WTF is an incentives marketing strategy? | How brands are merging loyalty programs and promotions to build long-term customer value

“CMOs and CEOs tell us that they want to discount less, but that only happens when they’re thoughtful and lean into it,” said Christoph Gerber, co-founder and CEO at incentives platform Talon.One. “We frequently see across otherwise sophisticated businesses that discounts and loyalty are a neglected part of the marketing estate. That C-suite neglect only breeds more discounting. It’s this paradox of needing to lean in to do less.”

Commonly used tactical tools like discounts, coupon promotions and loyalty rewards no longer resonate as well with consumers who have grown accustomed to and often demand personalized, seamless shopping experiences.

“If anything, these traditional tactics are too effective in that both customers and businesses have flocked to them,” said Sam Panzer, director of industry strategy at Talon.One. “From a business perspective, there’s no differentiation left in simply having a loyalty program. And from a customer perspective, the customer has moved so much toward value seeking.”

Rather than taking a siloed approach to loyalty rewards programs and promotions, many brands are unifying their incentives marketing strategy to create long-term customer value and differentiate themselves in a competitive marketplace.

That’s why Talon.One — with more than 10 years of experience shaping customer loyalty and incentive programs worldwide — is expanding its U.S. presence and empowering brands like Nordstrom, Bilt Rewards and Scooter’s Coffee to engage customers in more meaningful ways.

“Loyalty in itself is a definition of a relationship you have with your customers. It’s the end state of what defines a successful relationship that you have with your customer,” Gerber said.

In this WTF explainer guide, Digiday and Talon.One break down how a unified incentives marketing strategy doesn’t just protect margins — it builds a lasting competitive advantage.

Feels like a good place to start, right? A unified incentives marketing strategy is one in which efforts tied to loyalty, promotions and discounts are all implemented by a holistic team with a shared strategy and workflow. Siloed teams are eliminated and replaced by a merged workflow.

According to a recent survey from Talon.One and Harvard Business Review, more than three-quarters of respondents at organizations with customer loyalty programs (77%) said their customer loyalty program efforts are either extremely or very important to their executive leadership team, while 71% said the same of their promotions and discounts efforts.

However, only 50% of respondents at organizations with a customer loyalty program said that their efforts with their loyalty program are extremely or very effective, while less than half of respondents (48%) said that their efforts related to promotions and discounts activities are extremely or very effective.

That’s a clear indicator that brands should apply a unified incentives marketing strategy if they want to create long-term customer value and differentiate themselves in a competitive marketplace. Brands can leverage financially efficient tools like offering customers points instead of discounts; decrease spend on mass promotions by eliminating duplicated efforts; and apply data-driven personalization to inventory management.

The first critical step to building a successful unified incentives marketing strategy is to bring loyalty, promotions and discounts under one holistic umbrella — eliminating siloed teams and building a merged workflow within a shared strategy.

“All paths lead to loyalty — promotions, acquisitions, discounts, referrals and loyalty rewards are all value exchange,” Panzer said. “The businesses that are most flexible and thoughtful about how they navigate that value exchange are the most successful.”

“There is a classic playbook from early innovative loyalty players, like airlines, where there isn’t a line between loyalty and promotions,” he added. “Having one vehicle to think about the value exchange a brand has with its customers has proven to be extremely effective.”

The second step is to make sure the incentives themselves are designed to be effective. Too often, siloed teams pursue their own objectives and rely on discounts to entice shoppers. In turn, consumers become conditioned to always expect and use discounts.

But, well-designed incentives offer consumers value while discouraging overuse. These incentives don’t have to be expensive to implement either. Rewards like priority boarding on an airline or exclusive access to new product launches are essentially cost-free and are highly valued by customers.

For example, Sephora’s Rewards Bazaar program offers members of Sephora’s Beauty Insider loyalty program the ability to use points to redeem deluxe samples, donate to Sephora’s charity reward partners and participate in virtual beauty events with the retailer’s brand partners. 

Speaking on a podcast with Talon.One, Emeline Berlind, svp and general manager of loyalty at Sephora, said: “The building blocks of a loyalty program are about getting benefits from being part of a program and your interactions with that company. Offering access to discounts and promotions is really important, and that’s why we make sure to tie Beauty Insider membership to those promotions. But what’s also really important is the emotional component, so the member is excited to come back and continue their journey with Sephora. Because if you lean too much into the transactional part of the benefit, it becomes really easy to replicate in other places.”

The third step is to strategically use data and technology to personalize offers and improve targeting — moving away from mass discounting and toward adding value for businesses and customers.

“Blanket discounting mostly ties to non-incremental transactions that would have taken place without the discount, and the bottom-line damage that comes with non-incremental discounting is really profound,” Talon.One’s Panzer said.

“The best businesses use loyalty as the centerpiece of their data strategy — both in how they collect and use the data — to build a differentiated experience,” he explained. “And, as the industry enters the era of agentic AI, only differentiated experiences that offer relevant value will matter.”

According to the Talon.One and Harvard Business Review survey, 62% of respondents at organizations that have begun personalizing promotions and discounts said that they have seen increased sales as a result. Nearly half of respondents (47%) said that personalized promotions and discounts have increased customer loyalty, while 44% of respondents said personalized offerings have delivered a better customer experience.

