According to consumer incentive and reward program specialist Parago Inc., 80 percent of consumers today seek out products with reward features, such as discounts or points used toward other purchases. In fact, Parago found that 87 percent of consumers will drive up to 10 minutes to redeem a $10 reward on a $50 purchase. These metrics underscore the potential of a new type of prepaid card – the action-triggered incentive card.
Recently Parago launched this new type of reward card, one pre-loaded with a set dollar amount that requires an action by the consumer to activate the card and claim the reward. Immediately after completing the required action, like filling out an online survey or going to a certain store and making a purchase, the consumer can access the funds loaded onto the card. Parago compared the card to traditional paper coupons. Whereas coupons are often set aside and forgotten, never to be redeemed, because they create no sense of urgency in consumers, many consumers perceive prepaid incentive cards as cash gift cards – more valuable than coupons, the company said.
Incentive cards in general are apparently improving return rates on programs. According to First Data Corp. research, such programs are seeing average response rates four to seven times higher than traditional direct mail programs, which typically hover around one percent or less.
In an April 2013 whitepaper entitled Using Prepaid Cards to Enhance Direct Marketing Success, First Data cited the example of a chain store merchant that sent incentive cards to local households to raise awareness of a new store location. The prepaid card mailing resulted in a 13.4 percent response rate and an 86.6 percent rate of repeat sales from responders, thereby driving new business and customer awareness for the merchant. First Data revealed several reasons that incentive card campaigns are seeing higher response rates. Incentive cards provide immediate rewards – a customer can use it the moment it is activated. Since the incentive comes on a card as opposed to a paper coupon, it is perceived as more valuable. Also, because incentive cards work like cash and can be applied to anything a merchant offers, they are seen by consumers as more enticing, First Data said.
For merchants, incentive cards provide program flexibility. First Data said the cards can be used to target potential new customers or build loyalty with existing customers. Merchants can create programs that allow prepaid cards to be automatically reloaded when rewards are redeemed.
As an example First Data gave a restaurant that mailed out an incentive card loaded with the price of a meal. When used at the restaurant, the card can be automatically reloaded with the price of a free drink or desert for the next visit.
Incentive card programs can also offer merchants simplicity and ease of use. Coupon campaigns often require coordination between multiple vendors, which can become complicated, First Data noted. Incentive cards, on the other hand, require just one point of contact. With incentive card campaigns, market segments can be more effectively targeted, too. Redeemed cards can provide merchants with records of whom used the cards, and even where and when the cards were used. This information can be crunched to make future campaigns more effective, according to First Data.
Because the price of postage is continually going up while rates of return on direct mailed coupon campaigns remain flat or are in decline, targeted incentive card programs are becoming more attractive to merchants, Parago said.
"Customers want on-demand, immediate gratification," noted Mike Reynolds, Executive Vice President and Managing Director of Rewards and Recognition at Parago. "Our customers know that if they take a specific action, such as a demo or product registration, they'll have their rewards without delay. Marketers will love this product because they get the power of a prepaid card without the cost of sending out funded cards to their entire mailing list."
Incentive cards are thus seen as a best-of-both-worlds solution; they provide customers with the motivation to act quickly, while offering merchants access to new customers, a way to build customer loyalty, and a rich trove of data and information that can be used in future campaigns. 
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