DESIGNING THE RIGHT REWARDS PROGRAM FOR YOUR BUSINESS. TRADEOFFS AND TECHNIQUES FOR EFFECTIVELY INFLUENCING CUSTOMER BEHAVIOR

THE LANDSCAPE.

Rewards programs are a popular tactic used by marketers working to increase customer engagement and retention -

driving little ROI or in many cases, appearing as a cost center on a company’s

balance sheet.

Yet many of these programs fail to yield desired changes in customer behavior -

THE LANDSCAPE.

Less than half of customers -

45% join offered loyalty programs…..

…. and of those, only

16% are actively engaged and redeeming rewards.

* Forrester’s Research 2013 State of Loyalty Programs Report

HOW TO DESIGN THE RIGHT REWARDS PROGRAM FOR YOUR BUSINESS.

Marketers working to influence customer behavior through a rewards program must approach program

design and execution thoughtfully, taking time to fully weigh the

tradeoffs of various program structures and components to ensure fit for

their customer base and company.

How do you do this?

Firstly, loyalty marketers must understand the underlying dynamics of rewards programs…

FIRST DYNAMIC – RETENTION LEVERS.

Retention levers are tools loyalty marketers can use to influence customer behavior.

Understanding these levers allows marketers to weigh

tradeoffs between different types of Earn Models.

PERCEIVED VALUE The level of monetary value a customer perceives a product or service to be worth.

AFFINITY The emotional attachment customers feel with a company as driven by their product/service experience and broader brand relationship.

BARRIERS TO EXIT Dynamics that prevent customers from easily leaving a company and using a competitor to meet their needs.

THREE PRIMARY RETENTION LEVERS.

SECOND DYNAMIC – EARN MODELS.

Earn Models determine how customers earn value in the form of benefits and are the primary driver of program costs. The four types of Earn Models are:

1.! MEMBERSHIP 2.! THRESHOLD 3.! INTERVAL 4.! STORED VALUE

EARN MODEL #1 – MEMBERSHIP.

Membership Earn Models provide static member benefits that do not increase or decrease based on customer behavior.

Value over Time

Level of Complexity

EARN MODEL #1 – MEMBERSHIP.

Membership Earn Models are the most commonly used in transactional businesses as a “frequent shopper discount”

program – business characteristics include:

•  Company desires a proven tactic for capturing customer data •  Company desires a simple, easy to manage program •  Company is focused on increasing customer’s general perceived

value •  There are few behavioral or attitudinal differences between

segments

EARN MODEL #1 – MEMBERSHIP.

Cons: •  Does not recognize or reward

most valuable customers

•  Barrier to exit is static

•  Generally perceived as a

relatively low value program

given its wide availability and lack of “stacking” incentives

•  Provides few levers for

influencing customer behavior

•  Difficult to offer truly

compelling discounts due to mass scale and availability of

program

Pros: •  Increases the perceived value of

a product or service

•  Treats all customers fairly

•  Very simple, easy to manage and message

•  Customers immediately receive

full value of program

•  Provides simple mechanism to

capture customer data