9 May 2023

How to use incentives for engaged customers (+examples)

Sean McTiernan Editorial Content Writer Talon.One

Sean McTiernan

Editorial Content Writer

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7 minutes to read


The goal of any business is to have loyal customers. For some companies, that means customers who buy from them again and again. For others, it means customers who stay for the long haul—people who stick around even after other companies have tried to poach their business. But what does it take to keep your best customers happy? Incentives are one powerful way to engage with them and encourage loyalty.

In this post, we'll talk about how you can use incentives effectively as a marketing tool—and how they can lead to increased customer engagement in your brand.

What is customer engagement?

Customer engagement is the new buzzword in marketing, but there’s a lot more to it than just sending a coupon or two. Done right, customer engagement can help you build relationships with your customers and boost your sales by using incentives like discounts and rewards. Here are some tips from marketing experts on how to use incentives correctly:

How is digital marketing connected to customer engagement

Customer engagement is the process of increasing customer loyalty and satisfaction.

Customer engagement is all about understanding your customers better, so that you can provide them with value in a meaningful way. Digital marketing provides a way to engage customers and build relationships, as well as get more insights into what they need from you. You can use customer data collected from digital channels (such as websites, social media channels) to set up an individualized content marketing strategy based on customer data. This means creating content that’s relevant for each particular segment of your audience. It also means providing added value for their loyalty: adding exclusive offers or discounts just for them!

Digital marketing allows you to provide an added value for your customers’ loyalty. With digital marketing, you can provide them with valuable content that helps them make better choices about their purchases and get rewards for being loyal customers.

The psychology behind incentives

Incentives are a powerful tool that can be used to influence customer behavior and increase engagement. In this article, we’ll cover:

  • The psychology of rewards and incentives

  • Examples of incentives you can use in your business

Incentives are all about motivating customers to take actions that benefit them and your company. They’re usually offered in exchange for engaging with or sharing content on social media (e.g., liking or commenting) or purchasing certain products or services from you. You can also incentivize someone by offering them discounts, freebies, samples or other special offers just for visiting your brand website.

Incentives are one way to increase customer engagement with your brand, but they shouldn’t be the only method you use. Loyalty programs and referral rewards, for example, can also be effective at getting people involved in your business on an ongoing basis.

Let’s take a look at some of these other customer engagement strategies.

What is customer engagement marketing?

Customer engagement marketing is the process of creating a deeper connection between your brand and customers. It involves using various mediums to foster positive relationships with them. You can use this strategy to increase the value of your customers by fostering deeper connections with them.

The goal of customer engagement marketing isn’t necessarily to get more money out of your customers but instead to increase the value they receive from you so that they become more loyal and advocate for your product or service. The ultimate goal is for them to come back again, buy more products, and recommend it to others who may be interested in purchasing something similar from you as well!

What an incentive is—and isn’t

An incentive is something that motivates you to take a specific action.

You have probably received incentives many times, such as:

  • A discount or reward for signing up for a service or product.

  • The chance to win something in exchange for your loyalty to a brand, like a raffle ticket or sweepstakes entry.

Incentives can be simple and straightforward—a prize that costs less than the price of the product being offered as an incentive—or they can be complex and involve several steps that take time and effort from both parties involved in the transaction, such as redeeming points from one business in order to receive free items from another company.

Incentives are a great way to engage customers and get them on board with your brand. But some people may not think of incentives as gifts or rewards—they might see them as bribes, which can be problematic for businesses that want to encourage positive customer experiences.

But what don't count as incentives? And what incentive structures should you avoid?

A discount for signing up for a service or product is a common incentive. But there are two problems with this kind of incentivization: The first problem is that you can't offer discounts forever—eventually, your customers will get used to paying less than they should.

And second, offering discounts may work for a short-term goal of driving customer acquisition and retention, but it doesn't create any long-term value for your business. When used improperly, these incentives can cut margins and harm brand perception.

Check out our Talon.One case study with Eddie Bauer to find out more.

Earned versus given incentives

When deciding on your incentive structure, it's important to understand the difference between an earned incentive and a given incentive. Earned incentives are given to customers in exchange for a specific action, while given incentives are awarded randomly or without any action required.

