Reward engagement-- but only if it leads to loyalty

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By: RickFerguson |

Posted on January 14, 2016

Over at CRM Buyer, commentator Denis Pombriant argues that most reward programmes operate solely to subsidize current behavior, and that new approaches to rewards focused on rewarding engagement are necessary to build true long-term loyalty. Pombriant�s argument is correct�but only to a point. 

Here�s Pombriant’s central thesis:

�Instead of rewarding purchase behavior as if it were a demonstration of loyalty, we need to go upstream a bit to earlier forms of engagement. Many papers rightly point out that engagement is a predictor of loyalty, but unfortunately in many studies, the percentage of vendors that reward engagement hovers in the mid-teens. Simply put, we need to raise our sights, and rather than rewarding purchases, we should be rewarding engagement activities.�

Pombriant is correct�we do need to reward engagement, and many loyalty programmes do just that. But it�s not enough to reward engagement�you need to reward engagement predictive of increased customer value. Anyone can throw up, say, gamification elements on their web site and improve engagement metrics. Unless that increased engagement later leads to improved customer value, however, then you�re wasting your money.

The real trick is to reward those engagement behaviors that demonstrate a clear correlation with increased relationship value. Use predictive analytics to model current engagement to understand which behaviors are most predictive of customer loyalty, and then reward those behaviors. Contra Pombriant, it�s equally important to reward purchases�provided that the lion�s share of your reward dollars go to rewarding your most valuable customers.

Executed properly, a CRM strategy that captures customer interactions across the lifecycle�from awareness to engagement to purchase, and then to post-purchase behavior�and then rewards those behaviors most predictive of increased customer value offers the best path to success. Pombriant provides some useful advice to point us in the right direction.

--Rick Ferguson

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