Are You Focusing on Customer Retention Enough?

Increasing customer retention rates by 5% can increase profits by as much as 95% according to the Harvard Business Review.

Take a moment to grasp how powerful this statistic is. Despite the fact that there is a massive opportunity to improve company profitability by placing an increased focus on customer engagement and loyalty, many companies devote very little time and resources into keeping their existing customers happy and coming back for more. The lifetime value of one loyal customer can be extremely high when you take into account their purchases over the years.

We all understand that customer acquisition and awareness building is vital to growth and should be prioritized. However, it is time that customer retention is treated as an equally important initiative.

Customer Retention is Downplayed (Source)

  • 34% of those surveyed said they will increase their investment in acquisition in 2014, compared to only 18% heightening their focus on retention
  • 71% of content marketers said one of their main goals is acquisition, while only 65% cited customer retention and loyalty
  • 31% of marketers feel that their personalization efforts had a “high impact” on awareness compared with only 24% on retention and loyalty

To break it down into dollars and cents, we look to a powerful B2C example that demonstrates exactly how much more profitable it is to sell to a current customer than to acquire a new one.

The study determined how many pairs of shoes the company had to sell to achieve a profit of $100,000 under two particular conditions.

Under the first set of conditions, the company is investing a great deal of money into advertising to generate sales. Since 98% of their business is first-time buyers, they are spending $20 in acquisition, $10 in general administrative costs, $5 in shipping, $50 in product cost and have a profit margin of $15. High advertising costs and lower loyalty are causing acquisition costs to spike.

At these costs, 6,600 pairs of shoes must be sold in order to gain a profit of $100,000.

If they flip the script and devote 98% of their budget to selling to existing clients, the profit margin increases by $20 per unit to reach $35. $100,000 in profit will now be achieved when only 2,800 pairs of shoes are sold. That is a 58% decrease (3,800 units) in amount needed to reach that profit target.

Although the advertising and profitability numbers will be different for every industry, a similar picture remains. It is far more profitable to gain repeat business from your existing customers than to seek out new customers by exhausting large advertising budgets and/or devoting resources to lengthy selling cycles. New business is a must, but the value of repeat business is severely undervalued.

With that said, incentives for repeat customers should be considered. This might be as small as offering a $1 off discount coupon on the purchase of a car wash to a consumer or as extravagant as gifting a trip to South Africa for an advertiser that exceeds $10,000 in spend. Size of customer purchase will greatly affect incentive choice.

Sometimes even a simple, genuine “thank you” can go a long way…and this does not cost more than a moment of your time.

For more ideas on some interesting ways to thank customers, check out “24 Classic Tried-and-Tested Ways to Thank Your Customers” here or send us an email at jnrinfo@jnrcorp.com to pick our brains. We have been implementing programs for companies with some of the most loyal customers in the world for over 30 years in a variety of industries and would love to share our findings with you.

By JNR Incorporated

Written by Kristopher Hewkin

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JNR Incorporated is a results-based, globally recognized leader that specializes in creating custom travel, meeting, event, prepaid card and merchandise programs that motivate, engage and inspire the employees, customers and channel members of our clients. We have over 30 years of experience working with Fortune 500 companies of many diverse industries. Our programs are tailored to fit the specific needs of marketing, sales, management and human resource professionals. The unique solutions we apply are measurable and proven to increase performance, loyalty and revenues.

A Look at Prepaid Cards in Incentive, Rewards, and Recognition Programs

There are few rewards as satisfying as being able to pull out your wallet to simply slide out a prepaid reward or incentive card that is a branded, physical representation of your hard work.  In recent years, prepaid debit cards have skyrocketed onto the scene to become the most popular tool of choice by various firms to help motivate, engage and reward both employees and customers alike. The popularity of prepaid cards is evident through 75% of businesses believing that prepaid gift cards are among the most effective rewards, especially in driving loyalty and commitment as surveyed by the Incentive Research Foundation.  The majority of incentive planners also promote prepaid cards as a more meaningful, personal and impactful enticement than cash.

