A Reward Program That Lowers Customer Acquisition Costs & Increases Customer Retention

As a consumer, you’re well aware of the power of rebate and reward programs, ones where companies reward customer loyalty with discounts towards future purchases. A perfect example includes the frequent-flyer programs run by airlines, or the all too familiar Subway card. While a proven tool in B2C environments, the question often becomes whether the same type of strategy can work in a B2B environment. Well, not only does it work, but it provides up-to-the-minute market pricing data, while empowering you to increase customer loyalty and retention.

Our B2B customer reward program is fairly straightforward. First, this is not a contract; the customer doesn’t need to sign anything. They remain part of the plan as long as they continue to purchase the agreed upon minimum monthly volumes. Second, the rebate is applied to the number of units purchased each month. That rebate amount is placed in the customer’s “bank” and is retained for the duration of the agreed upon period. Finally, once the customer reaches the volume threshold, they are given their rebate; it can be applied directly to their account, or can be applied to future purchases. However, if the customer leaves the plan – at any time – then they forfeit their rebate. It is essential that your customer understand the consequences of leaving the plan. In addition, you must ensure that they purchase the minimum monthly requirement, otherwise the plan won't work.

* Must Remain in Plan

* Must Purchase Minimum Monthly Requirement

 

Why Does This Plan Work?

One of the issues of operating in a B2B marketplace is that it’s often difficult to keep track of competitive pricing. While some customers will call you directly to discuss competitive bids, others will simply switch the moment they’re provided with a better price. Unfortunately, you only find out about that lower price after you’ve lost the customer’s business. By then, it’s too late to do anything about it.

This customer reward program is different because it forces your customer to call you with information concerning that competitive bid. Once they partake in the rebate program, they’ll accrue credit within their “bank”. They’ll constantly be aware of the value of their rebate and will track their progress on a monthly basis. They won’t abandon the plan because they know they’ll lose their entire accrued rebate. Instead, they’ll call you directly because they want to keep their rebate and get you to match your competitor’s price.

If you want access to this sample table yourself, then please refer to:  Sample Back-End Rebate Excel Sheet for Customer Retention 

Ultimately, this type of plan works because it protects your gross profit on sales. You decide whether to match the competitor’s bid, offer a little less to your customer, or not match it at all. If you choose not to match, you may lose the customer’s business but you retain the rebate. Again, there is no contract to be signed. Your customer simply has to agree to purchase a minimum monthly amount for a predetermined period. The table I’ve included outlines how such a plan would work over a period of one year. It includes your price per month, quantity purchased, your costs, your gross profit on sales, your gross profit percentage before and after rebate, and finally, your customer’s accrued credit within their “bank”. The three sections in BOLD BLUE provide insight into what might happen when a customer comes back with competitive pricing.