Promotional Tools
Tools: Incentive Programs Defined
By Matt McAllister

Way back in the spring and summer of 1999, when Internet companies were first discovering how expensive it can be to attract new customers to their sites, incentive programs became a popular way for many online retailers to not only lure new audiences, but more importantly to reward those who remained particularly loyal. The idea was to offer rewards such as frequent flyer miles, discounts, or even cash whenever the user conducted a desired transaction, whether it be making a purchase, registering or merely reading an ad.

A year later, incentive programs fell out of favor among interactive marketers, mostly because, when relied upon as the main vehicle for driving customer loyalty, these programs cannot stand up to such lofty expectations.

An April 2000, report by Jupiter Communications analyst Melissa Shore put things in perspective. She warned that, “While specialized loyalty programs can provide incentives to engender loyalty, commerce players must first address the core gaps in site and servicing functionality. By focusing on loyalty drivers that are more important to more of their customers,” explained Shore, “commerce sites will be able to move from generating transactions to generating profits.”

Wiser for the wear, marketers have come to understand that an incentive program is not an end-all solution to instill customer loyalty, but a single component of an overarching marketing campaign — merely a piece of the puzzle.

Even so, the latest Media Metrix Top 50 contains incentive-based marketers such as MyPoints, CoolSavings, PrizeCrazy and Iwon.com. Look a little deeper and you’ll find sites like LuckySurf, AllAdvantage, FreeShop and others not far behind. And when you consider statistics such as the one by Jupiter stating that more than two-thirds of online buyers participate in some type of customer loyalty program, it becomes difficult to ignore the validity of such programs.

So if you, like many online retailers, are considering using incentives to attract new customers and help retain old ones, here’s a look at some of the top players in the space:


Netcentives

Netcentives offers to build customized loyalty and direct marketing solutions not only for your customers, but for your employees and business partners as well. With more than 300 corporate clients, Netcentives claims to manage nearly 40 million relationships altogether. The company’s popular ClickRewards program (http://www.clickrewards.com) enables members to collect frequent flyer miles redeemable at any of 10 major airlines. Other rewards include hotel stays, car rentals and brand-name merchandise.


A major client for Netcentives’ Custom Loyalty Networks is Lycos, which relied on Netcentives to help build a branded currency for Lycos Rewards. According to Bob Davis, CEO of Lycos, Inc., “The company helped us create…a marketing infrastructure that not only builds our membership base, but supports our participating members and merchants both online and offline. It's that level of complete integration and seamless effectiveness that sets Netcentives apart.”


MyPoints

While Netcentives’ offer primarily relies on the lure of frequent flyer miles, myPoints has created a point system whereby users can work towards a variety of products and services such as books, CDs, vacations, restaurants, clothing and more. Points are earned by shopping at specific merchants, visiting Web sites, responding to e-mails, and similar means. The company also operates CyberGold (http://www.cybergold.com), an incentive portal that pays its users cash for their attention and loyalty. The cash can then be transferred to a credit card or checking account, or spent at the CyberGold shopping directory, which includes top-brand merchants such as Barnes & Noble, eBay, Walmart and Wine.com.


“A large portion of the online population isn’t interested in frequent flyer miles,” says Geoff Ossias, MyPoints vice president of corporate relations. “We offer miles as one of our rewards, but our most popular incentives are things like phone cards and gift certificates to retailers like Target and Macy’s.”


CoolSavings

Recognized by its piggy-bank icon, CoolSavings offers its members the chance to earn coupons, discounts, samples, rebates and other promotional items from any of its participating merchants. The company boasts of a member base totaling nearly 11 million users, and purports to target various demographic profiles using sophisticated analysis of shopping behavior and user preferences. CoolSavings’ incentives can be redeemed online at the CoolSavings Web site or printed out and redeemed at the brick-and-mortar stores of its affiliates. Advertisers currently using CoolSavings include Barnes & Noble, BestBuy.com, Kids “R” Us, MCI Worldcom, JCPenny, and others.

Beenz

“Beenz” are kidney-shaped images that users can earn by shopping at or visiting affiliated Web sites, or simply for accessing the Internet through a service provider. The beenz can then be spent on products and services at the same merchants. Beenz are also redeemable for gift certificates and can be spent any place accepting MasterCard. Launched in March of ’99, the company now offers its rewards-based marketing services to businesses throughout North America, Europe and the Asia-Pacific Rim. Beenz.com recently announced the integration of an offline rewards program to complement its online promotions.


Other Choices

It seems that new incentive-based marketers are cropping up online all the time. Here’s a list of some others that you might find worth your time: FreeRide, Dash, AllAdvantage, iPoints, NetFlip, Ebates and Webstakes.com.