Incentive planners and business executives are not the only ones encouraging the use of prepaid debit cards; recipients are voicing their appreciation for these convenient compensations as well. In a study done by the Incentive Research Foundation, 44% of survey respondents proclaimed that prepaid cards are their favorite type of gift or reward. So much so, that when offered a prepaid card or equivalent cash, five times as many respondents chose the prepaid card over other alternatives. This data speaks volumes about the optimistic future of the prepaid debit card industry as it becomes the most notable way of simultaneously increasing both the potential incentives for employees and overall productivity for a firm.

So what’s the draw to these tiny pieces of extraordinary plastic?

There are numerous benefits associated with issuing prepaid cards, including, but not limited to the following:

  • Prepaid cards are being used as incentives across the spectrum as they can be accepted at any retailer where credit cards are taken.
  • Prepaid debit cards, unlike cash, can be used online, a more suitable feature in today’s technological age.
  • Prepaid cards have the ability to be reloaded, providing ease for the cardholder to continuously add funds to their favorite card.

Prepaid cards are being used as incentives on various levels, from spot rewards to holiday bonuses and for merchandise, dining, travel and entertainment. This slew of opportunities connected to each prepaid card has made the business a $46 billion industry in the United States as stated by the Incentive Federation. Furthermore, prepaid cards are now the most frequently used reward in corporate incentive programs, with over 75% of organizations utilizing prepaid debit cards as rewards according to Incentive Magazine’s Gift Card IQ Survey.

Businesses that are able to capitalize on the opportunity to enter into prepaid debit cards will have a positive position looking ahead, as it is widely believed that these cards drive a much higher return on investment than any other type of incentive rewards, such as cash. The flexibility and ease of distributing each card, as well as the ability to customize each as a personalized reward creates a mutually beneficial relationship while also establishing an emotional connection with an employee or customer. The facts speak for themselves, and the secret is out: prepaid cards are now on the map and are here to stay.

For more information on JNR prepaid card programs, please visit our website.

By JNR Incorporated

Written by Andy Tallon

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JNR Incorporated is a results-based, globally recognized leader that specializes in creating custom travel, meeting, event, prepaid card and merchandise programs that motivate, engage and inspire the employees, customers and channel members of our clients. We have over 30 years of experience working with Fortune 500 companies of many diverse industries. Our programs are tailored to fit the specific needs of marketing, sales, management and human resource professionals. The unique solutions we apply are measurable and proven to increase performance, loyalty and revenues.

Four Ways to Motivate Employees (According to a Behavioral Psychologist)

The best leaders in the world are the ones most adept at motivating their employees to perform to the fullest extent of their abilities. Increased productivity, improved sales, reduced waste and optimized efficiency are all byproducts of a strong leadership group.

If you ask an employee what would inspire them to work harder and more diligently, their response would likely be something like “SHOW ME THE MONEY!” Offering a monetary raise and cash bonus is not always the most effective or possible solution for your company however. Strong coaching and even noncash incentives (like trips, merchandise or awards) can yield a greater return on investment, and therefore be a more effective use of resources.

Since writing a check is not always the appropriate solution for motivating employees, Susan Weinschenk (“The Brain Lady”) of Weinschenk Institute, LLC, a professional with a Ph.D in Psychology and over 30 years of experience as a behavioral psychologist decided to use her vast knowledge of the human brain to learn more about what really motivates people. She summarized her years of research and analysis into a simple and easily digestible guide titled “Four Ways to Motivate Employees.”

1. Give People Autonomy

Granting your employees autonomy, the ability to have freedom over their actions, is an excellent way to stimulate their desire to master a subject. It is logical that people who have control over their actions will strive to master their craft. Allowing employees to be independent goes hand in hand with increasing their autonomy and therefore makes them more productive. On the converse, people who feel that they have little to no control or autonomy will become apathetic and lose their desire to master a task.

