Avoiding the Pitfalls of Mismatched Rewards and Promotions

Sep 18, 2013

With the focus that’s been placed on loyalty data management, ‘rewarding’ customers with valueless or undesirable offerings can be one of the biggest challenges for today’s loyalty marketers. How can brands properly utilize data drive insights to deliver better matched rewards and engagement

All too often, customer rewards programs have failed to deliver appropriate and contextual loyalty rewards and the overall loyalty experience.  Even in an age inundated by data-driven customer insights, there are many instances where such data aren’t collected properly or the information gathered doesn’t shed light on the needs of a specific demographic. For example, do you know your customer’s income and how they are spending their money and on what channels they prefer engagement? Just because a merchant-loyalty program partnership includes great deals on hot tubs and big screen TVs, doesn’t mean that is what a member wants in their loyalty reward shopping cart.to their most loyal customers? And, what are the actionable steps needed to improve their customer rewards offerings?

Another reason why customer reward programs fail is that the customer profiles associated with the program are outdated. In these instances, brands are unaware that customers have undergone significant lifestyle and lifestage changes. The result is an unsatisfying rewards catalog, filled with irrelevant items and a misaligned perception of value.

In this context, value isn’t the raw worth of a product but rather its indirect value. How much effort must a loyalty program member (particularly a new member) exert in order to redeem their reward and how many points need to be earned and burned?  In many instances, members simply can’t get to the first threshold to earn that reward. Your reward mix needs to have a set of aspirational items that aren’t quite as high level as what more established customers are putting on their rewards wish list or shopping cart.

In other words, what are the program rules and where are the “goal posts?” It’s clear that the rewards mix must include obtainable rewards, especially for program beginners. If consumers can’t enjoy immediate program benefits, then why should they join?

The Hidden Value of Tiers, Flexible Rewards and Third Party Prowess

Once program members meet early goals, their behavior has been incentivized to aspire toward greater levels of loyalty, exclusivity, status and higher value rewards – some of which might be “hidden” from other loyalty program members. This is a form of loyalty program tiering that is especially effective with credit card companies. Think about how satisfied a customer feels when they are invited to join the American Express Centurion card. Best Buy and its Reward Zone program is another good example of hidden rewards – even when that program hits a communications snag.

Let’s look at this example a little more closely. Best Buy once sent out a mass email to the entire Reward Zone member base, accidentally alerting low-tiered members to the existence of hidden rewards further up the tiering food chain. Although there was some initial backlash and negative press, the communications “boo-boo” nevertheless motivated lower tier members to aspire toward more exclusive levels of loyalty.

Another consideration is whether or not a brand’s loyalty program is managed in-house or by a third party.

If opting for the latter, brands must select service providers that can leverage customer insights and determine what inspires loyalty beyond intrinsic/internal rewards. Increasingly customers crave rewards and a loyalty experience that isn’t so self serving. Why not reward loyal customers with reward options beyond your current product mix or not-so-compelling experiential benefits?  Ever heard of iTunes?

Equally important is the collection of demographic, psychographic and attitudinal data, as well as firmographic insights into retail subcategories. This last category includes an awareness of industry size, competition, and the numbers of brick-and-mortar locations which help brands determine where customers shop.

Genuine Rewards Programs Require Genuine Staff

Ultimately, mismatched rewards and promotions aren’t just failures in data collection or customer profile analysis.  The human connection and the physical in-store presence counts for a great deal managing the loyalty experience. As such, retailers should be mindful of the following:

  • It is critical for employees to be given proper training on how to use the data they have access to, even a script of what to say and how to say it to customers.
  • Customers don’t want to be chastised for minimal engagement or be told they’re at risk of losing their status. They want encouragement: “You’re only X purchases away from earning Y.”
  • It’s all about empowering associates to enrich and engage members more appropriately to protect that status and diplomatically communicate a sense of urgency.

So how can brands mitigate the pitfalls of mismatched loyalty? Here’s a recap:

  • Keep customer profiles up to date and don’t settle for rewards partnerships just because the rewards look good on paper. Make certain they are items your customers will want to purchase.
  • Consider loyalty tiering as an engagement and customer insights tactic. And make the threshold for initial rewards relatively easy to obtain. Studies show customer loyalty is heavily dependent on the ease with which program members can reach the first “goals” of loyalty.
  • Know your customers before they join your program. That means taking the time to review demographic, firmographic, psychographic and attitudinal data as it relates to your loyalty program. Ideally this should occur before program launch.
  • If you must adjust your loyalty program’s rules and goal posts, however do so in a transparent manner that carefully explains what’s changed and what hasn’t. If a member is close to a rewards threshold, rather than letting those individual’s points expire, some of the best brands will bend program rules on a case by case basis. This can have tremendous long-term value as it shows that beneath all the technology and automatic rewards, there are still humans listening and adapting to people’s concerns.
  • It’s a little cliché, but as showman P.T. Barnum once purportedly said, “There is no such thing as bad publicity.” If a hidden loyalty tier happens to leak out, embrace the whoopsee and use it to your brand’s marketing advantage

How has your retail brand avoided the pitfalls of mismatched rewards and promotions? Share your experiences and insights with the Kobie community at www.kobie.com/contact-us or email us at info@kobie.com.