What is a Sign Up Bonus and How Does it Work?

sign up bonus

You’ve probably seen tons of advertising offering a “sign up bonus” as you browser the Internet. While the concept is easy enough to understand, not many people know the psychology behind it and where such marketing strategies are typically used. In truth, few know how effective it can be as a marketing tool.

What Products Typically Come with a Sign Up Bonus?

A sign up bonus can be offered for numerous types of products as an incentive to attract new customers. These bonuses may or may not be tied to specific actions or tasks that the new user or customer will need to fulfill. For example, stock brokerage houses often give out a sign up bonus that’s tied to the initial deposit for trading stocks, bonds, and other securities. Similarly, here are a few other areas where sign up bonuses are applicable:

Credit Cards – The credit market has always been a highly competitive one, so credit card issuers often incentivize new customers with a sign up bonus. The bonus can either be in the form of cash or a voucher. For example, many card issuers offer cash or reward points in exchange for minimum spends on new credit cards, while airline companies may offer cash or free travel if you spend above a particular level in a specific period of time.

Online Casinos and Sports Betting Sites – This is another segment where a sign up bonus is quite common. Typically, a new user will need to make an initial deposit to unlock the sign up bonus, which will then be added to their account. Being a highly competitive market, operators are constantly trying to one-up each other with bigger bonuses and more attractive sign up benefits.

Banks – Yes, even these staid, conservative financial institutions have started offering sign up bonuses for customers opening new charging and other types of accounts. Banks have now realized that they need to be more aggressive with their marketing strategies and have now included this type of incentive for potential customers, sometimes offering hundreds of dollars against initial deposits.

Reward Sites – These sites generally partner with online retailers and eCommerce portals to curate and display value deals on a vast range of products and services. As an incentive for new users to join, they often give out a sign up bonus. As in other cases, the bonus is usually tied in to your first purchase or a minimum spend amount.

The Psychology of Sign Up Bonuses and Offers

While cash or points are the usual ways in which sign up bonuses are given out, it could also be offered in other ways. In reality, a bonus is nothing more than a freebie to tempt people to buy a product or start using a service. We all love a good deal, but what we love more than anything is FREE STUFF! And free cash, of course. That’s why there are so many creative ways to spend on a marketing campaign. You already know most of them:

“Two-for-One Offer”

“Buy one, get the second one at half-off”

“15% Instant Cash Back”

…and, of course, Amazon’s hugely famous “Free 2-day Shipping for Prime Customers”

These marketing strategies are all designed to do one thing – increase customer inflow to the business. And it works because no matter how much money we have, we all love a good deal. And if we perceive that we’re getting something for nothing, we’ll be more likely to take advantage of the offer rather than pass it up.

What really works in the advertiser’s favor is not always the bonus itself, mind you. The real power lies in the fact that consumers don’t want to ‘miss out’. This fear of losing something is a tremendous motivator in the buyer decision process, which is why many offers come with conditions like “limited time only”, “offer expires today”, etc. These tag lines add a sense of urgency to the mix and are highly effective marketing tools.

Another aspect of sign up bonuses and similar offers is the exclusivity factor. You’ll often see this in the form of “offer valid for first 100 sign-ups only”, “exclusive offer for members”, and the like. Consumers like to feel that they’re getting special treatment, even if it’s a little thing like a small cash bonus. This is another powerful motivator for consumers.

Finally, the way the sign up bonus is crafted is also important. If it’s tied in to a massive purchase, it diminishes the value of the bonus. For that reason, the commitment needs to be in proportion to the bonus. That’s why you’ll often see what is called a ‘matching bonus’, which means if a consumer spends an X amount, their bonus will be a matching amount, subject to a cap or limit, of course.

We hope this article has given you some insight into the world of the humble sign up bonus and the powerful psychology behind it. See you soon!