Customer Reward Programs can be tricky.
When managers are designing a loyalty rewards program, they need to address a few questions and issues to be equipped to create a potentially successful loyalty program.
The first set of questions is about understanding the motivations of your customers, and how they relate to different kinds of rewards.
What will make customers loyal for your products?
Different businesses have different attraction points. It all depends upon one’s target market and their aspirations and perception. Loyalty can be inspired among customers by delivering monetary benefits, good service, quality products, differentiated products, etc.
What factors can contribute to their satisfaction and hence retention?
It is good to understand what satisfies one’s customers. Some stores deliver immaculate customer service, easy returns and exchange, distinguished product quality, prestigious products, great after sale service and assistance, premium services, and preferential treatment to loyal customers.
What motivates customers psychologically or monetarily to stay engaged with a store or business?
What stimulates your customers into action? Whether it is money-based or emotion and prestige-based rewards that motivates your customers? These things can be understood to design an effective loyalty reward program.
What encourages loyal customers to advocate your business or store?
Satisfied customers should experience some kind of affiliation with the business or store to be moved to speak positively about it among their social circles. What creates that affiliation for your customers? Do they feel satisfied when they are appreciated or recognised for their role as a valuable customer?
What to deliver better than other similar businesses or stores to retain customers?
Distinguishing one’s offering from competitor in terms of price, quality, product design, product essence, etc. can keep customers loyal, depending upon what shoppers prefer.
What can be done to increase customers’ basket size?
Is better placement of complementary products enough to increase basket size? Are customers motivated to purchase more things when they get a valuable offer or discount? Understand your customer’s psyche to sell more.
After these basic question are answered, one has to answer more technical questions related to the structure of their customer reward program:
Would customers prefer linear or tier-based loyalty program?
Does it motivate your customers to return to avail more and more benefits over time? If it does, then tier-based loyalty program will be more successful for you. If your target market is such that instant gratification works for them, then linear reward systems like cash backs will work best for you.
What kind of rewards will your customers like—points, free products or services, preferential treatment and services, or cash back?
This is related to the motivations of your customers and their preferences. Premium products usually attract customers who prefer preferential treatment and services, while regular consumer products attract customers who like to collect points that can be redeemed for store credit or cash backs.
At what point should loyalty rewards be given?
Whether you should charge a fee in advance to deliver premium services to loyal customers or should you deliver rewards at the time of purchase? Some businesses and stores delay delivery of rewards to the fifth purchase or a future purchase made by customers.
Who all in the business and store should handle loyalty enrolment and implementation activities?
Whether only sales or point of sale staff be included in encouraging customers to join loyalty program? Managers and marketers should also make an effort to inform customers about the program benefits from time to time. POS staff should also remind and enable customers to avail benefits they are entitled to.
Customer Reward Programs designed for small businesses and stores need to be based on logical and specific answers to the above questions. More specific and researched the answers are, higher are the chances of success of the program.
Established and old businesses and stores have data and insight to be able to answer these questions. However, businesses that are new in the market need to work hard to get this data through focus groups or feedback forms, to catch speed with the established businesses.