7 Starting Points to Design Your Loyalty Program Reward System

Uncertainty and hard decisions

You have just started designing a reward system for your loyalty program, and suddenly many unanswered questions pop up.

Okay. These questions are great as a starting point. Don’t worry; creating a well-functioning reward system for a loyalty program is not rocket science.

Based on my experience with creating loyalty programs, I have listed 7 vital questions that you should think about when you want to choose rewards.

#1. What kind of rewards should I offer?

Make a quick and dirty list. Consider everything that people can expect from your ecommerce store and from a typical loyalty program at the same time. Write down everything that makes sense.

If you want to group your ideas, I find this classification system useful:

• Physical items, for example gift packs
• Experience-type rewards, for example a VIP party entry, concert tickets
• Discounts, for example free shipping
• Virtual stuff, for example virtual badges, e-book downloads

Now let’s see how a bookshop can define its rewards based on these classifications:

• Physical items: Game of Thrones, a book by George R. R. Martin
• Experience-type rewards: VIP tickets to an autograph session with E.L. James, the author of Fifty Shades of Grey
• Discounts: free shipping for the next order
• Virtual stuff: a bookworm badge

Simple, right? Now comes the even more interesting part!

#2. How can I differentiate my rewards from each other?

You have another important thing to decide: how unique will your rewards be when compared to each other?

There are two ways to go with this:

• Non-customised rewards: items that are available in your webshop anyway
• Customised rewards: special merchandising items, a VIP ticket to your next exclusive company event

Let’s see how a bookshop’s rewards can be made even more sophisticated by these criteria:

• Non-customised rewards: Game of Thrones, a book by George R. R. Martin
• Customised rewards: Bookmarks with your logo autographed by J. K. Rowling

(Note: A good reward is definitely one that makes your customers feel special. But how can you design rewards that will magnetise your customers to your loyalty program? Don’t miss my next post; I will give you lots of ideas.)

#3. How will customers receive my rewards?

You cannot skip logistics. Sorry.

It seems too early to decide how customers can get hold of their rewards but believe me, it’s not. Logistics will affect the core of your marketing budget.

Here are the most common categories:

1. Delivered by your service centre when required
   The reward will be sent to the customer at the cost of the company.
2. Delivered with the next purchase
   The customer will get their reward automatically with their next purchase. This keeps money in your pocket, but can be a bit disappointing for the customer.
3. The customer can redeem it using a coupon code at their next purchase
   The reward itself is just a coupon code, and the customer can use it during the checkout process.
4. Download the reward directly when required
   If it’s a leaflet or an event ticket, the customer will get a download link.

Virtual rewards will cost you less, as you don’t have to pay delivery costs. So try to think out of the box and create as many of them as you can.

#4. How do I balance my rewards based on their value?

Think about your marketing budget; look at it with the eyes of an accountant.

Because cash marks your rewards as:

• high-value
• medium-value
• low-value
• free

Let’s look at these categories using our bookshop example:

• High-value: free trip to Belfast where Game of Thrones’ TV episodes are filmed
• Medium-value: gift-package of children books
• Low-value: pen with the bookshop’s logo
• Free: Bookworm virtual badge

A handy thing about loyalty programs that virtual rewards, like customer levels, are also free. Just find the right balance that keeps your customers’ interests and supports you in avoiding overspending.

#5. How do I limit my rewards accessibility?

Okay, so you have rewards with different values. To dodge any accidental expense, determine the limits of your rewards.

• No limitation
• Time limitation
• Quantity limitation

Let’s jump back to our lovely bookshop. Its rewards will look like this:

• Unlimited: Bookworm badge, 5% discount coupon
• Available in a certain quantity: Get one of the 20 specially printed bookmarks with our logo.
• Limited for a specific time period: Get free shipping between 10 June and 13 June. Get an autographed edition of Game of Thrones this spring (because the TV series premiered in spring).

Limited items excite customers and inspire them to act, as restrictions make your rewards more valuable. So, use them to create some buzz around your loyalty program.

#6. How do I maximize the uniqueness of my rewards?

Don’t show all of your awesome rewards at once. Try to differentiate rewards by who can see them. This will help you to add mystery to your loyalty program and therefore ensure constant customer engagement.

Create categories like these:

• Available for all customers
• Available only for newly registered customers
• Available only for returning customers
• Available only for customers who have achieved a certain level

What might our bookshop do in this scenario?

• All customers: an ebook entitled ‘The Ultimate Guide to Choosing your Next Reading Material’
• Newly registered customers only: A pre-reading option before the official release date
• Returning customers only: ‘My favourite book quote’ essay contest
• Only customers who have achieved a certain status: 20% discount for every purchase

By pushing monetary rewards to higher customer statuses you can secure your marketing budget and also ground real customer engagement.

#7. How can I create excitement around my rewards?

The best way to increase the frequency of a customer’s visits is to awaken two positive emotions in them: surprise and expectation.

Offer:

• Predictable rewards: the customers expect them, and know when the rewards will be available. Seasonal rewards typically have an effect like this.
• Unpredictable rewards: the customers don’t know when the reward will be available; it will really surprise them. Custom-made rewards, such as events, can work like this.

These two types of rewards ensure one important thing: constant attention from your customer.

Decide for yourself

Feeling dizzy?

Just, take your time and carefully go through all of the reward types listed.

We have prepared a digital crutch for you in the form of an Excel table (just click on the link to download). It contains everything you need. Just mark the right fields and add your reward idea to it. Your CMO will definitely love it.

How is it going? What are the most difficult challenges for you in a loyalty program? Is it creating rewards or something else?
Share your stories in the comments.

We are ready to help.

PS: Your reward system is ready now. You made decisions about your categories. Don’t miss my next blog post! I will give you some ideas on how to design your chosen rewards to magnetize your customers.

This article was syndicated from Business 2 Community: 7 Starting Points to Design Your Loyalty Program Reward System

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• Author Timi Garai
• Type article
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• Provider business2community