Best Practices: How to Build a Rewards-Based Loyalty Program That Is Engaging To Your Customers
Wednesday, May 09, 2012
Rewards-based loyalty programs can
be highly effective marketing tactics for B2B and B2C businesses aiming to
drive customer engagement and specific, desired business goals and objectives.
These loyalty programs should, in essence, be communication vehicles providing robust reward offerings and
frequent and relevant touch points to keep participants actively engaged.
However, loyalty programs contain
several variable components and each business and audience is different.
There is no silver bullet in loyalty program creation, no off-the-shelf program
design that will work for every business. Because of this, the following best
practice considerations should be taken when designing a loyalty program to
effectively speak to your customers:
Defining loyalty: Businesses can easily confuse loyalty programs with frequency programs or relationship programs, but it is crucial
to know the difference. A frequency program is designed to incite customers to
simply buy more, more often. A relationship program means that there is a basic
level of interaction established between business and customer. A true loyalty
program involves a company knowing who the customer is, how often they buy and
what products they prefer. With this information a company can then deliver
custom, relevant information to each customer, which will trigger specific,
desired behaviors.
Businesses should also consider
that an “active” loyalty program participant frequently engages with the
program in a number of ways and is regularly redeeming smaller, more frequent
rewards, rather than saving up for one, large-ticket reward and seldom engaging
with the program sponsor.
Understanding audience and defining goals:
Loyalty programs have been around for a long time, but their value
remains. 2011 Parago research showed that 77% of consumers report that stores
offering rewards-based loyalty programs incite them to shop more, and 83% of
consumers said that these loyalty programs influence their purchasing
decisions. However, amidst the current
lagging economic climate, consumers have also become more empowered in the
shopping process. Customers know that their loyalty is a hot commodity. With
this in mind, marketers are challenged to create loyalty programs that are
unique, rewarding and most of all personalized. And within each company’s
customer base are a variety of types of consumers, which must be understood.
Each business will have
top-performing and low-performing customers. This is typical. The key is to
create meaningful structure and segments and provide separate rewards that
speak to each group. Gone are the days of a blanket loyalty program that will
speak to a company’s entire audience.
For example, brand loyalists may
most enjoy a reward associated with the brand, such as branded apparel or
merchandise. But a mid-level loyalist may prefer cash back or coupons. And whereas price and discounts are more
important to lower performing customers, top performers place more value on the
experience – such as VIP treatment and exclusive services.
Structuring reward mix: When
meaningful reward options are delivered in a timely fashion, customers will be
wowed and will continually come back for more. Once a customer is truly impressed
in this way, their perception of the sponsoring company is increased and so is
retention.
Customers that are engaged and satisfied with loyalty programs are
those that are frequently redeeming their rewards and engaging. Providing
customers multiple ways to earn credit or points towards rewards will
effectively boost engagement and overall performance. If there are not multiple
ways to earn and point values are not aligned with earning potential and award
mix, then participants will become less engaged in the program and will likely
churn as a customer.
Earning points doesn’t always have to be tied to purchasing a product;
participating in surveys or games are also cost-effective ways for customers to
earn credit, and companies to gain more value and interaction. The more opportunities to drive customers to
the program website, and to earn and redeem rewards through various behaviors, the
closer the sponsoring business will be to increasing retention long-term.
Properly aligning the point values with the award mix is extremely
important. Merchandise offerings are very popular in loyalty programs, but if
the point value is $0.01 and the customer can only earn 100 points for each
behavior, they will only be earning $1.00 at a time. This structure makes it
very difficult for a customer to earn enough points to “burn” them on something
meaningful if high-priced merchandise is the only option. So if $0.01/point is
desired, then a more attainable reward offering should be considered – such as
gift cards.
Communication: Before planning communications for a loyalty
program, the business must fully develop the key messages, and the desired
behaviors of the customer. Each industry, company and program will be
different.
From there, companies should
consider what frequency of communication will be most effective. Is it
necessary to communicate monthly? Only when customers purchase? Only when
customers reach certain thresholds? There is no right answer because each audience
will have different preferences. In fact, within each company’s customer base
will be consumers that prefer differing levels of communications, just like
varied reward preferences exist.
Next is determining which
communications mechanisms are most effective for each customer. In today’s
hyper-connected world there are myriad options: email, snail mail, text, phone
call, social media and more. Communications can’t be one dimensional, either.
Program messages included in emails and text messages have to also be echoed by
sales associates and with in-store awareness.
Finally, businesses must try to be as “real time” as possible in the
execution and communication of their loyalty programs, in order to keep
customers engaged. For example, sales associates proactively telling customers
how many points they have and assisting them in redemption during the sales
process will be highly rewarding. Conversely, a loyalty program that remains
hidden solely on a website or kiosk will be cumbersome to clients and easily
forgotten.
Technology platform: The reward
environment must be built with the customer in mind. Making the program tools
simple to use and easy to understand is key. This is another area where
marketers have the choice of tailoring the loyalty program specifically to
their customers. Should the program be completely managed online? Have social media components? Include mobile
components? Most programs now have an intersection of one or more of these
options, but considerations must be made in accordance with customer profile
and preferences.
Measurement:
All of these options for
personalization can only be made with the use of targeted, frequent measurement
of the loyalty program success. To make sure that the program is moving the
needle, companies must define a set of controls to understand success metrics
and then continuously measure against them and optimize the program. Are
certain rewards very seldom redeemed? Replace them with something that could be
more valuable to the customer. Are desired behaviors very rarely seen after
text message communications? Perhaps an email communication would be more
effective. Is customer service frequently flooded with requests for support?
Online support and FAQs could help satisfy the customers, etc.
Achieving Satisfaction:
True loyalty is attained when both engagement and satisfaction
converge. When a customer is truly satisfied they become excited and want to
find more reasons to participate, i.e. they purchase more products or buy a
product from another line of business to earn points or credits faster.
Ongoing, active status in a loyalty program will eventually result in customers
feeling like part of a trusted community. In return, they will reciprocate the
feeling with continual support of the brand.
By Glen Holbert. Glen Holbert is the Executive Vice President of Sales at Parago, a leading provider of end-to-end engagement management programs for consumers, sales channels and employees. Glen joined Parago in 2008 with over 20 years of sales and leadership experience in the incentives industry. He is responsible for the revenue growth of the organization, building and maintaining a solutions sales organization, and expanding the company’s reach into new industry segments and programs. Prior to joining Parago, Glen worked with some of the nation’s leading incentive companies including MotivAction, LLC, BI Performance, Maritz Inc., and Marketing Innovators International.
Marketing Blog founder and top-selling author Michael Fleischner has been featured on The TODAY Show, ABC World News, and Bloomerg Radio. 
2 comments :
Good stuff! However, I think as well as understanding and determining customer types, it's also important to figure out what a customer expects to be able to gain from a loyalty program and why they choose to sign up in the first place. I think this is often overlooked in loyalty marketing.
This seems like a challenge for the small business? Would be important but the small business may find it too complicated.
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