Sign-Up Bonus: What It Is in a Loyalty Program
By Alva Chew · Updated
Definition A sign-up bonus is a one-time award of points a customer receives the moment they join your loyalty program, before they have bought anything. Research on reward cards (Nunes and Drèze, 2006) found that the share of the goal the bonus covers matters more than its dollar value. In a points-only program, a bonus of 10% to 20% of the first reward is a sensible starting size.
What is a sign-up bonus?
A sign-up bonus is a one-time award of points that a customer receives for joining your loyalty program. It lands on their balance at the moment they join, before any purchase. Some programs call it a welcome bonus or joining bonus.
In a points-based loyalty program the bonus is simply points, valued the same way as points earned on a purchase. A member who joins with 10 points and later earns 90 more has the same 100 points as one who earned all 100 by spending.
Why does a sign-up bonus work?
Progress that has already started feels worth finishing. Nunes and Drèze named this the endowed progress effect. Their studies covered reward cards, and they reported the findings below.
| Finding | Source |
|---|---|
| People given artificial advancement toward a goal showed greater persistence toward it, which raised the likelihood of completion and decreased completion time | Nunes and Drèze, Journal of Consumer Research 32(4), 2006 |
| The dollar value of the bonus mattered much less than the fraction of the promotion it completed | University of Chicago Press release, 30 January 2006 |
| With no reason given for the bonus, the effect appeared only when it was issued in an alternative currency such as points | University of Chicago Press release, 30 January 2006 |
Source: Nunes and Drèze, “The Endowed Progress Effect” (abstract), and the EurekAlert release of 30 January 2006.
The authors studied card programs, not small-shop points programs. Treat the direction as reliable and the best size as something to test in your own shop.
How big should a sign-up bonus be?
Take a share of your first reward. The table uses 1 point per US$1 and 100 points worth US$5, which are illustrative numbers, so swap in your own earn rate.
| Bonus | Share of first reward | Face value |
|---|---|---|
| 5 points | 5% | US$0.25 |
| 10 points | 10% | US$0.50 |
| 20 points | 20% | US$1.00 |
| 50 points | 50% | US$2.50 |
Source: our own arithmetic from the example rate above, not a published benchmark.
A bonus of 10% to 20% leaves most of the first reward to be earned by buying. A very large bonus gives the reward away to people who may never return. The full guide to sizing a sign-up bonus works through costs for 100, 500 and 1,000 new members.
What does a sign-up bonus cost?
Multiply the number of new members by the bonus, then value the points at what they redeem for. At the example rate, a 10 point bonus is worth US$0.50 at face value, so 1,000 new members cost at most US$500. Some members never redeem, so the real cost is usually lower.
Bonus points also count toward your points liability, the value of all points outstanding. Add them to that total from the day you award them.
What is the difference between a sign-up bonus and a referral reward?
A sign-up bonus goes to the new member for joining. A referral reward goes to an existing member, a new member or both, when an existing member brings someone in. The two can run together, but each is another rule to explain at the counter.
How does a sign-up bonus fit with joining?
A bonus gives a reason to join at the till today and not next time. Joining itself should still be short. KPMG’s 2019 survey of over 18,000 consumers in 20 countries found that 60% said programs are too hard to join or that earning is a challenge.
Source: KPMG, The Truth about Customer Loyalty, 26 November 2019, via PR Newswire.
Sign-up bonuses in Gimify
Gimify is points only, so any welcome credit you give is in the same points customers earn on purchases. Customers join by scanning a QR code and entering their email, and the free plan covers one outlet with unlimited members.
Questions owners ask
What is a sign-up bonus in a loyalty program?
A one-time award of points added to a customer's balance when they join. It gives the member a balance that has already started, so the first reward feels closer.
How big should a sign-up bonus be?
Start at 10% to 20% of the points needed for your first reward. With a 100 point first reward, that is 10 to 20 points. Test the size, because the research covers reward cards and not small-shop points programs.
Is a sign-up bonus the same as a welcome offer?
Often the words are used for the same thing. A welcome offer can also be a discount or a free item. In a points-only program the bonus is points, so it adds no new rule for customers to learn.
Does a sign-up bonus count as points liability?
Yes. Points you award and nobody has redeemed are owed at the value of the reward, so include bonus points when you count total outstanding points.
How do I stop people joining twice for the bonus?
Tie one award to one email address and keep the bonus small, so repeat sign-ups are not worth the effort. Review the member list for duplicates from time to time.
Read next
Start free
Gimify is free for one outlet with unlimited members and no time limit. Unlimited outlets are one flat monthly price.
See plans