Loyalty Programs: Are Your Rewards Cultivating Your Customers…
or Driving Them Away?
By Betsy Vavrin
You've put a lot of effort into designing your reward program to generate customer interest and increase customer participation in your loyalty program. You want your customers to be engaged with your rewards program. Studies show, the more customers use your product to collect reward points to redeem for a specific reward item, the more successful your loyalty program will be. And, the more successful your loyalty program is, the more revenue—and profits—your company will realize.
But how much do you really know about the items in your rewards program?
Customers—and the customer experience—are at the center of the success of your loyalty and rewards program. Your customer wields such significant power—particularly with the advancement of social media—to identify and broadcast opinions about your loyalty program.
Anything and everything involved in the point collection (and their subsequent value for redemption); the range of items in your reward catalog; what their perceived value is to your customer; how flexible the reward is (e.g. is it worth their time to even try to redeem?); and,
how many other criteria must they meet to use the reward (e.g. are they forced to redeem for a 5-night stay at a hotel, when they really only want a weekend?)—all of these topics, and more, are found in blogs regarding the features and subsequent benefits of existing rewards programs.
Choosing Your Rewards
So, how can you be assured that you have the correct selection of items to not only meet your customers’ expectations, but also exceed them?
We know that your loyalty program is designed to be the crux of customer engagement with your company. Your program gives your customers every reason to buy more and refer more friends. Depending on what the customer has their sights on in your loyalty catalog, they may even buy an item they do not really need at the time—just for the opportunity to have more currency for redemption. Their ultimate goal? Redeeming for an aspirational item.
Ah, the redemption part of the process—where the rubber meets the road in the loyalty environment.
When you think of loyalty programs—regardless of the industry—you likely think of the customary offerings: travel, merchandise, entertainment, and, more recently, experiential rewards and even donations to your favorite charity. The variety of items is designed to appeal to the different customer demographics and psychographics (lifestyles, values, attitudes) in your program.
But how good are these offers? What is the customer experience when redeeming them? Are there so many conditions for using them that even the most popular items (in terms of page visits) do not get the matching percentage of redemption numbers?
Your Customer's Interests
One card company found that their most popular reward category was travel. Internal studies consistently showed travel was their customers’ first preference. Yet, when customers clicked through to any of the travel products in their online catalog to learn more about the offer and how/when they could use them, customers left the travel category for another category search.
The terms and conditions were so limiting that customers would not even begin the redemption process.
Another mid-tier bank also wanted to provide travel awards for their customers. Their research showed that travel was the most redeemed category. Logic led them to expand their travel category with frequent flier miles available through point redemption. Sounds like a great idea. Unfortunately, they selected a major airline—yes, just one! Imagine being an American Airlines frequent flyer customer, and finding you could redeem for frequent flyer mileage—but only for United Airlines!
Actually, that is not the worst-case scenario. The redemption process is only part of the story. It is also possible the customer redeemed their points for a travel (or other) product, and had a bad experience.
Customers have high expectations about the redemption of their rewards. It is a visceral experience, built on their level of commitment and demonstrated by their purchase and/or usage behavior. There are many emotional elements involved, whether the reward item is just for them, or being used as a gift for a family member or friend. The redemption process must be painless—at the very least—with each step in the process thoroughly tested and analyzed.
The Customer Experience
And, beyond the redemption process, how can you be sure the items in your reward catalog are the best possible products for the “best-in-class” customer experience?
After the redemption process, the reward still needs to be fulfilled. Is that process working well? Whether electronic or physical delivery of the product, each element of the fulfillment process is critical to your customers’ perception of the value of your program.
Assuming the redemption and fulfillment processes are working well, what do you know about the quality of the customer experience with the fulfilled item? You selected it for them. Is this something that will build on your customers’ perception of your company, or conversely will it encourage dissatisfaction? Are your awards commensurate with your brand?
We’ve heard about the importance of testing for years. Usually, this applies to testing a specific promotional item to determine whether it performs well. Typically we don’t have the opportunity to test every item in the rewards catalog, especially if we have hired a rewards company to manage our program. In the interest of assuring that our customers have the best products available in our reward catalog, our due diligence demands us to test each item to be sure our experience will match our customer’s expectation.
What elements of your rewards selection should you investigate? Recent studies indicate customer’s primary concerns and areas of dissatisfaction with items in the rewards catalog are expiration dates and the terms and conditions. Customers rank ease-of-use highest in their feedback.
But the most critical of all elements is the customer experience throughout the entire process—especially the actual item. Much attention is given to the size and diversity of items offered in the reward catalog. At least as much focus needs to be on how well the customer experiences each item. Do not take anything at face value.
If the redeemed item is travel, does the hotel reservation live up to the customers’ expectation, or, are they given a lower-value room? Do they have to redeem additional points to meet their expectations, or, do they wish they had had that option when they were redeeming? How many additional ‘hoops’ must they jump through to get a coach seat on the free airline ticket award instead of sitting in steerage? When they redeem for music downloads do they get a library of unknown artists or the most popular ones?
Reaping the Benefits
The customer experience is at the center of your loyalty and rewards program. You have designed it to keep your customers’ interest high, to increase their satisfaction and consequential product purchase. You want them to have as many ‘WOW!’ experiences as possible. Everything your customer experiences reflects upon your brand. It is your responsibility to ensure that their experience is what you want it to be.
Are the reward selections, the terms and conditions, and the redemption process all contributing to the best customer experience?
We know how important loyalty is to the bottom line. Your rewards program plays a critical role in maintaining and building customer loyalty. Ultimately, that loyalty is what drives your company's revenue and profitability.
About the Author:
Betsy Vavrin founded SMC Marketing at Studio City, California, in 1996, following a successful career with Fortune 500 companies. Her company has developed many customer-driven, strategic marketing programs, that deepen the customer relationship, increase profitability and improve customer loyalty for major financial institutions.