Improve Lift and ROI by Rewarding Customer Interactions

May 27, 2015

Improve Lift and ROI by Rewarding Customer InteractionsRewarding behavior and interactions in a targeted and cost effective way, can be a powerful part of the loyalty toolkit. Here’s how you do it.

It’s important to identify the desired behaviors – and the value of those behaviors – before designing a reward structure. Equally important is identifying which customers to target, incentivize and reward for behaviors. Are you currently rewarding behavior that is not incremental? If so, we recommend tweaking your incentives, program structure or communications plan to drive incremental behaviors. Your fine-tuning should be based on a robust approach to program analytics.

In most loyalty programs, the key is to identify which customers – and at which points in the lifecycle – are most likely to defect. For example, key inflection points for a subscription-based brand could include, first full bill, first bill after promotional pricing expires, anniversaries, price increases, customer service issues.

Many programs do reward members for behaviors such as posting reviews, referring a friend, “liking” a brand, retweeting a message, entering a contest, responding to a survey, etc. But the value of such interactions is obviously less than the value of a purchase. That’s why, in a points program, the earning structure should have latitude and leverage, e.g., if a purchase is worth five points per dollar, an interaction might be worth one or two. Programs that allow earning for interactions also generally cap the amount one can earn through behavior. Financial governance is more important than ever when rewarding interactions.

Another approach to consider, especially within the subscription-based model, is allowing earning and redemption of hard value rewards only on purchases (renewal, longevity, additional services, etc.), while awarding recognition for behaviors; badges, honors, position on a leaderboard, being Member of the Month, etc. In the program design for a major entertainment brand, members earned points for purchases that could be redeemed for merchandise or special experiences. Posting reviews, answering surveys, taking quizzes, viewing a trailer or message online, all earned soft value rewards. In the case of this brand, the member earned a ringtone, special edition photo as wallpaper, members-only access to a “director’s cut” of a movie trailer, which had a cost of virtually zero, but a high perceived value to the member.

We guide our clients through the process of building a conservative base earning structure for recurring purchases with bonuses for incremental behaviors. Our experience shows that a brand could experience up to a 10% lift for customers who received bonus offers vs. customers who had just the base structure. We’ve also seen 4 to 1 ROI for dollars spent on promotional bonuses and increased ROI over time with more efficient communications. However, those figures are for clients in industries where we typically see higher response such as travel, hospitality and retail. If at all possible, we recommend testing first.

The good news is you have plenty of options to capture and reward both interactions and transactions to drive loyalty and engagement. If you’re still scratching your head about how to make it happen, and what to expect in terms of lift or ROI, drop us a line: We’re here to help.