By Ralph Browning, Epsilon Business Development Director (EMEA)
“The most successful reward programmes adopt a hybrid physical/emotional model to build winning customer loyalty.”
When it comes to modern loyalty programmes, brands are increasingly turning to soft benefits and engagement as their primary tool to maximise customer value. Brands and retailers are focusing on delivering soft benefits, such as service upgrades, exclusive access to experiences and high-value content to members.
This is great news, especially considering that soft benefits often generate a deeper and longer-lasting sense of brand affiliation, compared to customer relationships built on a purely transactional basis.
In this industry-wide rush for engagement, however, brands and retailers will do well to remember two golden rules: the vast majority of loyalty programme members are still very much interested in receiving physical rewards and these physical rewards provide brands with excellent opportunities to engage with their customers and enhance their brand promise/positioning beyond simply sharing discount vouchers.
It should not be a case of choosing between reward or engagement, but rather a dual approach with the focus on both emotional and transactional loyalty programme elements. Here are four golden rules every brand and retailer should follow when designing or updating their loyalty programme.
1. Make sure everyone wants your rewards
The highest-performing rewards programmes are carefully designed to appeal to all customer segments. This involves identifying aspirational top-end rewards that are guaranteed to create an impact with high-value customers as well as easily attainable deals and discounts for new customers and those with a lower lifetime value. In between there should be a carefully selected range of treats and savings of various values. By covering this full spectrum your loyalty programme will have the broadest range of rewards possible, satisfying all of your loyalty customer wants, needs and spend levels.
2. Use rewards to encourage incremental spend
Promoting incremental spend is one of the most effective ways of reducing reward costs and therefore increasing return on investment. In simple terms the aim is to encourage customers to make additional purchases and/or spend more, rather than simply encouraging them to redeem points on purchases they have already decided to make. For instance, asking a customer if they would like to spend their redeemable points on a product that compliments the items they have already purchased. A great example of this would be a restaurant server reminding a customer that they have points available and asking them if they would like to redeem those points on an aperitif such as a coffee or brandy.
3. Harness the power of behavioural economics
Every loyalty member will have mental list of goals when they sign to your loyalty programme. Being aware of this and using principles from behavioural economic such as ‘the fear of missing out’ and ‘loss aversion’ can drive both engagement and sales. This approach can involve asking loyalty members what reward they are saving for and then giving them an easy way to track their progress towards the date at which they can redeem their points. This tracking functionality builds the customer’s sense of anticipation and gives them a powerful sense of ownership. If the customer deviates from their spending pattern the reward either moves closer or further way. This is a relatively simply and yet highly effective way of keeping the customer engaged.
4. Surprise and delight your loyalty members
Retailers and brands are now looking to surprise and delight their loyalty brands in a range of new and innovative ways. For example, some companies are reserving select products to use as exclusive rewards available only to loyalty members. Cosmetics giant Estée Lauder, skateboarding brand The Zumiez, and beauty product retailer Sephora are among leading companies adopting the exclusive product approach to loyalty. Lifestyle brand The North Face is leveraging experiential curated rewards to reinforce the brand’s adventure and wild-frontier positioning. All of its members get access to the year-end North Face VIPeak Rewards catalogue which is filled with unique adventures and gear. Meanwhile brands such as Clinique are turning to technology and NFTs to connect with their loyalty base. Customers are encouraged to share stories on social media, with the best entries winning products and the chance to own highly collectable digital art in NFT form.
Final thought – choose rewards with longevity
With all this talk of behavioural science, innovation and NFTs it’s often easy to over-think loyalty. Sometimes the rewards with the greatest longevity are often the simplest. One of the best examples of a reward is sitting in the corner of my study as I write – a huge yucca plant which I used my points to purchase 10 years ago as a small potted plant. It’s a lasting reminder of a brand I engaged with a decade ago. If I had been offered a sales discount, that would have been long forgotten!
Leading companies worldwide benefit from Epsilon’s customer loyalty and rewards programme software. The scale of our platform is unrivalled — we send more than four billion campaign messages each month to more than 600 million loyalty members. We work with companies of all sizes, from the largest global enterprise brands to smaller boutiques, and continuously innovate so our clients are prepared for the future.