Many brands see cash-based incentives as a quick-win strategy, but the hidden costs far outweigh the short-term benefits. Here are the downsides:

1. Erosion of profit margins

Every cash incentive directly reduces profitability. Every £50 cash incentive is £50 off your bottom line. At scale, this becomes a significant financial drain. And with no guarantee of retention, it’s an expensive gamble, with little long-term return.

2. Attracting the wrong customers

Cash incentives appeal to price-sensitive consumers who are highly likely to switch brands the moment a competitor offers a better deal. The result? Low customer lifetime value (LTV) and high churn rates, forcing brands to continually invest in acquisition rather than nurturing long-term relationships.

3. Brand damage

Why invest millions of pounds building a strong, distinctive brand - only to undermine it with a cash offer or discount? Price-led incentives can dilute brand perception, positioning your brand as transactional rather than premium or purpose-driven. Over time, this erodes brand equity, cheapens the customer experience, and weakens the very value proposition that sets you apart from your competitors.

4. Lack of emotional engagement

Cash is a transactional exchange. Once the financial incentive is received, there is no lasting emotional connection between the customer and the brand. Research shows that customer loyalty is driven by engagement, personalised experiences, and perceived value – all factors that cash incentives fail to address. The proof? A study found that while cash incentives can boost short-term sign-ups, they don’t create lasting engagement - leading to increased acquisition costs and lower retention.

As brands recognise the limitations of cash-based incentives, many are adopting experience-led rewards - incentives designed to create meaningful customer interactions and strengthen brand engagement. This approach offers several key advantages:

1. Stronger emotional connection

Customers value experiences over financial rewards. A personalised reward, exclusive event, or unique brand experience creates a deeper emotional connection, making customers feel seen. And customers who feel seen? They stick around. And the longer a customer stays with you, the more valued they feel and the more valuable they become to your business.

2. Higher retention and engagement

Experience-led incentives encourage ongoing engagement rather than one-off transactions. They reinforce brand loyalty, keeping customers engaged long after the initial offer - increasing LTV and reducing the need for repeat acquisition spend.

3. Enhanced brand advocacy

Unlike cash incentives, which are quickly forgotten, memorable experiences generate word-of-mouth marketing. Customers don’t rave about cash incentives. They do talk about exclusive events, VIP perks, and personalised rewards. Customers are also more likely to share their positive experiences – and that’s free marketing for your brand. A study found that 71% of consumers expect companies to deliver personalised interactions - and three quarters will switch if they don’t like their experience. And if you still need convincing - a comparison of incentive strategies revealed that offering a $75 experience-based reward generated 160% more customer referrals than a $150 cash discount.

Consider the following scenario:

• Cash incentive: A brand offers a £50 cash reward for new customer sign-ups. This attracts initial interest, but there is no guarantee of retention, and many customers disengage after receiving the incentive.

• Experience-based incentive: The same brand is able to offer an exclusive experience or personalised reward worth £150 for the same £50 cost. This approach not only attracts customers thanks to a much higher perceived value; but also reinforces brand affinity, leading to higher retention rates and increased LTV.

TLC have a unique reward ecosystem that enables brands to unlock exciting rewards for a fraction of the cost. The financial and strategic benefits are clear. Cash incentives are a short-term acquisition cost, while experience-led incentives are a longer-term brand investment.

Several industry leaders have successfully moved away from cash-based incentives, opting for experience-driven programs instead:

• Banking: UK bank Barclays has restructured its loyalty program by replacing the traditional £5 monthly cashback with benefits such as Apple TV+ subscriptions and Major League Soccer passes. This shift aims to enhance customer engagement through exclusive experiences rather than direct cash rewards.

• Retailers: Leading brands now prioritise personalised shopping experiences, VIP access, and tailored rewards over traditional cash discounts, increasing customer engagement and loyalty.

• Telecommunications: Mobile providers like THREE UK have introduced coffee perks every week. These experiential benefits are designed to increase customer satisfaction and loyalty, moving beyond conventional cash incentives.

• Hospitality: Marriott International's 'Marriott Bonvoy Moments' allows loyalty members to redeem points for exclusive experiences, such as VIP access to concerts and culinary events, enhancing customer engagement beyond traditional rewards.

• Airlines: Many airlines have restructured their loyalty programs to focus on exclusive experiences and premium perks rather than cash-based discounts, resulting in higher customer satisfaction and retention. These brands are proving that high-impact incentives do not have to come at the cost of profitability.

These brands are proving that high-impact incentives do not have to come at the cost of profitability.

If your brand is still relying on cash incentives, it’s time to ask - is it delivering the long-term value you need?

The reality is, brands that invest in experience-led programs - offering personalised, high-value rewards - are seeing higher retention, increased brand advocacy, and stronger ROI.

Get in touch⁠⁠⁠⁠⁠⁠⁠ with the team today to rethink your strategy.