Thinking of Creating a Rewards Program?

One of Savvy Marketing’s clients is creating a rewards program to increase customer engagement across their product portfolio.  They are starting from a blank slate and need to determine branding, digital assets, market fit, pricing/rewards as well as a communications calendar.  As part of the project, I evaluated the benefits of multiple rewards programs and came up with the following framework.

The best rewards programs include the following:

• Obvious value proposition with tangible benefits such as significant discounts and rebates or ability to earn points redeemable for services and products
• Intuitive and straightforward user experience at acquisition and activation
• Intangible, often unpublished benefits that can include preferential access to services
• Frequent communication reinforcing the value proposition

First a quick history lesson. Do you know who launched one of the first rewards programs?  Betty Crocker, which started one of the first rewards program in 1930s along with a few grocery stores.  Betty Crocker’s target customers (housewives managing a budget) could earn rewards points and exchange them for household items at substantial savings.  General Mills closed the program in 2006 to focus on a new program: BoxTops for Education, which earned $74m for schools in 2012.

Today, consumers have many more choices, yet not all programs provide tangible benefits that improve the daily lives of their target customers.  As of 2011, US consumers belong to 2.1 billion different types of loyalty memberships ranging from travel to financial services and retail. The average US household joined 18.4 programs in 2011, up from 14.1 programs in 2009. Despite the increase in overall membership, households only actively participate in 8.4.  The challenge today is making sure that your loyalty program is among the 8.4 that people actively use.  Without active participation it’s difficult to generate a decent ROI.

Here are a few examples of successful loyalty programs that combine tangible benefits (rewards, discounts) with intangible benefits (access to events, VIP feel).

Barnes and Noble

• Loyalty Card costs $25, customers sign up online or at stores
• Free one- to three-day shipping; discount of 20% percent on hardcover books (40% percent on best sellers)
• Additional perk of 10% at Starbucks cafes in B&N stores
• Discounts are applied at the time of purchase

American Express Membership Rewards

• Customers earn points based on spending
• Points are redeemable for travel at participating airlines,  products part of Shop Amex or for gift certificates to restaurants and events
• Point balances are included on monthly statements
• Customers can accrue as many points as they want before redeeming

Amazon Prime

• Membership to Prime is free the first year $79 the second year
• Prime Members enjoy free two-day shipping
• Free movies and TV
• Instant access to Kindle titles
• Prime members see “eligible for Prime” as a delivery option at check out

Museum of Modern Art

• Family Membership is $175
• Members receive 20% off retail prices
• Members have access to “viewing hours” before the museum opens, Little Member Mornings  and Mother’s Day at the Museum
• New benefits include access to the Digital Lounge an online community for members only

The key elements are to reward customers with tangible benefits that they can’t get elsewhere to acquire customers.  Then to make sure they stay active, remind customers of the value proposition as often as possible across all customer touchpoints.  Finally, recognize that intangible benefits cost nothing and make customers feel good about continuing to participate in the program.

Betty Crocker logo used until 2003 (Photo credit: Wikipedia)