When built and managed properly, rewards and incentive programs offer incredible value and ROI to the companies who use them. They are, by far, the most effective and cost-efficient promotional solutions available.

1.  Sales data drives the program – Companies use the historical sales data from their customers and/or channel sales partners to create valuable insights into their current behavior to find purchasing or sales trends and insights for the program to leverage. 

2.  The program employs reward economics that favors the company offering the program – reward offers that are in proportion to the value of the transaction received. So, if you’re working with a 40% margin, offering an incentive of 1.5% to secure a transaction makes sense. But if the margins are lower, you use a lower reward value, etc.

3.  Point-based reward programs tend to cost less than cash-based rewards like discounts and rebates, as points are accrued over time; as the point balances increase, their influence increases but the relative program costs do not. With discounts and rebates, competitors are constantly trying to out-do one another, resulting in companies dramatically increasing the value of their incentives to break through the noise. Because they don’t get an invoice for the discounts, the company tends to overlook the actual cost relative to the goods sold, but if they were tallied, the actual costs would be quite surprising. In fact, cash-based rewards are usually three to four times more expensive to use than non-cash rewards. (Source: Aberdeen Group)

10 most common uses for a B2B rewards and incentive program

B2B rewards and incentive programs targeted to customers and channel partners can be used to help accomplish virtually any sales goal a company may have. Here are 10 of the most common uses:

 1.  Customer retention

Customer retention is a key objective of any organization for growing ROI. A B2B customer loyalty program rewards participants for their commitment to your business. The more they interact with you, the more they are rewarded, keeping your brand top-of-mind and the users engaged and less likely to go to a competitor. 

4.  Cross-selling

Many companies assume they must be capturing the majority of their customers' category spending, but this is rarely true. Most customers and channel partners work with multiple vendors. By doing so, they can amass more available credit, increase product certainty and fill rates, build a wider array of product selection and increase their leverage when negotiating product costs, etc.

An effective tool for growing accounts in a loyalty program is use of growth tiers. Customers or your sales team or sales partners earn a modest "base reward" for all purchases or sales but are rewarded with increasingly higher reward incentives when they direct more of their purchases or sales to you than they have in the past. Their historical purchasing or sales data is used to guide the performance bonuses offered. The more they purchase, the richer the reward levels.

In most cases, the incremental gross profit from the program-related growth will more than pay for the entire reward program - so long as the offer values used are in line with the available margins.

Loyalty programs offer an effective means for growing each order size with your customers and channel partners. Order size varies depending on the customer and their needs. For those who stock inventory, using bonus reward “threshold” offers to increase average transaction sizes is an easy way to increase each customer’s purchasing.

You can use generic offers for all program customers and/or sales teams (e.g., Spend/Buy over $4,000 in a month and get 3X rewards) or using your sales data, you can look for program participants exhibiting similar behavior and tailor each group or segment's program experience, increasing engagement and response rates, which then drives even higher program ROI.

Margins vary from one product or service to another. In a perfect world you could maximize your profit on each account with your sales team and channel partners always selling and/or customers always buying, your highest margin items. In reality, that isn’t the case. A B2B reward program can be used to tip the odds heavily in your favor by using bonus reward offers on your highest margin goods or services to increase the odds your customers will buy them more often – or your channel partners will be extra-motivated sell those items to your downstream customers.

Most businesses, especially distributors, sell a wide range of different product categories. The more categories a customer regularly purchases from the vendor, the stronger and stickier the relationship tends to be. A loyalty program can optimize category spending with the use of multi-category offers, where the customer receives increasing value of rewards as the number of categories in a single transaction or time period increases. A minimum transaction size will ensure the bonus offer ROI remains high.