Maximize Your Customer Loyalty Strategy by Keeping Your Rewards Program on Track

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So you have a customer loyalty program but lately, it just isn’t performing as well as you’d like. Are your members becoming less engaged? Try these four tactics to help you turn the tide on your customer-centric approach.

Go Above and Beyond

Who doesn’t love getting rewarded? Your customers sure do.

But if monetary rewards are the only way you’re making customers feel special, then their loyalty may be hanging by a thread. Since these rewards need to be earned over time, it begs the consumer question: What have you done for me lately?

The trick, of course, is to keep that loving feeling going strong during those stretches between reward redemptions. Here are three ways to do it:

  • Communicate: You probably have promotional communications down to a science. But what are you doing for customers that adds value to their relationship with your store? Give your customers a reason to come to you for information, entertainment, and insider scoops in an e-newsletter. Provide plenty of opportunities for meaningful two-way dialogue via social media and product reviews and you’ll be the one rewarded.

  • Create experiences: The most successful loyalty initiatives create ties that emotionally and rationally bind customers to your organization. Most of our retail clients find that long-term loyalty and participation come from a combination of hard benefits. Some of these include discounts and soft benefits, like a VIP experience, a personal shopper, or curbside returns.

  • Discover their desires: Developing a three-dimensional view of your customers, through your data and research, will help uncover what they like and dislike about your service, your products, and the buying experience. This can lend valuable insight into how you can best add value and create the most relevant program benefits.

Here’s an example of how one of our clients, a discount department store, put this all together.

First, they recognized a large group of seniors among their customers. Through research, they identified segments based on lifestyle factors, differentiating customers despite their identical demographics. The store was then able to target communications and experiences to those specific segments.

For instance, one less-active sub-group responded well to appreciation certificates for complimentary home delivery and closed-in VIP parking. Another group of very active seniors preferred one-on-one communication via a monthly coffee event with the store manager, as well as VIP recognition at the register.

Of course, no matter how you choose to make your program stand out in a crowded arena, there are at least two overriding goals that should guide you:

1) Exceed your customers’ expectations
2) Keep it easy for them to participate

Keep Rewards Fresh

Ask yourself: Do your loyalty program offers have weakening redemption rates?

Even if your program was once going strong, these are early warning signs of an impending breakdown in customer engagement and profitability. Steer your program back on track with these three fixes:

Analyze breakage

You know not every customer reward gets used. Evaluating this breakage and its effect on revenue can help you strike a balance between customer engagement and program profitability.

If breakage is too high, it could signal customer disinterest. You may need to offer more relevant rewards.

If breakage is low, your discounts may be too deep and you may be operating at a loss.

Encourage redemption

This is especially important for getting program newcomers involved. Consider targeting this group with special incentives to redeem (for instance, doubling the reward value when they redeem within a specific time period).

The medium plays a significant role, too: email reminders can quickly engage and mobilize online shoppers, while statement reminders are more subtle and less actionable.

Don’t forget about the actual messaging. Targeted messaging is a top tool for encouraging rewards redemption. Gap Inc., for instance, sends loyalty members personalized emails reminding them of unused rewards and expiration dates, and provides quick links to “shop now” and “print rewards.”

Use data to keep rewards fresh

As time goes on and the environment shifts (competitors, demographics, economy), your once- valuable benefits may lose their luster in customers’ eyes. Get ahead of such trends by using customer data to analyze and predict behavior regularly and adjust your rewards offerings before they lose their shine.

Expiration Dates Matter

How much time are you giving your rewards program members to redeem their points? Or are you using expiration dates at all?

If you give your customers too much time to redeem rewards, you may face disengagement and, ultimately, a lower ROI. Setting reward expiration dates too far away means you could be missing out on additional engagement opportunities with your customers.

On the flip side, giving too little time can create customer frustration. The key is to strike a balance that keeps customers engaged and incentivized enough to come back and buy again.

So, how do you achieve the right balance? Look at your customer purchase patterns and test, test, test. In the meantime, here are a few tips and tactics you can use to motivate loyalty members to redeem their rewards points faster.

Create a sense of urgency by giving customers shorter redemption windows. When you clearly establish and communicate a timeframe for customers to redeem their points, they’re likely to feel more motivated by a sense of urgency to act quickly and avoid losing their discount or reward.

Motivate repeat customers by rewarding them for collecting and redeeming their points more frequently. Frequent purchases mean more revenue for you.

Increase brand loyalty through more frequent engagement with your customers. When members know that a deadline is approaching, your brand will be more top of mind.

Create additional marketing touchpoints. Use shorter redemption windows as an opportunity to send more marketing and product emails that include reminders and status updates.

Points Aren’t the Only Option

Businesses often assume points are the only way to go when developing a loyalty program. Sometimes it’s the right choice but not always. That’s because points programs can be:

  • Expensive
  • Legally cumbersome
  • Complicated for your customers
  • Ineffective at delivering the “wow” factor that will keep the best customers coming back over the long term

So, before you rush headlong into points, pause to consider these four proven alternatives.

1. Base it on benchmarks to build aspirational momentum. Create simple benchmarks that reward customers at certain predefined levels. For instance, a tiered rewards structure based on cumulative dollars spent within one year: the more a customer spends, the more rewards she earns.

2. Focus on the best customers. Three-fourths of your profitability may be coming from just 20 percent of your customer base. Why spend precious rewards dollars on less-than-profitable customers? Instead, use data modeling to identify your top-tier customers (and their behaviors), then spend resources on them to increase ROI immediately.

3. Surprise and delight. Recognition is one of the most powerful yet underused benefits in a marketer’s arsenal. Try showing appreciation to valuable customers with unexpected, “spontaneous” rewards. These tend to be the most buzzworthy and can also bolster your social media efforts.

4. Add value through communication. Give your customers reasons to come to you for information, entertainment, and insider scoops. Give them plenty of opportunities for meaningful two-way dialogue. Ultimately, you’ll be the one rewarded.

Boost Engagement

To recap by taking a customer-centric approach and following these 4 tactics when developing your loyalty program you will not only increase engagement but also your ROI.

  1. Go above and beyond by communicating, creating a memorable experience, and discovering your customers’ desires using your data and research.
  2. Keep rewards fresh by analyzing breakage, encourage rewards redemption vial email reminders and targeted messaging, use data to keep rewards fresh.
  3. Expiration dates matter: create a sense of urgency, motivate repeat customers, increase brand loyalty, and create additional marketing touchpoints.
  4. Points aren’t the only option because they can be expensive, legally cumbersome, complicated for your customers, and ineffective. Consider these alternatives instead: base it on benchmarks, focus on the best customers, surprise and delight, and add value through communication.

Revitalize your loyalty program and bring customer engagement, along with profitability, back where it belongs!

About the Author

Sandra Gudat, President and CEO of Customer Communications Group.

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