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Is your loyalty program rewarding membership or belonging?

 

Loyalty is very much alive and thriving in South Africa.

With a reported 79% usage rate across 100+ local programs and consumer wallets packed with 9 loyalty cards on average*, we’re living in an expanding universe of reward possibilities.  Hey - everybody earn and burn.

If your loyalty program has been riding high on a wave of competitive advantage and transactional flings, you may want to start looking beyond your membership scorecard to the evolving loyalty landscape.

Transactional burnout

The proliferation of rewards programs across the country and the world has somewhat diminished the value of loyalty in the eyes of customers, and on the other side of your business, channel partners. What was once a reward for specific behaviour (buying more of this brand or selling more of that brand) is now an expectation and prerequisite to transacting, never mind engaging, with your business. It had to happen.

The old ‘do this/get that’ loyalty paradigm was a set-up to deliver much of what’s wrong with extrinsic rewards and carrot and stick motivation. Sure, the approach has its place in the broader scheme of loyalty, but as an exclusive reward strategy it works against the spirit of emotional connection and creates an obstacle to forging deep customer relationships.

The quirks and flaws of carrot and stick motivation

The do this/get that approach to influencing behaviour, which I grant you has some usefulness in a broader rewards scheme, comes with well-documented risks and great potential for counter-intuitive consequences. Remember Drive, Daniel Pink’s eye-opening book on the realities of human motivation? The classic carrot and stick approach to motivation gets the treatment in this early chapter titled, Why Carrots and Sticks (Often) Don’t Work. Here’s a handy reference list.**

CARROTS AND STICKS: The Seven Deadly Flaws

  • They can extinguish intrinsic motivation
  • They can diminish performance
  • They can crush creativity
  • They can crowd out good behaviour
  • They can become addictive
  • They can foster short-term thinking
  • They can encourage cheating, shortcuts, and unethical behaviour.

So right up there in first position is perhaps the biggest single reason to select and dispense carrots (that is, rewards) with strategic discretion, “They can extinguish intrinsic motivation”. He goes on to point out that this is particularly true when there is a contingent ‘if/then’ attached to the reward.

‘If/then’ gone bonkers

When used as a blunt instrument of borderline passive/aggressive coercion (it happens) a great reward, and a potentially rewarding experience can have precisely the opposite effect on loyalty. Or on repeat customer business, for that matter. I’m thinking here about the “50% off your next purchase” voucher offered specially to me if I buy this coffee maker (yellow only) together with that matching toaster. Store card only purchase by 5:00pm tomorrow. Offer valid until next Friday. Tier 3 customers only. Huh? Keep your voucher, thanks.

Warning! Rewards are addictive

And how about addiction? It sounds vaguely hysterical to think about anybody being addicted to rewards, but Pink makes the point, “… some scientists believe that “if/then” motivators and other extrinsic rewards resemble prescription drugs that carry potentially dangerous side effects.” Other scientists, apparently, cut right to the chase and liken the feel-good dopamine rush of rewards to the sublime high of cocaine and similar illegal substances. “According to these scholars, cash rewards and shiny trophies can provide a delicious jolt of pleasure at first, but the feeling soon dissipates - and to keep it live, the recipient requires ever larger and more frequent doses.”*** Rewards Purgatory. Think about funding that habit.

Carrots are ok

The carrot and stick list of deadly flaws goes on and it’s not difficult to recall a familiar scenario for every one of them. There’s nothing wrong with carrots, per se, but they only take you so far in making a heart-to-heart customer connection. To revive the emotional spark of loyalty, in the truest sense of the word, you need to find ways to instill a deeper bond and create the sense of belonging people desire in any relationship.

Fanning the flames of attraction

Genuine loyalty is all about intrinsic motivation and the emotional swells of attraction, belonging, bonding, relating, sharing and generally feeling good about a connection. The right rewards are ideal instruments for fanning the flames of attraction and demonstrating the true value of a loyalty relationship.

Beyond transactional to relational

How do you define loyalty? Allegiance, true-heartedness, devotion, bond; not exactly the tone of yesterday’s transactional loyalty model, is it? So enough already with the paradigm of lump-segmentation and tiering. Today, customers, channel partners and employees are seeking a more nuanced rationale for their brand loyalties. So give them an innovative, personalised and personally rewarding reason to connect with you.

Rewarding relationships

The right rewards, delivered in the right way at the right time are ideal instruments to demonstrate the true value of loyalty, because people experience rewards emotionally. Whether indifference or delight - and obviously, you’re aiming for delight - rewards resonate with us on an emotional level and gratify any number of intrinsic needs for belonging, connection and just plain happiness. We know from countless scientific sources that decision-making is both rational and emotional. So, knowing how you can use rewards to emotionally bond people to your brand is just good business.

Put people first

The first and maybe the best rule of customer engagement is empathy. It’s the old, ‘walk in your customer’s shoes’ cliché written for the 21st Century. We’re all human. After that, we’re all different; driven by different motivations and shaped by different experiences. Strong personal relationships make space for individual differences. Strong customer relationships require much the same awareness and respect. In a rewards context, the key message here is to put people at the core of your rewards strategy.

Let’s look at how it’s done.

Building a people-centred reward strategy

Design thinking powerhouse, IDEO describes human-centred design as “a creative approach to problem-solving that starts with the people you’re designing for, and ends with new solutions that are tailor made to suit their needs.”

This thinking applies as much to product and solution design, as it does to strategy.

Taking a holistic approach to strategy development means gaining a full understanding of the people for whom the strategy is intended; also of how the strategy would work within an existing market and technological environment.

A good indicator of a sound reward strategy is when every touchpoint has been considered as an opportunity to surprise, delight and deliver benefits to the people using the product or service, and interacting with the brand.

Another key focus area for strategy is ensuring that it aligns with the overall objectives of the business. Be sure that you have identified the key actions or behaviours that will impact business performance, and then match those actions with rewards that your user groups favour.

It is vital to define relevant measures of the ROI in your reward strategy. Metrics don’t have to be complicated: A simple cost-to-benefit ratio is a good starting point. Also, don’t make the mistake of thinking that customer, channel partner and employee satisfaction scores are ‘soft’ metrics. They’re not. Remember, a human-centred reward strategy includes live and continuous feedback from users throughout the implementation stage.

Finally, be sure to identify and compare your results with your competitors. Research shows that loyalty and reward programs are on the rise. According to a mobile loyalty report released by 3Cinteractive, 64% of brands reported an increase in loyalty program membership in 2017.

As the brand loyalty arena becomes more and more competitive, having a reward strategy that aligns business and people for performance is the benchmark for success. Gearing your loyalty program around personalised and personally rewarding experiences is the upgrade your strategy needs now.

 

Notes

*2017 Eighty20 Loyalty Survey

**Daniel H. Pink, Drive, The Surprising Truth About What Motivates Us (page37)

***Pink (page53)

 

rewards drive ROI ebook cta

 

Joyce Monson

About Joyce Monson

Joyce Monson is a freelance writer with an abiding interest in human behaviour. She has written for numerous trade and consumer publications on subjects ranging from loyalty marketing to employee recognition and rewards.

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