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Top 5 Frequently Asked Questions when Launching a Customer Loyalty Programme

Here are our top five questions that are asked by prospects when considering launching a customer loyalty programme. These are based on real-life discussions that we’ve had so hopefully will shine a light on some thoughts you may be having if you’re launching a programme.


 

1. Should I offer non-cash rewards, discounts, rebates or cash?

There are many options on what you give back to your customer to say thanks for their loyalty and each of them has its own pros and cons so let’s explore them.

• Non-cash rewards: Travel, experiences, and physical merchandise.

Pros Cons
  • Non-cash rewards have great trophy value that stirs pride, and emotion and creates experiences.

  • Usually taxed at lower rates and can be obtained at a discounted price by the business, putting more control in your hands.

  • With the Incentivesmart platform, you’re only charged when a user redeems their points so you’re not wasting money.

  • Promote the right behaviours by having something personal to work toward. Have memorable value as the recipient will associate the reward with the action they took to receive it.

  • You have to offer a wide range to ensure there is something aspirational for everyone. (The Incentivesmart reward catalogue has hundreds and hundreds of rewards to choose from!)

  • If the business is choosing the non-cash reward, the recipient may not like it. (With Incentivesmart, we allocate points so the recipient can choose their own reward!)

• Discounts: A deduction from the usual cost of something.

Pros Cons
  • A quick way to gain more sales.

  • Lower prices or time-sensitive offers can attract new customers.

• A quick way to clear out old stock.
  • Can damage your brand value as you effectively reposition your message and suggest the value of your product is lower than the original price.

  • Can encourage your customers to shop around for an even lower price or encourage your competitors to start a price war.

• Create inconsistent buying patterns, customers will only buy when a discount is available.
• Rebates: Reimburse a customer for part of the purchase price, following, rather than at the time of, the sale.
 
Pros Cons
  • A quick way to gain more sales.

  • Encourage repeat purchases if the rebate is associated with money off the following purchase.

  • Attracts new customers and encourages existing customers to spend more.
  • Complex processes in ensuring customers get their money back, such as providing proof of purchase which can result in customer frustration.
 
  • Complex processes can also create problems honouring the rebate offers, largely due to the inability to keep up with demand.

  • Can result in a significant time cost for a company if not managed well.

  • Many consumers see rebates as a “sleazy marketing tactic” due to the frequent mix-ups and delays in processing.

  • Creates cash flow problems, particularly if rebates are offered at the end of the quarter / financial year.
  • Cash: Money given as a reward.

Pros Cons
  • A simple one-size-fits-all approach that can be used for everyone.

  • Can achieve short-term goals such as increased productivity and engagement.

  • Most people think they would prefer a cash reward.
  • No memorable value as the cash is likely to get swallowed up by bills, a trip to the local shop or a takeaway.
 
  • No trophy value - people like to get a reward that stirs pride and emotion and they can shout about.

  •  There’s a hefty amount of tax involved and you’ll also find it hard to predict how much budget to set aside as the market fluctuates.

  • The recipient will also suffer a tax deduction.

  • Risk of de-motivating individuals if bonuses are given to one person but not another.

 


 

2. What’s the difference between a “managed” and “self-managed” programme and which is best for my business?

Each business has a different operational framework. While some may prefer to manage their platform in-house with a dedicated team to monitor, analyse and maintain the platform, some may gain more value from delegating the task to Incentivesmart.

Managed: A managed programme means you have a dedicated Client Success Manager that will be responsible for managing your platform with your organisation’s best interest at heart. As part of this package, but depending on whether you’re on our Premium or Enterprise plan, you’ll have:

  • A simple and efficient onboarding process.
  • Monthly reward communications are created for you.
  • Regular meetings and health checks to review programme performance supported with reports and analytics.
  • Points allocation process completed by CSM.
  • Content updates completed by CSM.

Self-managed: A self-managed programme means you take control of managing your programme, with little support from the Incentivesmart team. For businesses looking to self-manage, you’ll get a frictionless onboarding process and intuitive design and customisation features. However, if you do need some support, there will be support on hand when you need it. To make life easier, you can automate some of the manual processes to help ease your workload, as long as your customer loyalty programme is able to integrate with other areas of your organisation.

 


 

3. Who should I invite to join my customer loyalty programme?

There may be clear reasons as to why you’d want to exclude certain people or perhaps you’d prefer to launch the programme in phases. Just remember, the more people you invite to your customer loyalty programme, the more engaged and loyal customers you’ll have!

 


 

4. Should I reward every purchase, set sales targets or incremental sales vs a previous period?

There are 3 popular models on how you should reward your customers on a loyalty programme.

  • Incremental: Reward is only paid out on sales above and beyond a pre-determined benchmark (such as last year’s sales).
     
Pros Cons

You can be more generous with the reward as you are only rewarding for sales you would not normally have.

Aside from the start of the programme where the launch creates excitement, the data clearly shows a fast decline in engagement levels which remain consistently lower.

Eventually, as targets are met, momentum builds but it never recovers the engagement levels of the all-in model. Once customers are “switched-off” it is very difficult to re-engage them.
  • All-in: Reward paid out on all sales as they occur.

Pros Cons
Engagement is typically much higher and is much more sustainable as everyone has an opportunity to earn. It can be argued that the programme pays unnecessarily for sales that may have taken place anyway, however, there is a knock-on effect that can clearly be seen in overall engagement.
  • On Target All-in: Reward is paid out on all sales but only once a pre-determined target has been met.

Pros Cons

Reward budget is only spent once the targets are met.

Realistic targets can be a great driver of behaviour.

Disengaged customers will be disinterested in the programme and it will have no impact on their behaviour until they hit a target or get very close to the target. Therefore with the on-target all-in and incremental models, you are arguably still only rewarding for behaviour that would naturally happen.

 



5. How much should I be giving back as a reward?

As a guideline, you should be giving your customers 1-5% of their spending back as a reward, but depends on the margin. So for example, if they spend £500, give them back £5 - £25.

 


Hopefully, this will give you a bit of an idea of how best to launch and set up a customer loyalty programme but if you have any more questions, feel free to get in touch!

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