Loyalty schemes have been around a lot longer than you think, going back even further than the frequent flyer programmes that took off in the late 1970s. Hamish Sherlock of Applause, explains how to build a next-generation loyalty scheme.
For centuries, merchants have been offering special tokens that repeat customers could redeem for goods. Today, stamps, vouchers and coupons have mostly been replaced by apps and digital methods of tracking customer engagement. But while the core value proposition remains the same, the ways that loyalty schemes function continues to evolve.
Ultimately, companies want to develop loyalty programmes that drive revenues and retain loyal customers. Ongoing user experience testing is critical for companies that want to make sure their loyalty programmes stand out. Brands should ask themselves the following questions to get the best out of their loyalty programmes and stay one step ahead of the competition.
1. Do your customers value the rewards the scheme provides?
As competition intensifies, it’s more important than ever to understand what types of incentives your customers really want and will use. Whether members can get free coffee, exclusive perfume samples or priority boarding, your loyalty scheme needs to offer a good perceived value. If not, there’s no incentive to participate.
Some of the most popular loyalty schemes in the UK are attached to supermarkets or coffee shop chains, where customers can literally ‘taste’ their tangible rewards as they exchange points for food and beverages. These schemes offer perks and incentives that encourage regular participation.
Sometimes creativity and partnerships with other brands can help create an enticing incentive. Collaborations between petrol stations, grocers and supermarkets for points and discounts have been popular for years. BP recently announced a loyalty pricing scheme that gives customers discounts on retail products through partnerships with brands like M&S, while continuing to earn points that can be redeemed on fuel or store purchases.
However, part of the value equation needs to assess whether rewards accrue quickly enough for customers to use them, allowing them to take full advantage of the benefits the scheme offers. Plus, the rewards points should be available to consumers in a timely manner. If rewards are slow or late to appear, they may be less useful as a mechanism to engage with the customer.
To keep loyalty schemes performing well, companies need to regularly collect data and member feedback on the types of rewards they offer, whether rewards accrue quickly enough, and how customers feel about those offerings.
2. Do customers clearly understand how to accrue and apply rewards?
If your rewards programme isn’t intuitive, customers will find another one that better meets their needs. We worked with a major airline to help update its loyalty scheme app and website. We helped them to learn how their customers felt about both the programme itself as well as the user interface. Gathering input from members of the airline’s rewards programmes, as well as competitors’ programmes, allowed the airline to understand where it could adjust language or visual components to more effectively communicate how the scheme worked.
Ensuring customers can easily redeem rewards may be more complex for organisations that have partnership programmes in place. For example, if my bank offers me a discount at a coffee shop for using digital banking services, the bank needs to ensure that discount works, whether they’re posting me a physical gift card or providing me with a coupon code in my mobile banking app.
It’s also crucial to test whether rewards benefits accrue properly. Credit cards often offer extra points or rewards or a cash back percentage on certain types of purchases, such as petrol, groceries, restaurant meals, or some other category. If rewards aren’t calculated correctly, customers get frustrated and tie up your customer service channels trying to resolve the situation, or they abandon the scheme altogether.
Testing how rewards accrue ahead of time can help ensure that you’re looking at those categories through the same lens as your customers. When one credit card provider decided to add cash back on travel and transportation expenditures for loyalty members, Applause was asked to test in a few different cities to see what types of transactions cardholders expected to earn rewards from. In addition to things like flights, trains and taxis, travellers also expected the discount on things like parking meters, bikes and scooter rentals. The card network was able to make sure that it had correctly categorised those merchants so that customers using other forms of transit would get their rewards.
3. Does the customer journey flow smoothly?
There are several considerations here. To begin with, when do you offer customers the opportunity to join your rewards program? How easy is it for them to join? And once they’ve joined, how do you keep them engaged without overwhelming them? Inviting customers to join a loyalty program at an awkward point in the purchasing process can derail them from buying. Sign-up needs to happen at a logical point – which may vary depending on your industry or the region where you’re operating – and allow customers to complete the task that brought them to your website or app in the first place.
Make sure that you identify and address sources of friction that prevent customers from joining and engaging with your loyalty scheme. Ideally, you can then use data you collect from the programme to create personalised offers and drive more value for each member, by analysing purchase patterns and offering specific discounts on products that customers buy on a regular basis.
Loyalty schemes need regular testing to make sure they’re effective. This involves payment testing to ensure members can accrue and apply rewards and UX testing to understand customer perceptions. Done properly, loyalty schemes add value for brands and customers, dedicated testing can help you to evolve your offering to deliver a next-generation loyalty experience.
About the Author
Hamish Sherlock, Senior Director of Solution Consulting, Applause.