Regrettably, many programs miss their mark—failing to address the human elements that drive consumer behaviour and offering rewards that primarily serve the needs of the host company instead. To help reward their audience in a more meaningful way and drive a positive brand experience, companies should start with a customerfirst approach to reward sourcing. When it comes to consumer loyalty programs, consumers consider two things, “Is it easy for me to participate?” and “Is it worth my time?” Any company designing a loyalty program needs to demonstrate value for effort, connecting with their target consumers on a human dimension that reflects the target’s interests, lifestyle and needs. When I first learned about loyalty programs, I was taught “It’s not about the rewards.” The program design and financials were the primary considerations. This was in direct opposition to my promotions training, which advocated getting the biggest prize possible and selling it with “sizzle.”
Now I know that there is an element of truth in both approaches. It’s not about the rewards, it’s about the right rewards, the ones that excite consumers and draw them closer to the brand by giving them value for their engagement. While there needs to be an aspirational aspect to rewards, the reward experience needs to meet their real-world expectations.
Defining value. Value comes in many different forms. In loyalty programs, we typically refer to value in terms of hard or soft rewards. Hard rewards are products; merchandise, gift cards and travel. Soft rewards include preferential treatment, exclusive access to events—experiences that are less tangible than hard rewards. Historically, consumers used to browse hard rewards via a flashy print catalogue and suppliers would stockpile enough merchandise to support catalogue redemptions for approximately two years.
These days, loyalty programs have generally migrated away from print to online. While the medium has changed, the rewards strategy has not changed enough. Although loyalty programs have done a good job of adding experiential rewards, green rewards and charitable rewards in response to consumer interest, the hard rewards offering has not evolved to reflect consumers’ real-life preferences. Reward sourcing is still often influenced by what appeals to the program owner or where the company can score low prices or bulk discounts. Just-in-time loyalty inventory
Consumers are used to shopping retail and having a diverse variety of products to choose from. Most retail stores have tapped into the human dimension of their consumer base and play on the seasonal, age influenced or trend driven desires that motivate this base. Retailers know that buying decisions have as much to do with emotional and sentimental elements as with logical considerations such as convenience and price.
A rewards inventory of two-year-old stock can’t possibly meet consumers’ expectations. Just as stores stock differently for special events (Father’s Day, Canada Day, Back-to-School), reward programs need to feature an enticing and relevant set of rewards that reflects the consumer’s real-world interests while that consumer is browsing. Filling warehouses full of product that sits until it sells or becomes obsolete is the way of the past and unacceptable in the present. To grow in the future, loyalty programs will need to adopt just-in-time inventory, injecting momentum into their offering and keeping up with consumers’ expectations. The value to the company is that its participants will have the opportunity to earn and redeem for products that they see and want today. Not only does this make the company’s incentive stronger, it builds the brand by association with cool, in-demand products. And more importantly, a revolving rewards selection will prompt participants to return more often to visit the site to see “what’s new.” For many of Maritz’ programs, consumers make four visits to the reward portion of the site before selecting an award. Each visit offers additional interaction and brand building opportunities for the loyalty program sponsor. Can a heavy focus on rewards trump the value of the loyalty program itself? No, because it is not just about the rewards. Rewards are tools to drive the relationship and enable dialogue between a company and its consumers. The right reward mix keeps consumers interested and engaged and can continuously promote the brand in a great way. Given the current economic conditions, I’m frequently asked about whether rewards programs should move to “near cash,” substituting merchandise for cash back or gift cards.
I say no! At Maritz, over the first half of the year, we have seen merchandise rewards climb compared to the same time a year ago. While travel reward redemptions have slowed down in parallel with lower seat prices, merchandise has proven to be in high demand. What explains this? Consider the human aspect of receiving a reward. The reward gives people a sense of occasion in the every day, and it prompts a powerful emotional response. This emotional response is the human dimension of loyalty companies strive for. Such a response can only be achieved by taking into consideration the unique elements that motivate a specific audience. While building a reward program that reflects consumer demographics, companies must also bear in mind the psyche of their customer base. Consumers expect to achieve anything they want anytime they want it. If a program cannot match that level of convenience and connection, what value is the company offering? And if the company is not offering any value, why should consumers engage with their brand? DM
Author: Paul Gallant is the director of Loyalty, Incentives, Insight & Strategy for Maritz Canada, a marketing services company based in Mississauga, Ontario. Paul is a respected loyalty veteran with links to most of Canada’s longest running, successful loyalty programs. He has worked with Aeroplan, Canadian Tire, AirMiles, Scene and TD Canada Trust, among others.