, , ,

Loyalty & Rewards: Pathways to Success

WM Circle Logo

By: Mike Capizzi, CLMP™ |

Posted on July 13, 2018

In Part One, “A Trip Down Memory Lane,” an historical perspective on the ever-changing role of rewards in a loyalty value proposition was articulated. In our second installment we’ll focus on solutions.

By Mike Capizzi, CLMP

Consumers still join loyalty marketing programs for one simple reason – to be rewarded and recognized for their patronage, advocacy and brand support.  Basic tenets in human psychology suggest that without the reward and recognition a member will be unlikely to join a program, resistant to behavior tracking, not engaged and potentially a threat to churn.

In my previous installment, the ever-changing rewards landscape was examined from a historical perspective and how/why different vertical markets evolved the way they did. The current mania surrounding cash as the perfect reward was highlighted with focus on the good (reduced friction), the bad (no spread between cost and perceived value) and the ugly (are we totally forgetting basic loyalty marketing tenets?).

New reward solutions emerge every day. Whether they are right for your brand, or your clients, is largely an exercise in program design and refreshment. Imagination and innovation must take precedence over the stale reward thinking of today or the predictable responses from consumer surveys about rewards.  Taking risks may help us find new pathways to success.

So, here’s a couple of thought starters for your loyalty and rewards team.

Travel remains the most aspirational reward in the repertoire. Don’t ignore it. While hurdles may exist regarding redemption and the value seems diminished by points inflation vs. the declining “true” costs on the open market, nothing touches the soul of a member more than a free trip. If you’re not a travel provider, think beyond buying miles – think B&B, Uber, Lyft, charters, river cruises, golf trails, campgrounds for kids, rail excursions and anything else.  It’s the experience and the corresponding memory that will cement the relationship between your members and your program.

We have only scratched the surface on experiential rewards. It’s about time we put them on steroids. It’s more than just a free ticket.  Once again, you must make it the experience of a lifetime and the choices are endless. Music, theater, opera, dance, sports, art, cuisine, fashion, cinema, and high-end concierge services for your most valuable customers. Can’t afford all of this, you think?  Try charging a fee for the reward or a portion of its processing cost. If the experience is worth it, the membership will gladly contribute.

Points plus cash is a must have today. Consider this approach vs. cash-back only.  The member can benefit from a wider choice of redemption options; the program operator gets much greater leverage in rewards cost.  But the real beauty of this solution is the ability to overcome weak earning velocity and drive engagement sooner in the relationship.

Micro rewards – digital delivery, low cost, high perceived value, easily customized. What’s not to like? A plethora of choices in the music and entertainment categories that members can access and redeem very early on in the relationship.

Charitable components of a personalized nature. While a generational divide appears to exist regarding the attractiveness of a charitable reward item (boomers NO; millennials YES), those members who want to donate their loyalty program benefits want to choose their own benefactor.  Don’t limit their choices with a drop-down menu. Let the member choose the charity and support the contribution with social messaging.

For loyalty program operators in the B2B space we must get back to the foundational concepts expressed by the “Gemini Effect.” The B2B member is both an individual and a business. The reward offerings must reflect these twin personalities.  While the intelligent voice assistant device is positioned in the rewards catalogue as a new way to help the business drive productivity, the authorized redeemer may simply order it for her kids.  Who cares!  She’ll remember how she got it.

Fitness and health are under represented as a reward category. The explosion in interest among memberships exists at all age and income levels.  The employee loyalty market is especially ripe for this kind of reward.  We have new devices, new tools to aid in our quest for better health but we also have old technologies that can be of great interest to the membership – in-home fitness machines, back braces, athletic shoes, nicotine patches; the list is endless when it comes to health.

The era of reward personalization is rapidly approaching. In a perfect environment the program would allow the member to choose their own reward (no catalogue) and the program would set a redemption value, procure the reward and deliver it.  While the operational challenges are enormous with this approach, and some limits may need to be established at launch, the program which allows for reward self-choice is the program most responsive to its membership. How much is that worth?

Should we reward for lifetime value instead of current year behavior? Historically we have ignored tying reward benefits to lifetime value because of the “what have you done for me lately” thinking of program operators. No better way to antagonize a career patron then telling them they no longer mean anything special to the brand. Special categories of reward, available only to those of lifetime significance to the brand, are easily deployed and remind the member why they became brand advocates in the first place.

The use of “Other People’s Money” (OPM) in the reward equation is still a strategy that is underdeveloped. All businesses want to acquire new customers. You can help them. Most businesses know the cost to acquire. You must learn that for each of your potential OPM partners. Acquisition cost less future margin contributions leads to an eventual ROI for the acquiring business. How long will that take? Research logical candidates for OPM and offer them a chance to acquire at a fraction of the normal cost. Put their offer on the table for your members. They only pay for conversions and your membership gets a discounted deal that you didn’t have to pay for.  Everybody wins.

Finally, the soft benefits side of the rewards equation remains missing from far too many loyalty programs. Special access, special privilege, special pricing all scream recognition to the program members, especially those of highest value. And never forget – rewards without recognition is like picking a thoroughbred to win a horse race and not betting it!

Mike Capizzi is the Dean of The Loyalty Academy and a Certified Loyalty Marketing Professional™.