offered money for making a purchase, and 22% gift cards, by companies. But it is not only the type of reward being offered that is key – the value has to be there, too. According to the data, in order to be significant enough to impact the purchasing decision, consumers feel incentives should be worth an average of £ 21.

The most effective types of rewards What types of rewards and incentives would make you the most likely to buy a product or service?

The most effective types of rewards When you have personally bought something in the past as a consumer and you have been offered rewards or incentives to do so, what form has this taken?

The value of custom In many smaller businesses, incentivising consumers to make a purchase by offering them a reward may not be entirely practical. But this research does provide some indication as to what businesses looking to utilise incentives should expect to have to pay in order to make an impact. Of course, whether or not this is feasible for businesses depends on the price of the item and their marketing budget. However it is interesting to note that the average cost of products and services currently being incentivised is £ 312 – and the rewards on offer are worth an average of £ 21. Meaning that, on average, rewards should be worth 7% of the product price in order to trigger a purchase.

Which companies are incentivising consumers the most? The research shows that retailers and supermarkets are currently incentivising their customers the most, with 30. 38% of respondents recalling having been offered a reward in exchange for a purchase by these types of businesses. This is perhaps not surprising, as these are the businesses that first helped to normalise this practice in the UK by introducing rewards cards and loyalty schemes. Manufacturers of lower value products are also investing in incentive marketing, with food and drink manufacturers falling into second place. But predominantly it is the more contract-based purchases, such as insurance (3 rd), telecommunications products like mobile phones and internet (4 th) and bank accounts (5 th) that businesses are incentivising. The Top 5 Company Types Incentivising Consumer Purchases The most: 1. Retailers (shops/supermarkets) 30. 38% 2. Food and drink manufacturers - 17. 23% 3. Insurance providers 16. 43% 4. Telecommunications providers - 13. 65% 5. Financial services providers - 7. 92%

Which companies are missing out? According to the research, media publications are the type of product consumers report being incentivised to buy the least (6. 47%) – despite the fact that many are low-price items that are designed for repeat purchases. Despite the fact that there are big opportunities for upsell within the leisure and tourism industry once the first purchase – such as a hotel booking or a theme park ticket – has been made , just 8. 07% report having been offered rewards for making purchases by leisure companies. Vehicle dealerships and manufacturers fell into third place (8. 47%) - suggesting perhaps that these businesses have less faith in the impact of incentives and are less willing to try it. And while many consumers report they are commonly being offered rewards in exchange for contract-based purchases (such as telephone contracts, Wi-Fi packages, etc. ), the utilities industry (8. 57%) has not quite caught onto the power of incentive marketing yet. The Top 5 Company Types Incentivising Consumer Purchases The Least: 1. Media publications 6. 47% 2. Leisure companies 8. 07% 3. Vehicle dealerships & manufacturers 8. 47% 4. Leisure & travel 8. 57% 5. Travel companies 9. 66%

Which types of companies are missing out on the power of consumer rewards? Which types of companies have you received a reward or incentive from?

Which types of companies do consumers expect to reward them? Comparing the types of purchases consumers expect to be rewarded for with the actual purchases they are being rewarded for suggests that in this case, the supply is very much dictating the demand. For those companies who are not (and crucially, whose competitors are not) currently investing in consumer incentives, this is good news. The only difference in the top five lists of companies that consumers expect to be rewarded by and those they are currently being rewarded by is travel companies. 22% of consumers expect to be incentivised by travel companies, yet just 10% of consumers report having received them.

Who stands to lose the most? Which types of companies would you not buy from if they didn’t offer you a reward or incentive for buying their products or services?

Conclusion This research clearly shows the scale of incentive marketing in the UK is huge, with the majority of consumers having been incentivised to purchase in the past. In fact, the scale in the B 2 C market is so large that consumers are now actually expecting businesses to deliver rewards and gifts for their custom – and in some markets, consumers will actually refuse to purchase if they are not incentivised to do so. For those companies who currently do not explore this type of marketing, this is food for thought. As is the relatively small scale of rewards needed to achieve the desired results – based on the rewards consumers are currently used to receiving, an incentive worth just 7% of the purchase price is deemed enough to motivate a purchase. While a customer incentive programme may not be possible in every business, the fact that rewards can be both effective and scaled to suit price points and marketing budgets is good news – and means many companies will be able to find a way to implement them and reap the benefits. T: 0207 608 2008 | E: corpsales@one 4 allgiftcard. co. uk | W: one 4 allrewards. co. uk