When it comes to loyalty programs, the rewards you offer are paramount. Exciting rewards entice more customers to sign up for your loyalty card and continue to use it, while boring rewards get overlooked or passed by. However, it can be difficult to develop a rewards program that balances customer desires with expenses.
There are two major types of rewards in loyalty programs – instant rewards, and cumulative “delayed” rewards. Both types have their proponents and detractors, but in truth there are advantages to each.
Cumulative Rewards
The more traditional approach to loyalty card programs uses cumulative rewards, often based around “points” or other discounts that accumulate over time. This can include percentages off of gas purchases, rewards points that can be redeemed for prizes, or any other reward that doesn’t take place at the point of purchase.
Cumulative rewards are attractive to many retailers, especially those whose customers aren’t everyday shoppers. This can include restaurants or specialty retailers like clothing, electronics, and hardware stores. For these retailers, loyalty point programs can give customers an incentive to make repeat purchases over a period of time.
The difficulty with cumulative rewards, though, is making it easy for customers to take advantage of the points they earn. In many cases, points accumulate but customers have no simple way to track them, so they are unaware of how many they earn or what they can redeem them for. Retailers can solve this problem by displaying the number of points customers have on receipts or online.
Another kind of delayed reward is the simple coupon campaign, which sends out special offers to loyalty program members via email, text message, or physical mail. These programs are simple and dependable, but can seem antiquated to today’s digitally-savvy customers. Plus, there’s no way to guarantee your coupon will be enticing to a given customer.
Instant Rewards
Instant rewards offer a very different customer loyalty prospect, where the customer gets a benefit from their card immediately. This can be as simple as a discount applied to every purchase (such as Target’s loyalty card program, which applies a 5 percent discount to all purchases made with the Target Card). However, retailers can also be creative with their instant rewards. For instance, Waitrose, a UK supermarket retailer, gives customers in the myWaitrose program a free cup of coffee or tea every day.
Overall, instant rewards are becoming more popular with retailers, and there is evidence to show that they work in driving repeat business. However, they are not without their own drawbacks. For one, instant rewards programs lose the cumulative benefits that “power shoppers” enjoy. Also, if a customer isn’t interested in your reward – they don’t drink coffee, say – it can be harder to get them to join your program. You can always offer a variety of rewards, but the more you offer the more complication you potentially add to the program.
In the end, both types of reward programs have their perks. A retailer thinking of starting or modifying a loyalty program must consider the needs and desires of their customers, as well as the image they are portraying and what kind of program they can afford to run. Fortunately, there are experts who can help you design and manage the perfect loyalty card program for your business, like the ones here at Lucas Color Card.
If you want more information on designing and managing a loyalty card program, Lucas Color Card today.