Earned incentives have been proven to be more effective than given ones because there's a sense of achievement — as well as a bias towards this reward because they're 'chosen'. They can also be very powerful in motivating customers—especially when paired with social proofing (which we'll get into later).

A great example of an earned incentive is offering customers a discount code for joining your email newsletter. This offers an immediate reward that helps build trust, while also providing the brand with valuable contact data. On the other hand, a given incentive might be a spin-the-wheel process with several prizes hidden inside—including one grand prize. This doesn't offer much in terms of building trust or value beyond what's "hidden" under the surface.

You can find an example of a spin-the-wheel campaign in our HappyFresh case study.

How does gamification increase engagement?

Gamification is a popular method of increasing engagement. It's a way to increase engagement by adding elements of game-play to a non-game experience.

The idea behind gamification is that if you make your app or product more like a game, people will be more engaged with it. They'll keep coming back for more, because they enjoy playing the game and want to win—or at least get better at playing it over time.


Using game-like elements to reward interest and loyalty is a more positive retail experience all around. The customer earns tangible benefits for the time and money they’ve invested with a business while the business can nurture long-term relationships with their ideal customer base. Customers who feel heard and seen are more likely to be loyal to a brand and more information about these customers allows a business to further tailor its offering. Some advantages of gamification might be immediately obvious, i.e. increased engagement and customer retention, but thoughtful gamification can also yield more subtle positive results like enhancing brand development and lowering cart abandonment.


This great potential also comes with risk. Development that’s rushed or siloed from the rest of the company can lead to an inflexible, unsuitable experience. When gamification backfires it leaves customers confused and businesses incurring even greater technical debt as they scrabble to revert to their previous model. 

Losing control of the customer experience

Losing control of the customer experience is a common problem for many businesses. Customers get frustrated when they have to go through numerous channels or bounce between different logins or frontends. In fact, nearly half of all customers cite poor customer experience as their number one reason for leaving a company's website.

To prevent losing control over your customers, you must invest in tools that automate processes and enhance communication between you and your customers. These solutions take care of the mundane tasks — like ensuring a seamless session — so you can focus on what matters most: developing relationships with your most loyal customers.

If you want to build strong relationships and keep them coming back, it’s crucial to have an effective system in place that allows for easy communication between teams, departments and anyone who interacts with customer data, so you prevent silos and give customers reward hooks at every stage of the lifecycle.

The best way to plan customer engagement

The best way to plan customer engagement is to start by considering the needs of your customers. Ask yourself what would be most useful for them and how you can help them. The right incentive will be something that makes their lives easier in some way, whether it's giving them free shipping or helping make a decision they've been struggling with with a well targeted discount — such as a cart abandonment coupon.

Incentives should also be tailored specifically toward your audience: if they're interested in Adidas sneakers, don't send them a coupon for a Dyson vacuum cleaner. Find rewards that are context and customer appropriate — if someone is buying a tennis racket, maybe a set of free sweatbands or some tennis balls would make sense.

The proper way to offer incentives to build engagement

Incentives are a great way to encourage customers to engage with your brand. There are many types of incentives, and they can be used in different ways. For example, you might offer an incentive that’s tied to a specific action or event (like sharing content). Or you may give away an item as a reward for completing some task or action that is part of your strategy (like completing the Know Your Customer flow in your app).

The best way to use incentives is by offering them at key moments in the customer journey when they have been especially engaged with your brand or product.

The best time to offer incentives depends entirely on what stage the user is at in their journey with you; however, if it’s possible then offering one-off rewards such as free shipping might work well in the first purchase or two, so they learn how the order process works.

Perhaps for long term customers, offering a high-value option might be better. My favorite coffee shop gives me a 15-gram taster bag of a new coffee variety once I've ordered enough kilos of coffee. It's a simple touch but one that makes me consider trying the new (more expensive!) coffee the next time I order.


At the end of the day, customer engagement is about creating a positive experience for your customers. You want them to feel like they’re getting something out of their relationship with you—and that’s what incentives do! But it doesn’t mean throwing money at people will get them engaged. If you want to use incentives effectively, then remember the four strategies we discussed above and apply them to your marketing strategy.

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