The rewards program best practices that inspire customer engagement
There is no shortage of rewards programs available to customers in 2018; nearly every major retailer and brand has a rewards program in one form or another. However, the effectiveness of individual rewards programs varies when it comes to generating customer engagement.
While the vast majority of consumers, up to 75%, are more willing to shop with a brand that has a loyalty program, most of those consumers actively participate in very few of them on a consistent basis. While rewards may help incentivize a one-time buy, regular and recurring spending attributable to a rewards program is significantly harder to achieve. The brands that succeed at this marketing strategy are the ones that develop and follow a set of engaging rewards program best practices.
Best practices in a rewards program should attract consumers who will engage with your company or your brand; reward programs should not be used as one-time purchase drivers. Engaged and loyal consumers spend more money and spend more frequently. It’s no surprise, then, that about one-third of marketers use these programs specifically to drive engagement. If driving engagement is your primary goal, these five rewards program best practices must be included in your strategy as well.
Rewards Program Best Practice #1: Rewards Must Be Mobile
Consumers do not want to carry around a physical card in order to participate in a rewards programs. More than 70% of consumers are more likely to take part in a loyalty program if it’s on their phone. Choosing to implement a mobile-based rewards program, then, is one of the best practices suggested in order to gain an engaged customer base. Mobile rewards programs:
Appeal to younger generations:
About one-third of millennials report that they don’t like rewards programs because of the cards they must carry with them. Using a mobile option eliminates this complaint.
Stay on top of market trends:
Most companies are doing away with card programs, instead choosing to use smartphone-based approaches. It’s anticipated that three billion loyalty cards will be mobile only by 2020.
Encourage frequent use:
The top two reasons why a consumer won’t use a loyalty program they’re a member of is (1) they don’t have their card on them at time of purchase or (2) they don’t remember they’re a member of the program. Both issues can be resolved via a mobile program thanks to the convenience and visibility of apps.
Consumers want mobile programs. They encourage use, appeal to prime segments of shoppers, and keep retailers and brands on trend in the digital age. This best practice for rewards programs is truly a must, not a suggestion, in order to build an engaged user base for your program.
Rewards Program Best Practice #2: Make it Free, Ditch the Fee
A free vs. fee-based rewards program is often a major consideration for companies launching a new customer rewards program. While free might drive high adoption rates, fee-based programs may be more likely to attract consumers who are truly dedicated to the brand or retailer. Additionally, a fee-based program can act as a revenue stream. Despite those on-paper benefits to the retailer or brand, however, free is best if your goal is customer engagement. We can explore why via this brief study of the most popular app-based rewards program in the US, My Starbucks Rewards.
Starbucks initially launched their rewards program in 2001 in the form of Starbucks Gold. For $25 a year, customers received 10% off each coffee order. This program never really caught on, however, and the company eventually decided to shutter it. In 2012, they launched a new free, phone-based program called My Starbucks Rewards. In the first year alone, the number of rewards members doubled compared to the previous program. That momentum has continued and the program is now one of the most downloaded brand-based apps in the world.
The company would not have seen this kind of wide-spread engagement had they continued with their fee-based version of the program. They were able to revive a failing rewards program model by:
Starbucks went from a card-based program to a mobile-based rewards system, which was a significant motivator for adoption.
Eliminating the cost:
While $25 might not seem like a lot of money for a yearly membership, for consumers who did the math it wasn’t much of a benefit. With a 10% discount, the customer would have had to order more than 50 coffees to break even.
Adding exclusive deals and discounts:
Instead of making consumers pay for Gold status, they can now earn it. After a consumer amasses a certain number of rewards points, they’re automatically upgraded to Gold status, giving them access to exclusive discounts and additional points.
Rewards programs don’t often work as an engagement driver for new customers if they’re fee-based; that’s something that only already loyal customers are willing to pay for as they may shop or buy more frequently. As a best practice, the only thing your customer should have to invest in the rewards program is time.
