Refreshing rewards – seven universal truths that apply to loyalty programs
Rewards programs have never been more popular. Globally, the market for loyalty programs is estimated to be growing at a rate of four to five percent per year, and is set to reach US $201 billion by 2022.1
With so much at stake, it is vital to run reward programs with rigor and discipline. Of all the metrics available to businesses, the redemption rate is one of the most telling – giving a direct line of sight to the attractiveness of loyalty program and the extent to which customers are engaged with it. Given this criticality, it makes sound strategic sense for companies to continually review, rethink and redesign their redemption options.
Redemption not only allows you to see how engaged your customers are with your program, but it can contribute 12% to overall customer satisfaction and redeemers are 8-20% less likely to leave a company than non-redeemers2. Given the impact that redemption can have it deserves to be prioritized in the design, operation and ongoing assessment of any loyalty program.
So, what is the best way to review and re-evaluate your redemption options?
The specifics vary across market sectors and geographies, but our white paper “Refreshing rewards” outlines seven universal truths that we believe apply to any loyalty program, in any sector, in any country. It is essential that businesses consider these truths when rethinking and redesigning merchant loyalty program redemption options.
Universal Truth #1
Loyalty is always measurable
Customer loyalty is knowable and can be quantified using spend data, the two most important measures to regularly assess for both members and non-members of your loyalty program are share of wallet and customer retention.
Universal Truth #2
A healthy dose of skepticism should be applied
Your redemption options need to be relevant to your customers, but how do you figure out what options are the most relevant? It’s not uncommon to just ask your customers what they want, but it helps to be skeptical of their responses – what people say is not always what they want or do.
Universal Truth #3
Your consumers may not be consumers at all
In order to offer the sort of redemption options that would resonate with your customers, you need to understand your true customer base – so don’t underestimate the prevalence of small businesses within your customer base.
Universal Truth #4
The left brain will only take you so far
The quantitative and analytical dimensions of customer behavior do not give you the full picture, to truly understand your customers, you need to understand what motivates their decisions – quantitative data needs to be supplemented with qualitative assessments.
Universal Truth #5
It is always best to look beyond your direct competitors
Conducting competitive and comparative analysis is always valuable, but you must not limit it to your own industry. Your customers will compare your loyalty program and redemption to the other programs that they actively engage with, regardless of industry, and you should do the same.
Universal Truth #6
Human-centered design principles bring optimal results
By applying human-centered design processes to redemption ideation we can see consumer redemption decisions within the overall customer journey – so you can not only understand what is driving customer decisions but also evaluate the feasibility of a redemption concept.
Universal Truth #7
The sweet spot lies between customer appeal and "implement-ability"
Our universal truths will help you to discover a number of redemption options, but you can’t implement them all. In order to decide which will benefit your business most you need to find a balance between what your quantitative and qualitative data recommends and the ease of bringing the idea to life.
For more insights on loyalty programmes, please read our full white paper here. To find out how we can help you address any of the ideas discussed, please get in touch with our Visa Consulting and Analytics team.
1 Loyalty Programs Market to Reach $201 Billion by 2022, Beroe Inc., February 2019, https://www.beroeinc.com/press/loyalty-programs-market-2022/
2 ITC Infotech Strategic Loyalty Study, cited by Loyalty Magazine https://www.loyaltymagazine.com/points-breakage-the-bane-of-loyalty-programs/, Loyalty360 https://loyalty360.org/content-gallery/daily-news/rewards-breakage-boon-or-bane-the-role-of-technology-in-optimizing-breakage
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