What are Extrinsic Rewards How do Extrinsic Rewards Apply to Marketing

What are Extrinsic Rewards? How do Extrinsic Rewards Apply to Marketing?

Also Known As: positive reinforcement, conditioned rewards, external rewards, extrinsic motivation

Definition:

An extrinsic reward is a physical reward given to someone for doing a task. Extrinsic rewards are valuable ways to motivate new customers who have yet to try a new experience.

Extrinsic Rewards Examples:

Loyalty Programs. Loyalty programs have become a mainstream marketing tool for airliners and ecommerce stores. But what’s the value of turning a new customer into a loyal customer?

Let’s assume your average order value is $100 and a loyal customer buys once a month. This comes to $1,200 in annual revenue. At a 30% profit margin, a loyal customer is worth $360 in yearly profit. The one-time customer would bring in $100 of revenue and $30 of profit. That means a loyal customer is worth $330 more!

But, you can do one better. Let’s say you offer a free t-shirt to any new customer who joins your loyalty program. The cost of a t-shirt is $10. That means every new customer that becomes a loyal customer is worth an extra $350 ($360 annual profit – a $10 shirt). Additionally, would also benefit from the word-of-mouth created from this happy customer.

See Also: Salience, Intrinsic Reward

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