When all three steps are taken, a unified incentives marketing approach becomes a strategic advantage in which internal teams align, incentives are truly effective and customers receive better personalization. This generates greater customer lifetime value and increased profitability for brands and retailers.

Good question. And, no, it can’t wait. Putting a concrete figure on the value of incentives marketing has been hard for companies that take a siloed approach to discounts, promotions and loyalty programs. That’s because siloed strategies require significant investments against customer spend and marketing teams’ efforts often overlap.

“One huge risk with siloed programs is that you have different teams reaching into the same pot and diluting your customer economics for acquisition campaigns, clearance campaigns, loyalty rewards, free shipping,” Talon.One’s Panzer explained. “If those choices aren’t thought about holistically, a company will overspend and destroy the profitability of that purchase and the lifetime value of that customer.”

However, the Talon.One and Harvard Business Review study found that businesses that have already begun to integrate their loyalty and promotions strategies often report higher sales, stronger engagement and better ROI — making now the critical time to build a unified incentives marketing strategy.

Well over half of survey respondents at companies that have partially or completely integrated their promotions efforts and customer loyalty programs (60%) said that improved customer loyalty is the No. 1 business benefit they see from applying an integrated incentives marketing strategy. Fifty-eight percent of respondents said that increased sales and revenue was the top benefit they achieved, while 56% said better customer experience was their top advantage.

“A client we’ve been speaking to about partnering with Talon.One told us that they have one team that runs discounts, one for promotions, one for vouchers and one for loyalty. That can’t be a coherent experience,” Talon.One’s Gerber said. “The clients that align business goals to their loyalty and discounting promotions and incentives strategy start to drive real results.”

Sportswear giant Adidas, for example, began cutting back on discounting and unifying its promotional strategy after facing its first annual loss in more than three decades in 2023.

Speaking to investors in May 2023, Adidas CEO Bjorn Gulden said the business had begun weaning itself off discounting, despite maintaining a promotional environment. By fourth-quarter 2023, Adidas had significantly cut discounting levels and reduced marketing and point of sales expenses from 12.3% of sales in 2022 to 11.8% in 2023.

“From a discounting point of view, we did a great job the last couple of years and now it’s stabilizing and still very, very good sell-through of our products when it comes to the underlying drivers,” Adidas CFO Harm Ohlmeyer said during the company’s third-quarter 2025 earnings call.

At best, discounts can be equated to empty calories — revenue without any positive contribution, according to Panzer. “Discounts are too often throwing good money after bad, digging the brand in a deeper hole,” he said. “But effective promotions are amazing. They increase the customer’s perceived value, motivate the customer to come back, minimize the pain of buying and maximize the pleasure of the purchase. If you can maximize those upsides while minimizing the risk, you can strike gold.”

Brands need platform partners with the following tools and services to make sure they’ll have a winning unified incentives marketing strategy:

1. Enterprise-grade security infrastructure that is compliant with GDPR (the EU law that protects citizens’ personal data and privacy), SOC 2 (the U.S.-based compliance framework that evaluates how organizations manage customer data) and ISO (the international standard for information security management systems) to ensure loyalty programs and promotions are both scalable and secure — and to avoid costly replatformings as a business grows.
   
2. API-first architecture. Platforms with APIs as their primary interface can seamlessly integrate into diverse technology stacks, while allowing developers to build custom solutions and workflows.
   
3. Partnerships with best-in-class technology and solutions providers like Commercetools, Brace and Salesforce to ensure all promotions and loyalty management tools are readily available.
   
4. Integrated data and analytics tools that help brands unlock customer behavior insights and maximize flexible promotion campaigns. By tying promotions to their loyalty programs, brands can ensure that offers are not only relevant but also strategically targeted to engaged members and maximize ROI.
   
5. AI-backed insights that pinpoint when a customer transacts and can provide a holistic view of best offers for that consumer.

“If a customer is a point hoarder, AI can surface that and give the consumer more points to push them to a transaction,” Talon.One’s Gerber explained. “It doesn’t cost a brand money because the customer is not using the points. It’s a granular cockpit to drive decision making and make offers — discounts and loyalty tied to business goals, but in a very smart way.”

Brands should continue to challenge the status quo of siloed promotions, discounts and loyalty programs that don’t work. The future of customer loyalty lies in a unified incentives marketing strategy where outcomes are tied to concrete business goals and can be clearly measured. The results — increased profitability and greater customer lifetime value.

Companies also must create value beyond what AI tools like ChatGPT provide. “Brands don’t want to lose a customer to an interface that they don’t control,” Talon.One’s Gerber said. “The relationship is not sending out emails every day, and it is not giving consumers 10% off.”

“A platform partner like Talon.One has so many data points that even if a customer transacts in ChatGPT once, we have enough context and understanding to engage and keep them in that brand’s ecosystem,” he added. “That is why now is the time to double down on loyalty. If a business doesn’t do that now, they become irrelevant.”

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About Talon.One

Talon.One is the most powerful incentives engine that unifies loyalty, promotions and gamification into one holistic platform. Backed by enterprise-grade security and scalability, Talon.One empowers companies to build personalized, profitable promotions and loyalty programs using any data. Today, over 250 of the world’s most-loved brands including Adidas, Sephora and Carlsberg work with Talon.One to drive deeper engagement and lasting loyalty with their customers. To learn more, visit: www.talon.one