4 Qualities of a Successful Customer Rewards Program
With the widespread use of customer rewards programs by small businesses and retail conglomerates alike, it’s easy to assume that these programs work in terms of fostering brand loyalty, providing added value, and increased revenue growth for the companies that use them.
However a recent McKinsey study suggest that on average, they do not – those that spend more on loyalty, or have more visible loyalty programs, grow at about the same rate, or even slightly lower, than those that do not.
Despite this trend, rewards programs that promote brand loyalty persist. More than that, certain companies thrive and succeed where others fail. There are those that seem to be the exception, those who seem to have managed to buck the trend.
Here’s what these winners are doing differently.
1. A Differentiated Store Experience.
High end American retailer Neiman Marcus offers the InCircle loyalty program which provides members with the chance to earn points for purchases made both online and in-store, a $100 gift card for every 10,000 earned points, free shipping, first dibs on double points programs throughout the year, among others. What makes their program special is that they’ve created a points system specifically for the type of shopper that wants a full store experience rather than just fashionable clothes, which are the types of shoppers this rewards program attracts. Loyalty is amply rewarded with even more perks for frequent members.
Starbucks does this spectacularly well, too: they’ve integrated payments and technology with the unique brand experience of drinking coffee at their stores to make the transaction even more pleasurable.
2. Well-defined ideal customer behavior profiles that are incetivized accordingly.
Gilt is a purely e-commerce site that allows frequent visits and customer activity to earn rewards points in their loyalty program. The program includes access to sales, discounts, free shipping, and more. The company studied their own customer base and gained considerable insight to their behavior patterns, which in turn allowed Gilt to craft an irresistible point system program based on the actions that their current clients are already doing.
Best Buy’s Reward Zone program also work within these principles, where they reward tech savvy online customers by engaging with them via their iPhone and Android apps. Studying customer data allows you to craft a program that is both relevant and streamlined, a definite plus in promoting brand loyalty that can potentially inspire a rabid fan following.
3. A rewards program that customers can’t refuse.
Nordstrom is a popular American retailer that recently switched from an in-store rewards program to one that provides a point system for their Visa credit card users. They are one of a few big name stores that allows members to earn points for any purchase using their card, and this feature has earned Nordstrom a steady stream of loyal members. Because the program truly benefits its customers, they’ve earned an enviable following in their market.
4. A non-monetary rewards incentive that appeals to customer’s values.
Building a program around the idea of environmental sustainability is the perfect fit for Patagonia, an eco-friendly outdoor clothing company. The company recognized that their customers are the type of consumers who cared about leaving small carbon footprints, recycling and doing good things for Mother Earth. Patagonia’s Common Threads initiative has struck a chord in its client base, where the program was formed in partnership with eBay that will allow customers to re-sell their high-quality apparel via their company website.
To have a successful rewards program, simply having just any me-too, points-based rewards program is not enough. You need to have a carefully thought out plan that truly answers a specific need that your customers want. Generic programs that were thrown in half-hazardly just won’t do. Listen to what your customers want, and find a way to fulfill that need, and truly provide a better value that will prevent clients from switching to your competitors.