Rewards Program Best Practice #3: Offer Opportunities to Earn Without Spending
Most rewards programs are dependent on the consumer making a purchase in order to see any benefits. However, if your goal for the program is engagement, you should offer opportunities to earn points that aren’t purchase driven. Here are a few ways to do this:
This can be a great option for retailers and QSRs alike. Allow your customers to earn rewards points just for entering your location. This is a benefit that doesn’t cost them anything but encourages them to visit your establishment. This increases interaction with your company while also increasing the likelihood that the customer will make a purchase.
Another good tool, which can be used by CPG brands as well, is to offer rewards points for scanning product barcodes. This encourages the customer to seek out your products in store, like a digital scavenger hunt, familiarizing them with your products and their benefits.
A time-tested method for increasing engagement is incentivizing your current customers to give you referrals. Offer customers the opportunity to gain rewards points for sharing your program with friends. This increases engagement with, as well as adoption of, your program.
Offering consumers a way to gain rewards without having to make a purchase encourages them to interact with your rewards program and, by extension, your company. It helps them find your locations and products, which can often naturally lead to sales. While the overall goal of any company should and must be sales, a best practice for a successful rewards program should be to start with activities that engagement, first and foremost.
Rewards Program Best Practice #4: Differentiate Discounts from Points
When designing your rewards program, avoid creating a transactional relationship with consumers. A transactional relationship is one where the customer is focused solely on an immediate, typically monetary-based, benefit driven by discounts; engaging them will be nearly impossible unless you consistently offer a lower price than your competitors.
It is important to recognize that discounts and deals are powerful motivators in gaining the attention of consumers; however, consider sectioning off discounts and special offers into their own unique space within the rewards program app.
Nike is a company that uses this strategy very well. The brand offers a rewards points program that includes a specific section for listing current deals and events. By dividing their app into two sections, rewards and discounts, they’re able to cater to multiple groups of consumers without having to create several campaigns on separate platforms.
Rewards Program Best Practice #5: Host Exclusive Benefit Events
One way to get a surge in adoption to your rewards program is to host an exclusive benefit event that encourages individuals to sign up for and engage with your program. Some options include offering higher point values or more opportunities to earn for a brief period of time. This leverages the idea of scarcity as once the extra benefit period is closed, it will be a lost opportunity.
Amazon capitalized on this exceptionally well with its Prime Day event, which it started three years ago. For one day a year, members of Amazon Prime were given access to exclusive offers and rewards. The company reported that they saw a 60% surge in sales during the most recent Prime Day event, which surpassed their sales from Black Friday and Cyber Monday in the previous year. The company also reported that more individuals joined Amazon Prime that day than on any other day in the history of the program. The company was able to achieve this level of engagement because they:
Capitalized on exclusivity:
Only members of Amazon Prime can participate in Prime Day, which drove many individuals to sign up for the service simply for the sake of participating in a single event.
Prime Day is exactly what it says it is: one day. As the window to take part is so limited, customers are more likely to participate as they know it is a now-or-never scenario.
Timed it right:
One reason why Prime Day is so successful is that it occurs in mid-July when few other sales events are occurring. As they created a niche for the event, Amazon doesn’t have to compete with other major retailers as they do on Black Friday and Cyber Monday, for example.
While Amazon’s Prime Day is a fee-based service, it’s still worth reviewing their methods to see how a rewards program-based event can increase sales and membership numbers. Events are a great way to engage consumers with your brand while also improving overall sales, making them a best practice when implementing a rewards program.
Follow Best Practices for Rewards Programs by Partnering with Third-Party Shopping Apps
Shopping apps improve customer engagement as they combine all the best practices while also exposing your brand or company to a new target audience. As these apps are designed to be used while a consumer is in the seemingly endless shopping aisle, you can gain greater engagement by communicating with the consumer as they’re shopping.
Partnering with a third-party app gives you the ability to leverage a mobile platform, focus on rewards over discounts, and offer multiple ways to earn and engage. They also allow you to bypass the process of adoption as they come with a built-in user base; you don’t have to spend your marketing budget developing your own proprietary app. If you’re looking for a way to easily implement the rewards program best practices outlined above, a third-party shopping app may be the best—and simplest—solution for both your company and your customers.