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There are lots of reasons why customer rewards programs stall, fade or worst case, collapse.


The obvious problems are weak program strategy, distorted measures and shallow metrics. Poor communication is a big one, as well. But if you’ve got those basics locked down and you’re still not getting engagement traction with your rewards, heed the warning. They’re just not working.

Redemption = engagement = loyalty

From a program owner perspective, redemption rates are the be-all metric of reward program success. Earning points is one thing, but redemption is the stuff loyal relationships are made of – the rush of anticipation, the delight of presentation, a reward wish fulfilled and the bonds of loyalty drawn a little tighter. That’s the emotional experience you’re aiming for. The financial people have a different agenda.

Strike a balance

The gap between reward points earned and points redeemed, or breakage, is on average 25% – 35% depending on your industry. That means money on the table,and show me a Financial Director who won’t smile at that.

This sort of conditional giving seems a cynical base for a customer relationship, or any relationship for that matter, but striking a breakage balance is key to running a successful program. Too little breakage and you’re financially underperforming, too much and you’re clearly not offering value to customers.

People get bored, move on, change habits or simply forget they have points to redeem. That’s life. But flirting at the higher side of an acceptable breakage range flags a rewards strategy gone awry. Assuming of course, there was a strategy to start with.

What strategy?

How is it that in the bigger picture of strategic rewards program planning, the actual rewards are almost an afterthought? They’re a hefty budget line item, so you would think program designers would be clever in leveraging every drop of personal, emotional, psychological, heart-felt relationship value rewards have to offer. All kinds of rewards – digital and tangible, experiences and things, extrinsic and intrinsic. They all play into the loyalty love potion.

So why do some rewards programs happily offer up a slap-dash assembly of ‘must have’ stuff that every family will certainly love because the brand manager thinks so, or the online customer survey suggests so, or because ‘young families have been our target market for decades and they’ll love it’. Really? That’s a mighty big assumption.

Yes, you need a rewards strategy

Points for you if you’ve aligned rewards with your big picture loyalty program objectives. But you need to go deeper. What specific goals do you want those rewards to help you achieve? Do you want to open more engagement opportunities, drive a switch to digital distribution or grow a particular segment? Set specific goals and let your rewards entice the behaviour you’re looking for.

Want to make long-term customer connections? Find out how in Achieving long-term loyalty with rewards.

Remember, rewards are more than an exclamation mark at the end of your big-picture, data-driven strategy – they do the emotional heavy-lifting in a customer relationship. Tap into the innate desire for rewards to entice and reinforce specific behaviour patterns (Wednesday deals for cardholders) and motivate specific action (like a once-off or monthly promotion) with the promise of more rewards.

Know your audience

You may think you know your customers, but the data may tell another story. Gather and consolidate insights about your audience from multiple sources. Transactional, of course, but think of the myriad of segmentation possibilities; including ‘segment of one’ – type profiles.

More like an online dating profile than a category, this approach to segmentation involves “getting to the intangibles of human motivation” and creating individual customer narratives with details like personal interests, preferences, values, viewpoints and attitudes.

Keep the love alive

Be mindful of resting too comfortably on your membership numbers and taking customer loyalty for granted. Your most loyal followers will accord you some scope for the occasional screw-up (with immediate remedy) but you need to work at keeping the relationship vibe crackling.

Find new ways to surprise and delight with on-trend rewards, unexpected perks and novel experiences. Be inspired by your finely tuned individual customer insights (those up close and personal profiles) and be fearlessly creative in demonstrating your interest and appreciation. However you keep the love alive, your main objective here is to avoid the ever-present triple threat of customer boredom, entitlement and migration.

Make it meaningful and memorable

Ramp up the perceived value of your rewards with great presentation. It really is the difference between a quiet, ‘Oh, nice’ and a loud, ‘Oh, wow’ response to any kind of reward. It’s the surprise and delight factor of a Friday afternoon phone ping, ‘Hey, George, buy one pizza get one free’, or the SMS at the till, ‘You’re invited, Tumi, to a VIP preview of our newest must-have summer dresses”.

If you’ve worked out what’s meaningful, follow through with memorable presentation. The free pizza reward on Monday morning? Not so interesting. The till-point invitation to a VIP event? Perfectly timed to reinforce the feel-good factor of loyalty to your brand.

Keep evolving

Sometimes you don’t get your reward offering quite right. That’s ok. Just fix it when your rewards aren’t working. It’s a dynamic process. Rectify and realign your selection, your distribution channel, or whatever isn’t working, until you find the right groove. And don’t delay. Incremental improvements show you’re wide awake and working on creating a better experience. Which is a positive signal in any relationship.

Need some help getting your reward mix right? We’re here for you. Get in touch and let’s talk rewards.

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