We’ve sat through plenty of meetings about loyalty programs and often decisions go slowly because it's difficult to reach consensus on how to design rewards programs. One of the biggest mistakes that leads to this type of roadblock is designing a ‘one-size-fits-all’ rewards program.
Here’s why: your different customers segments will differ in their interaction with your rewards programs. Among the key dimensions to consider are:
Degree of participation:
Not every customer will place the same importance on rewards - and some will not even participate in a rewards program even if it is offered.
Impact on purchase decisions
Will the absence of a rewards program affect a customer’s purchase decision -- the answer is “it depends”. This also is often a segment specific thing, with some customer types putting high importance on it -- making a deal breaker if they are not offered a rewards program with purchase.
Where do rewards rank in the customer’s priority list? What ranks higher or below it? Things like price, support levels, features, customer ratings and brand also play a big role -- and vary in their importance by customer segment.
What Are They Will To Trade For Rewards?
- Sharing personal information
- Promoting your company to their social media networks
These factors affect the ROI of rewards programs and vary from customer segment to customer segment.
Companies have found that the rewards platform has a significant impact -- for example in coffee and sandwich shops, the switch to mobile platforms has impacted the participation of the “in the rush” high income professional.
Reward level hurdles
Designers of loyalty programs will tell you that among most diehard rewards fans in your customer base, there will not be an acceptance of just any reward level. As they are being innundated by different promotional programs, many customers are demanding a minimum level of value from rewards including when they will receive their first reward.
Quality vs Quantity
Segments will vary based on their preference for high quality or exceptional rewards -- some will be more focused on sheer quantity while others will respond more strongly to exceptional experiences, access or products.
So what’s the conclusion?
There is usually an instinct among business managers that the ‘one-size-fits-all’ doesn’t work with most customer segments. Given the number of different variables we’ve laid out in this article, doesn’t it seem to make sense that companies should take their rewards program design to a customer segment level. The primary reason being that the ROI of loyalty programs (which is a major concern during these economic times) is dependent of different success factors for each key customer segment a company has.