2. Connect People as Part of a Team

If your team feels connected, they tend to be more motivated to work together. Gregory Walton, a professor at Stanford, studied the feelings associated with belonging to a group and its effect on behavior. In one study, he discovered a higher level of inspiration present when college students believed they shared a birthday with another student in the group. Even minimal connections with others, like a common day of birth, can lead to an increase in drive and pursuit of goals.

3. Know When to Reward

It is widely accepted that rewards are powerful tools for reinforcing desired behaviors. When and how often to administer these rewards may be the more important decision here. To establish a new behavior, Weinschenk recommends rewarding every time a preferred action is carried out. For example, an employer issues a popular retail gift card every time an employee reports a safety issue on a new form.

After the advocated behavior has been established, adjustment to the reward schedule is necessary. B.F. Skinner researched reward schedules in the 1950s and the findings are still relevant today. Skinner found that varying the reward schedule was the only way to sustain a desired behavior in the long run. Now that gift card is only awarded after three safety issues are reported, then after five and finally, after seven safety reports.. This variation of the reinforcement schedule allows the motivation level to remain high but prevents predictability. Lower incentive costs will also result due to the fact that fewer rewards are needed.

The type of reward and value further enforce behaviors. Rewards with monetary value can include: gift cards, merchandise, awards and travel. Non-financial incentives might include leaving work early, comp days and public recognition from management.

4. Give Appropriate Feedback

Praise can be used as a reward to sustain desired behavior, but will not always lead to a desire for mastery. Giving feedback without praise is a more appropriate way to promote this quest to be the best within an individual. Feedback can be largely positive, but should also pinpoint areas where improvement is needed. Logically an individual who is praised without constructive criticism may assume they do not need to improve.

Weinschenk took 30 years of learnings in behavioral psychology and identified knowing when to reward as one of the four most important ways to motivate employees. At JNR, we have dedicated our own 30 years to mastering the keys to employee motivation. This has resulted in a keen expertise of understanding the appropriate times to reward, type of rewards to utilize, ways to communicate reward programs and most cost-effective ways to administer rewards. Incentives utilized by JNR include: travel, reward cards and merchandise. Whether you are looking for the appropriate reward to reinforce small behaviors such as cleaning up the company kitchen or large endeavors like reaching multi-million dollar sales targets, we have the tools to ensure that all of your employees desire mastery of their craft.

Check out “8 Steps to Effectively Implement Employee Incentive Programs” here or send us an email at jnrinfo@jnrcorp.com today if you have any questions.

By JNR Incorporated

Written by Kristopher Hewkin

Prepaid Debit Cards Are Effective Incentive and Reward Options

Prepaid debit cards are a specific type of gift card pre-loaded with a fixed monetary amount. In 2012 alone, $77 billion worth of transactions took place using these rectangular pieces of plastic. It is not surprising that businesses of all types are reaching out to reward both consumers and employees with prepaid cards and their popularity continues to soar. Curtis Arnold of Forbes cites 9 creative ways to use prepaid debit cards in a recent article including: door prizes, employee incentives, event attendance, blog giveaways, and tax refund payments. We want to focus on the effectiveness of these cards in the recognition of not only employees, but also customers, dealers and channel sales personnel.

Over half of the companies that give out non-cash rewards utilize some type of gift card. There are three basic categories. The first type is a debit card offered by credit card companies or banks that can be spent virtually anywhere credit cards are accepted. It is usually pre-loaded with a fixed amount, but sometimes able to be recharged. The second is a retail or manufacturer gift card offered by household name retailers, hotels, airlines, and restaurants. These are typically valid for face value and customizable with company logos or specific product imagery. The third type is a debit credit card. These cards appear to be a standard credit card issued in the user’s name. There is a fixed amount deposited toward the card balance initially and can be spent anywhere credit cards are accepted.

There is an ease of use and flexibility that comes with prepaid cards that benefit the recipient as well as the issuer. Aside from the more obvious sense of appreciation that comes with receiving a gift of material worth, a less obvious response is now being recognized as well. Confidence is an underlying form of appreciation when someone is given a card in his or her name that, due to the economy’s impact over the last seven years, may not have the opportunity to use a credit card otherwise. This provides a level of self-assurance that cannot be replicated with cash rewards and in return, loyalty.

