Christine leads marketing for a mid-sized consumer brand. Her team is stretched thin, her budget is tighter than last year’s and expectations from the C-suite are higher than ever. She’s under pressure to acquire new customers, improve loyalty metrics, and deliver measurable return on every dollar spent—all while navigating discount fatigue, evolving consumer preferences and increasing pressure to stand out in a crowded market.

For Christine—and marketers like her—the tools and strategies that used to work don’t anymore.

But smarter incentives do.

The problem with discounts

Most marketers face shared challenges spanning from attracting and converting new customers, rewarding longtime customers, driving basket size and reducing checkout drop-off. But discounts aren’t best suited to overcome these pain points.

Blanket discounts chip away at margins without creating long-term value, and one-time offers often bring one-time buyers. Marketers need modern tools and strategies that do more than capture attention; they need to move the needle on business outcomes.

Evidence shows incentives drive smarter growth

Research from Blackhawk Network (BHN) shows that businesses using rewards and incentives like gift and prepaid cards, loyalty points, and mobile wallet credits are seeing much stronger results across every major performance metric when compared to discounts.

Incentive-based promotions don’t just prompt purchases—they create lasting engagement and drive strategic customer behaviors. In fact, in BHN’s in-depth research of more than 700 business owners and executives, those that reported using and prioritizing incentive-based promotions over traditional discounts experienced:

• 2x the annual improvement in customer satisfaction (60%)
• 1.5x year-over-year improvement in cross- and up-sell revenue
• 34% higher growth in customer lifetime value
• 36% greater improvement in shortening the sales cycle
• 16% higher return on marketing investment

These are not marginal gains. They speak to a fundamental shift in how effective marketing is built.

Smarter incentives and rewards create a value exchange that benefits the business and the customer. Unlike discounts, which can erode brand equity, incentives reinforce loyalty and improve customer experience without reducing perceived value.

Businesses are investing more in incentive programs

Loyalty-building strategies are changing and incentives are playing an important role. Nearly half of the executives surveyed by the Incentive Marketing Association (IMA) say they’re seeing new incentive initiatives being launched regularly, and more than one-third expect incentive budgets to grow this year. This signals a more deliberate, more outcome-oriented approach to long-term marketing strategy.

Ultimately, reward-based promotions are proving to be more than a conversion tactic. They’re becoming a core lever for building engagement, satisfaction, and value over time. Incentives give brands a way to recognize, motivate and retain their most valuable customers while staying responsive to economic realities and consumer behavior.

Research confirms which incentives are the most effective

Unequivocally, research shows that gift card incentives are yielding the highest ROI for businesses. According to the IMA’s research, 60% of respondents anticipate increased gift card incentives use—outpacing alternatives like travel and merchandise.

The appeal is clear: gift cards are flexible, quick to deliver and redeem (including digitally), easy to personalize and scale, and resonate with a broad audience. Gift cards inherently empower recipients, providing an immediate sense of value and flexibility that translates directly into stronger emotional connections. This direct link between reward choice and satisfaction helps companies cultivate deeper relationships, ultimately boosting retention and loyalty. 

Additionally, digital incentive formats—mobile wallet integrations, SMS delivery and branded customization—are increasingly viewed as standard. The IMA found that few respondents (only 17%) expect major shifts in how recipients want to receive rewards, indicating that digital is no longer a forward-looking incentives strategy. It’s an expectation.

Modern incentives are a marketing mix must

For Christine and other marketers, improving ROI and exceeding KPIs doesn’t need to be a complex process. Available data crystallizes a clear, straightforward imperative: incentive- and reward-based marketing delivers stronger results in the short and long run.

By strategically integrating smarter promotions that embrace digital transformation and lean into consumers’ incentive preferences, marketers can create authentic connections, measurable outcomes and enduring customer loyalty. 

Editor’s Note: