The Difference Between Rewards & Gifts (& Why Your Company Needs Both)

When considering rewards vs gifts in your business strategy, it’s crucial to understand the key differences between them—and why those differences matter. While both can be powerful tools for incentivizing customers and employees, they serve different purposes and trigger distinct psychological responses.

Rewards are transactional, given in exchange for specific actions, while gifts are unexpected gestures of goodwill that foster deeper relationships. Using both strategically can strengthen your incentive programs, encourage engagement, and enhance brand loyalty.

In this article, we’ll explore the difference between rewards and gifts, and how to choose the right option for your incentive programs.

Understanding the differences between rewards and gifts

When designing incentive programs, businesses need to distinguish between rewards and gifts to ensure they are used effectively.

The key difference between the two lies in the concept of reciprocity—or the expectation of something in return.

• Rewards are conditional. They are given in direct response to a completed action, such as making a purchase, achieving a sales goal, or signing up for a newsletter. The recipient must earn the reward through their actions.
• Gifts are unconditional. They are given without requiring any prior action from the recipient. While a business may hope that a gift will generate goodwill and encourage future engagement, it does not come with an explicit expectation of a return action. A free gift is a free gift, period.

This distinction also applies to related types of incentives, such as:

• Incentives – Promised in advance to motivate a specific action (e.g., “Sign up today and receive a $10 gift card”, often used to incentivize webinar attendance or demo signups).
• Awards – Often unexpected but still performance-based (e.g., an employee of the month bonus).
• Prizes – Randomly awarded, not tied to individual performance (e.g., a contest drawing where every participant has an equal chance to win).
• Payouts – Financial disbursements given for completed work, rebates, or reimbursements (e.g., a digital prepaid card for research participation or expense reimbursements).

A well-balanced incentive program will include both rewards and gifts, ensuring motivation while also strengthening relationships with employees, customers, and partners.

When to use rewards

Tangible rewards work best when your goal is to drive specific, measurable actions. Businesses commonly use rewards to:

• Boost employee productivity – Offering performance-based employee rewards can encourage employees to meet or exceed goals, especially during high-demand periods. SPIFFS and other sales incentives also fall under this category.
• Encourage customer loyalty – Rewarding repeat purchases or engagement fosters long-term customer relationships and increases retention.
• Drive sales and conversions – Offering rewards for purchases, referrals, or sign-ups can incentivize new customers to try your products or services.

Because rewards create a sense of earning and deserving, they are highly effective motivators—assuming you choose the right type of reward (more on how to create a highly effective rewards program). This makes them especially popular for employee recognition programs.

Meanwhile, for rewards to work most effectively, they need to be instantly available. Think about it. You take a survey online, maybe from a retailer or about a wellness program you just completed. You’re expecting an immediate digital payout. You check your inbox ... but ... no reward. Days pass, weeks, and then you finally get your reward. Will you even remember why you got it? Will you care?

When to use gifts

Gifts, on the other hand, are about surprise and delight. They’re those perks that let your business express generosity while subtly encouraging positive behaviors, too. Corporate gifting and employee engagement are common use cases, with businesses often sending gifts to:

• Show appreciation to clients and shareholders – Strengthen relationships with key stakeholders by recognizing their contributions.
• Celebrate company milestones – A thoughtful way to acknowledge work anniversaries, years of service, growth, or other significant achievements.
• Recognize employees and partners – Rewarding loyalty and hard work helps build a positive work environment and company culture.

For gifts to have the intended impact, they should be:

• Unexpected – The element of surprise enhances their emotional value.
• Unconditional – Recipients should not feel they have “earned” the gift; otherwise, it becomes a reward.
• Untransactional – The gift should not create an obligation to give something in return.

In other words, done properly, there really can be such a thing as free lunch. 🥪

By keeping gifts authentic and unlinked to performance, companies can cultivate stronger emotional connections with employees and customers.

What Makes an Effective Incentive?

Regardless of whether you choose to offer a reward or a gift, your incentive should be:

• Easy to redeem – Recipients shouldn’t struggle to activate or use a digital gift card or prepaid Mastercard®.
• Flexible – Offering choice improves perceived value. For example, allowing recipients to select from a curated list of gift card brands ensures a personalized experience.
• Digital – Sending rewards or gifts digitally reduces costs, allows for instant delivery, and improves efficiency.
• Trackable – Businesses should be able to monitor engagement, track redemptions, and analyze data to refine future incentive strategies.

Digital gift cards are incredibly effective gifts and incentives

Bulk digital gift cards check all the boxes: they’re easy to redeem, flexible, digital, and trackable.

But they also offer something else entirely: recipients love them.

Perhaps it seems counterintuitive, but studies consistently show that recipients find non-cash rewards (like gift cards and prepaid cards) to be more meaningful than cash itself.

And 2 out of 3 people who get a gift card from a company will remember why and how they earned it, and what they redeemed it for.

Better still, they’ll associate it positively with the company that gave it to them.

Of course, this assumes that you’re giving the right types of gift cards and the right type of brands to the right recipients. Your tech saavy audience is going to want different rewards (maybe League of Legends or Xbox gift cards) than busy parents who might like a Door Dash card to take care of dinner one night.

Or you might be like Molly Quinn, Managing Director of Marketing & Communications at Distinctive Schools, and treat meeting attendees with a Starbucks gift card.

“Teachers love coffee, so that’s easy!” she says. “Even just a cup of coffee has been a nice gesture.”

So to ensure you’re meeting the desires of your full audience, be sure to find a gift card distributor with an accurate, robust gift card and prepaid card catalog, along with the option to give your recipients full choice.

Don’t neglect your international audience

Meanwhile, if you don’t know where your audience is located, or if some of them are located outside the US, don’t assume that you can just send them an Amazon gift card and call it a day. Just because a brand is global, doesn’t mean their gift cards you buy in one country will be redeemable in the next. 

Instead, look for a gift card provider with a full catalog of international eGift cards as well. This will help ensure that all good work you put into your program doesn’t go to waste.

Giftbit makes it incredibly easy to send highly desirable rewards and gifts to audiences around the world. Sign up for your free account now.