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When it comes to loyalty marketing, sometimes less really is more

April 14, 2014 by Fred Thompson

Let's play a game. Ask your fellow executives to name (without looking) those perks that your customers perceive to be the top five benefits of your loyalty program. Next, have them list the rest of the benefits your program offers. Could they recite the entire list? If they're at all typical of senior team members, they probably nailed the top handful, but faltered further down.

Now I ask you, if they can't remember them all, how many do you think your customers will remember? The answer is even fewer. In fact, customers tend to remember the top three to five benefits that programs offer, and that's about it. It's time to realize that sometimes less is more.

Hotel programs, for example, usually offer more than twenty benefits. Customers, however, simply want three key offerings: free rooms, amenities that improve the guest experience, and room upgrades. Members may be aware they also have gift shop discounts; or, that they can donate points to charity. None of these, however, is as important as the top three. The more effectively hotels meet these key needs, the more loyalty they will earn.

We recently tested my theory with a major fashion retailer. We asked loyalty members if they could describe the benefits of their program. They were able to name a few. But when we asked, for example, "Did you know you get free valet parking?" they had no idea. The same result occurred with other specific benefits (and these were not cheap perks for the retailer to be offering). The results were so intriguing that we are rolling out a larger study of this issue, the results of which will be fully analyzed and published.

The conclusion here is that there is a propensity to load programs with benefits and features. This propensity is based on the assumption that customers will remember and value a broader offering. This approach, however, is not the most effective.

Pinpoint accuracy

When limiting the number of benefits, it should be obvious that choosing the right ones is critical. Begin by pinpointing and understanding the needs of all members. Then you can look for across-the-board issues that affect everyone and set a baseline for program benefits.

Consider, for example, the typical quick-service restaurant where most, if not all, orders are taken and delivered at the counter. Points and discounts are great, but the most obvious customer pain point is the waiting in line, especially during peak times. It’s no surprise then that this industry's hottest perk is the ability for customers to use their phones to place an order; charge it to their account; and, then bypass the pick-up line. Instead, they can just grab the order and go. This one single benefit is a game-changer for all customers.

The next step is to channel resources toward high-potential/high-value customers. For example, Phil is a high-value clothing customer, but because his build is true-to-size, Phil doesn't need any tailoring. If his retailer offers free tailoring to all customers, then that’s one benefit the store has that loaded into the program and is paying for, but that Phil will never use or even care about.

In determining what new benefits would be most appropriate for priority members, you must uncover the customers’ primary pain points and determine whether your loyalty program is properly addressing them. If not, then you have an opportunity to close the gap and increase customer loyalty.

Five tips for setting limits

Here are five key tips to help you streamline your program and establish appropriate benefit limits:

1. Focus on addressing your members' pain points. Satisfy the pain points that relate to the entire group first. Then look at your high-potential/high-value customer needs.

2. Strive for quality, not quantity (and cost) of benefits. Sometimes all it takes is one — if it's the right benefit — to substantially improve member satisfaction.

3. Offer a mix of both hard and soft benefits. These appeal to two equally important customer needs: economic reward and recognition. Hard benefits are usually offered in the form of such currency as points; and, are the most important part of the value equation.

4. Announce all new features and benefits at one time. Then, take your praise and criticism quickly. Just remember to have a strong explanation in your messaging for why you are making changes or additions.

5. Your loyalty program should always amplify your corporate strategy and brand. When crafting any new program benefits, ensure that they align with the overall mission of the firm.

When it comes to benefits, less truly is more. The right rewards can have a much larger impact and even cost less. And isn't that what all marketers actually seek: margin, lift and profits.

About Fred Thompson

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