Loyalty programs have never been a “set it and forget it” endeavor. They require regular attention and evolution to remain compelling and profitable.
A recent New York Times article presents the high-level dynamics of programs that are changing due to market factors, technology advances, member demographics, and consumer preferences. Perhaps the biggest challenge is how to socialize those changes without member backlash and while retaining the brand love you’ve carefully cultivated.
Here are some tips to keep in mind when considering changes:
- Monitor cost and inflation impacts on program ROI. Pay close attention to spend-based point accrual, reward thresholds, and tier levels. Thresholds may become easier to attain and more costly given changing economics.
- Keep your program financial model up to date. Things change over time, and your program assumptions may need to be adjusted accordingly. Make sure your financial model is a living document that you can update as needed.
- Give yourself some wiggle room. Prices rise. So, when designing your program, give yourself some added space to grow before you absolutely need to make a change. This will help make forced changes as infrequent as possible.
- Mix in some good news with the bad. When socializing changes, members are more likely to accept changes when they can see that they’re gaining value in some areas, even if they’re losing it in others.
- In 2022, Dunkin’ Donuts introduced food items to their rewards – something customers had been wanting – while also hiking reward thresholds, mitigating some of the negative messaging.
- Be transparent. Most members understand that loyalty programs are a two-way street – they’re designed to benefit both the brand and the member. Being upfront about the reasons for change can help mitigate any negative perceptions and narratives.
- In 2022, Chipotle Rewards publicly attributed their reward threshold hike to “inflation in the cost of fresh ingredients”, something most members could relate to.
- Remember that loyalty is emotional. Even though points and rewards are rational benefits, members can become attached to them over time. Be sensitive to their reactions and show them that you appreciate their loyalty. While the early reactions can be uncomfortable, in time members commonly recall what initially fueled their brand love.
- In 2022, Dunkin’ Rewards got a sip of how emotional members can get about point devaluations, potentially underestimating the reaction and insufficiently driving the narrative in their roll-out messaging.
- Offer reasonable alternatives. For example, if you’re raising reward thresholds, consider introducing smaller rewards that members can earn more frequently. It’s a great way to keep them engaged while still managing costs.
- In 2022, Starbucks Rewards hiked their reward thresholds while also diversifying the number of thresholds, including lesser options for fewer “stars”.
- Treat your VIP members like royalty. They’re your biggest advocates, and they can help weather the storm during the initial stages of program changes. Show them some extra love to let them know they’re still valued and encourage their continued advocacy.
Following this tips and reaching out to Kobie can help your brand successfully introduce changes to your program while ensuring it continues to be profitable, engaging, and loved by members.