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Misra: Driving loyalty redemptions

By Praphul Misra

The value of a loyalty program to its members takes form in many ways: through discounts, special invitations, free vouchers, and more. However, in a reward redemption model, the most important ongoing value proposition will be the online catalogue available to the members.  When designing a reward catalog, consider the following points as best practices—an introductory list to be sure, but one that captures the broad strokes of building a successful catalog.

1. Design your catalog to encourage redemptions. Always remember that you want your members to redeem. A significant number of loyalty programs lose their effectiveness because the company starts treating the loyalty currency as a cost head, and treating points redemption as cash outflow. When this happens, program managers often create artificial barriers to block or delay redemption. Such practices are contrary to the business logic of rewarding currency in the first place: the plough-back (the rate of giving points) of points is determined assuming 100% redemption, as the customer has already ‘earned’ those points by shopping at the program sponsor. Design your catalog, therefore, to facilitate as much redemption as possible.

2. Include the proper reward mix. Your reward catalog will be effective only in as much as it reflects both the lifestyle and the aspirations of its members. Design your catalog to include both easily attainable rewards with high utility, as well as aspirational rewards that encourage earning and saving currency.

3. Encourage pampering. Effective redemption catalogues typically get customers to indulge in redeeming currency for products they most likely won’t buy for themselves, it is akin to pampering oneself, which most people do not do by themselves. This has a direct impact on the product selection; going by this logic we will not want to include too many utility items in the catalogue.

4. Create special moments. Special or novel items, such as a telescope or a violin, are usually purchased only by consumers who already value them. In a reward catalog, on the other hand, such items can become valued redemption options. Members who would never buy a telescope can come to value one earned through a loyalty program. Over the years, the keepsake value of such products creates repeated recall as the member recalls the good feeling associated with earning and redeeming for the reward.

5. Focus on early redemptions. Loyalty operators know that a member’s first redemption experience is critical to long-term program engagement. Hence, successful operators design their reward catalogs to facilitate the first redemption as soon as possible. One effective  technique is to pre-load reward currency  in the member’s account as a sign-up bonus; the key to success is to be generous enough that the member can earn an entry-level reward after one or two purchases.

6. Build in a range of price points. Well-designed reward catalogs offer redemption products in a complete range of price brackets. This range offers members a clear path to progress from entry-level to aspirational rewards—provided you offer multiple products in each price bracket.

7. Build in a range of product categories. Offering a wide selection of product categories, such as electronics and jewelry, in your reward catalog achieves two key goals. First, allowing customers to choose from multiple product categories in the same price bracket provides a “self-select” mechanism that fuels engagement. Second, the customer insight you gain from mining redemption data can in turn fuel additional offers that increase relevance and build loyalty.

8. Include “gift-able” items.  Redemption analysis reveals that men redeem for a significant number of jewelry rewards, while women redeem for items such as leather wallets. The conclusion? Many members redeem rewards for gifts. By including “gift-able” items in your reward catalog, you can create redemption episodes high in personal and emotional value to your members.

9. Keep it simple. The last thing you want is for your program call center staff to field questions about reward product issues. To escape this trap, avoid rewards with overly complex instructions, or which have a high propensity to result in service issues. Any product breakdown or service issue will result in an implied negative association with program value. Keep your rewards simple, and your members will thank you for it.

The above best practices are but a few introductory considerations for effective reward catalog design. By building a well-crafted reward catalog, you can lay the foundation for engagement, loyalty, and increase member value for years to come.

Praphul Misra is a founder of Netcarrots.com and a member of the Customer Strategy Network.

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