Factors for a stronger loyalty rewards catalogue

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By: Wise Marketer Staff |

Posted on November 22, 2007

Factors for a stronger loyalty rewards catalogue

The rewards catalogue is an integral part of any loyalty programme and, if handled properly, can make or break the programme itself. In a follow up to its previous article on 'maximum impact rewards', loyalty agency SurfGold here examines three key factors in building a strong rewards catalogue.

The original article (click here) took a bird's-eye view of the issue and the approach was relatively broad. This time, Ramasubramani Nag of SurfGold probes the factors behind rewards catalogues in more depth and presents the various approaches than can be taken in designing the catalogue, and in finding out what customers look at when evaluating rewards catalogues.

The eye of the beholder The attractiveness (or otherwise) of a rewards catalogue is largely dependent on how attractive it is in the eyes of the customer - or more appropriately, the loyalty programme member.

If the catalogue is attractive, and there are enough redemptions, then loyalty points will be used up (burnt) more quickly and the liability on the programme operator is minimised. If, on the other hand, the catalogue fails to excite programme members, redemptions tend to slow down, and the pending points balance soars, along with the programme operator's points liability.

Three major factors So how can a programme operator make the rewards catalogue attractive enough for the member to keep redeeming points regularly? According to SurfGold, there are at least three key factors that go toward making the rewards catalogue an effective one:

  1. Effective choice This is one of the most important factors in inducing redemptions. If, for example, you have 100 items in your catalogue, it would be natural to think that it is a good catalogue. But does quantity of choice mean it's good? Look at the three catalogues in the sample shown here:

    Consider the case of a programme member who has 800 points. If the catalogue follows the model of Catalogue A, the member has 5 items to choose from - so the effective choice for this member is not 100 but 5. Naturally, those members in the bottom quintile in this situation may be very sluggish in redeeming their points. Of course the redemptions can still be high, provided we take care of the other two factors (attractiveness and price).

    Now look at Catalogue C. The member in this case has 30 items to choose from, which is quite good considering that this is definitely not an Elite member in the programme. This catalogue is likely to see redemptions among the low-points group of members take off. So the point to be noted is that, if you want members to actively redeem their points (and thereby actively engage with both the programme and your brand), you have to make sure that the effective choice is reasonably good.  

  2. Suitability and attractiveness The second factor to consider in building a rewards catalogue is the suitability of the rewards in the catalogue for programme members. Do the items on offer match the lifestyle of the programme's members? If the programme caters to middle class members, are you filling rewards catalogue with utility items? If so, redemptions will be often. But are you packing your catalogue with jewellery while most of the programme's members are men? If so, redemptions will be slow.  
  3. Price The third - and most important - consideration of pricing is often assumed to be the least significant because marketers often think consumers feel they're getting something for nothing... so why should they care how many points a nice reward costs? Of course, in reality, programme members tend to view their reward points as a bank balance and so they evaluate every item, and its pricing, quite keenly.

    This situation gets even more complicated in dynamic markets where prices fluctuate widely and MRP (maximum retail price) is never the standard. Wherever there is a discount being offered in the market for a particular item, programme members expect the loyalty programme's catalogue to be competitive or, worse still, the cheapest in terms of price. The extent to which programmes can meet this goal helps to determine the catalogue's overall attractiveness to members.

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