On the issuer’s side, a prepaid card comes with straightforward shipping, customizability, the simplicity of recharging a card without incurring the cost of a new card each time, and an inimitable display of gratification for one’s patronage. Prepaid cards can be used in a multitude of programs at all levels producing a sense of fulfillment and motivation across the spectrum from sales incentives to non-profit event attendance motivators.

The pros of gift cards include:

  • A Plethora of Options – Nearly every retailer and many consumer product manufacturers and travel-related companies offer gift cards.
  • Wallet Power – Unlike cash, these cards will often stay in the wallet of the recipient for an extended period of time, serving as a constant reminder of the generosity from the issuer on the branded card.
  • Ease of Distribution – Shipping a card in the mail is extremely quick, easy and inexpensive.
  • Ease of Use – A majority of cards can be used online or at retail outlets.
  • Popularity – Prepaid cards are the most common gift for recipients. An impressive 44% of IRF survey respondents said that prepaid cards were their favorite type of award. When given the choice between a prepaid card or cash equivalent, five times as many respondents chose the prepaid card. Further, over 71% of respondents said that gift cards are either the “best of all gifts/rewards” or “a good gift/reward” while only 8.47% said they would rather have cash.

When you break it down, the pros of prepaid cards make it a worthy investment for any company or organization.

The prepaid debit card industry is booming for good reason and you need an expert in the field to walk you through the process of effectively using cards and effectively growing your ROI. If you are interested in learning more about a JNR Incorporated prepaid debit card program, please send us an email at jnrinfo@jnrcorp.com. We will fill you in on how we have been leveraging our relationship with MasterCard® rewarding the employees, customers, and channel personnel of our Fortune 500 clients to consistently exceed their expectations.

To read more on prepaid debit cards, check out our research here.

By JNR Incorporated

Written by Kristopher Hewkin

Auto Consumers Love Rebate Cards

Enticing car buyers to make purchases with incentives is not a new concept. It has long been known that those in this market can be swayed based largely on what they receive in return for their purchases of products and services. The most crucial choice in this process lies in deciding on the most effective type of incentive to offer. Cash back rebates on prepaid cards and discounted prices are the two most common ways to incentivize consumers. Which of these is most appealing to the buyer?

A new auto study published in Incentive Magazine by Deanna Ting surveyed 1,300 U.S. consumers. It showed that auto shoppers are more motivated to make car or tire purchases, take test drives, or book car services when offered cash back rebates—typically administered on prepaid cards—not discounted prices.

This logic is not difficult to understand when you consider that a $1,000 rebate on a prepaid card at the time of purchase is much more appealing than the same value discounted over the life of an automotive loan. Saving $1,000 on the final price of the car will result in a miniscule decrease to the monthly payment over the life of even a short three-year loan. Additionally, people naturally enjoy instant gratification over delayed payoffs.

Further findings from this survey:

  • Rebates encourage test drives – The survey showed that a $500 after purchase rebate in addition to a $50 prepaid card is the most compelling formula for increasing the number of test drives taken.
  • Incentives strengthen service loyalty – Consumers said they would change their behavior and remain loyal to a particular dealer if they were given a $100 prepaid card for every year of service at that dealership and a $10 prepaid card for every service performed there. This is a fundamental way to ensure that your customers remain loyal to your dealership over others.
  • Prepaid cards are the best incentive for tire shoppers – A $50 prepaid card is the strongest motivator for those in the market for tires. Surprisingly, it is even more effective than a $60 gift card, a free year of oil changes, and even $300 worth of discounts on future tire services. Again, instant gratification wins out over future savings.

In light of these revelations, prepaid rebate cards should be a prominent part of your 2014 strategy for improving automotive revenues and increasing the loyalty of your customer base.

For more information on why prepaid debit cards are so effective, check out our free whitepaper on prepaid debit cards: http://www.jnrcorp.com/resources-whitepapers#whitepaper3.

By JNR Corp

Written by Kristopher Hewkin