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Cash, points and steak knives


Cash, points and steak knives


The perception of many consumers is that most loyalty programs ask lots, but give little. This is fuelled by media reports of having to spend big just to get a bus trip to Shepparton. It’s a pity but in many instances commentators don’t understand the dynamics of programs that, if well structured, motivate customers to consolidate spend with certain brands.

However, if customers think they are getting short changed – in real terms or perceptually – all that great work in setting up a program will fast evaporate.

There are lots of elements to making your loyalty program work but one of the biggest challenges facing businesses is to determine its ‘currency’. Points that are able to be redeemed for merchandise or flights, percentage discounts, straight cash back, preferential access to special offers or VIP treatment – these are all valid and valuable options in providing value to customers.

But that’s not where you should start in dealing with this vexed issue. It really all depends on what you are trying to achieve.

Are you mainly focused on driving sales today or do you want to significantly improve the relationship you have with your best customers to build advocates? Identifying your primary objective is key – you can then build from there.

1. Sales today – if you are predominantly after increasing frequency of visits or average sales, this is best dealt with by providing achievable rewards as close to the point of purchase as possible. Cash back and percentage discounts (either instantly or by gift card redemption) are particularly effective in driving increased sales because customers can see the value in a transparent and immediate fashion. Priceline, one of Australia’s five largest programs by member number, does this really well with clear achievable hurdles and tiered discount rates.

But beware – cash rewards customers are loyal largely to the discount drug. They will move to a brand that offers that little bit more if nothing else motivates them to stay loyal.

2. Share of wallet – a points based program is, in theory, better structured to grow longer term share of wallet gain if the value equation – i.e. the earn to redeem ratio – is competitive and proportionately richer as spend and membership years grow. Make the time frame too long, the hurdles too high or the point’s life too short and then potential damage to the brand will be significant and long-lasting as the customer will feel cheated over a longer period of time. At best you will have just added a cost burden on the business with little benefit to the top line.

3. Lasting Loyalty – building longer term loyalty is, of course, much more than dollars back to the wallet or points in the bank. The key is building components into your loyalty strategy or program that reward – either directly or experientially – in an engaging and enriched fashion.

For example, the IKEA FAMILY reward program goes beyond year round points or discounts by offering a suite of benefits that, yes, includes offers for reduced pricing on certain products, but taps into the home family vibe of the IKEA brand by giving members a free cuppa in the restaurant. A simple and low cost feature that is, nevertheless, an engaging reason to spend time in store. Country Road for instance provides personalised shopping experiences for their top tier – one-on-one assisted shopping. What a great way to engage with your most valuable customers (and no doubt sell a lot more than if they shopped alone!)?

So what is in it for your brand? For instance if you were a food brand why wouldn’t you not only encourage but reward customers for developing and sharing recipe ideas? If you were a baby food product why wouldn’t you link new parents together so they can share tips and tricks – and importantly reward them for doing that? Wouldn’t your greatest blogger expert be not only recognised and congratulated but also rewarded with exclusive opportunities? The use of social media platforms opens this option up significantly.

Importantly building loyalty through emotional engagement will reduce the impact of any small differences in the earn-redeem value equation. It will be a richer, deeper relationship that should – if managed right – lead to truly loyal customers who become your advocates.

Now isn’t that better than a set of steak knives?


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