When people think about loyalty programmes, often the default is to think of a complex reward scheme with a blend of discounts and points which encourage customers to engage more frequently or buy more from a brand. And if you’re thinking about building this from scratch, it can rightly seem a big, expensive commitment requiring a high level of management.

Loyalty programmes

Loyalty programmes and rewards can take many forms: from a simple price or service promise (for example Admiral’s MultiCover insurance, where if you cover more than one car or pet you save money) to those more complex data-driven programmes designed to target each customer individually using points and discounts (such as Tesco Clubcard and Boots Advantage Card). It’s important to work out what’s right for your brand – as it may not be as complex as you think.

In this article, we explore the range of different types of rewards you can offer and how you can use them to help you achieve your brand’s objectives.

 

Start by defining the behaviours you want to drive

Different rewards can drive different behaviours. In order to identify the best rewards to use for your brand, you need to know what customer behaviours you want to drive. There are three things for you to consider here:

  • Your loyalty objectives: What are you looking to achieve for your brand by investing in a loyalty programme? Is it about wanting customers to purchase more products, purchase a wider range of products, or increase the length of time they use or subscribe to your products? Or is it about wanting to increase customer recommendations to help acquire new customers?
  • What works commercially for your business: You need to know what you can afford to give away in rewards. Useful inputs to this are your business model, product margins, lifetime value measures, behaviours of existing customers (e.g. how frequently they buy from you and what product combinations they buy) and what headroom for growth exists with your current customers and/ or potential new customers (e.g. what market share gain is reasonable to expect).
  • What motivates your customers: You need to understand the types of rewards that motivate your target audience, for example one-off offers, versus exclusive content or charitable donations. Customer profiles, existing research debriefs or commissioning new research can be good sources for this. We also recommend looking at the types of rewards these customers get from competitors and other brands they interact with, as this can set customers’ expectation levels. It’s worth noting here that you really need to focus on your target customers and not try to be all things to everyone, as this has the potential to dilute the appeal of your rewards to the customers they are aimed at.

Partnering with your insight, finance and commercial teams to gather and understand this insight is essential. You may also need to allow time to carry out new research or create new models to understand customers’ current and potential future behaviours.

 

Get creative and list out the potential rewards you could offer

One of the things we’ve always found fascinating is the wide range of rewards that are possible. We take time to brainstorm rewards for our clients to make sure we are considering all possible types.

For some customer groups, approaches like prize draws can be really motivating and add an element of fun and surprise, whilst others prefer rewards they are guaranteed to get. Identifying as many ideas as you can, gives you the greater chance of landing on something really motivating for your customers.

As a starter for ten, here are some of the rewards types we put into our lists to explore:

  • Discounts (on your products or third party products)
  • Points collection scheme
  • Free gifts or vouchers
  • Prize draws
  • Charitable contributions
  • Exclusive experiences
  • Personalised advice or content
  • Enhanced customer support

As inspiration, we suggest looking at other companies and what they have successfully done in the past – look outside of your category, beyond your direct competitors, even look overseas to get fresh ideas.

You should end up with a long list of ideas that you can then order into logical groupings. There will be some that you immediately cross off as they don’t match behaviours you want to drive, or work commercially – and that’s OK. You now have a potential list you can further explore, refine and test.

Bring together the structure of your rewards programme with the rewards you may want to offer

Alongside identifying the types of reward you want to offer, you will also need to decide on the structure of the rewards. For example, is it one promise for all customers (e.g. 10 points for every £10 spent) or will you offer rewards that build the longer a customer engages with your brand or the more customers buy from you? We’ve written about how to do this in an earlier article

You now need to match the reward types you have identified to the structure of your scheme, so you can start to see what a customer could receive when they meet certain criteria or milestones.

There will be different ways of matching them together, for example the structure of your scheme may be that your customers get a reward for every year that you subscribe to your service. These rewards could either be a discount that grows over time, a free add-on or additional products or services for each year your customers subscribe, or the opportunity to win a really appealing prize with your customers’ chances getting bigger the longer the tenure they have with you.

We recommend you map out each of the options so you can see them next to each other. When doing this, remember to keep it simple with similar reward types grouped together. Customers do not and will not want to engage with something that is complex or that they have to spend time getting their head around. A complex scheme is also hard to explain – another reason to keep it simple.

You will need to work with the analytics and finance teams to sense check the different approaches to make sure they work for your business plus that the approaches enable the business to meet its financial (or other) goals.

Once you have brought these together you can then start to research the options with your customers.

Research the rewards

It’s really helpful to get feedback from your customers on how motivating your potential rewards are and we see this as an essential step. There are multiple ways in which you can do this research; the different methodologies can be grouped broadly into qualitative and quantitative approaches:

  • Qualitative research: Typically through depth interviews or focus groups. This will allow you to hear how customers interpret the rewards you are offering them, how they feel about the rewards, and what does and doesn’t work for them and why.
  • Quantitative research: This usually takes the form of a survey, delivered online. Here you can size people’s responses to your different reward options. You will get data on which offers or combination of offers most motivate customers, how different customer groups respond to the different offers and how much the offers are likely to change customer behaviour.

We often carry out qualitative research first and use this to inform what we take into a quantitative stage.

 

In summary

In order to define the types of rewards you may want to offer, you first need to identify the behaviours you want to drive. Working alongside the loyalty or marketing team, your insight, commercial, analytics and finance teams will play a crucial role in this, working with you to align on the best rewards to offer.

Take the time to list out all the potential offers you could deliver. You can get creative here to really think about what is possible and what your customers may value.

You then need to align the structure of your rewards programme with the rewards you may want to offer. This gets you to options you can research with customers.

Use customer research to help you refine your rewards selection and identify the optimum reward or combination of rewards and the structure through which you make them available to your target customers.

Author: Jess Poore

Jess has experience across a breadth of areas from brand and commercial marketing to customer experience. Her passion is putting customers front and centre to drive business growth and customer happiness. Jess brings together data and insight, creativity and commercial understanding to shape impactful brand and marketing strategies.