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When Is The Right Time To Implement A Customer Loyalty Scheme?

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Manage episode 454279365 series 2984018
Innehåll tillhandahållet av Colin Shaw and Beyond Philosophy LLC. Allt poddinnehåll inklusive avsnitt, grafik och podcastbeskrivningar laddas upp och tillhandahålls direkt av Colin Shaw and Beyond Philosophy LLC eller deras podcastplattformspartner. Om du tror att någon använder ditt upphovsrättsskyddade verk utan din tillåtelse kan du följa processen som beskrivs här https://sv.player.fm/legal.

Deborah has a pickle. She is considering implementing a Loyalty Scheme but isn't sure when and how to do so. She thought we could help.

We can help. The first question, then, is easy. Now. These things work. They don't create real loyalty, but they get people to keep buying from you, giving you more chances to earn loyalty.

It's the second question, how, that's a little trickier.

Many companies create these programs to foster loyalty, but often, they work more as reward systems, encouraging repeat transactions rather than building emotional attachment.

For example, although frequent flyer points, like Delta's SkyMiles, incentivize repeat bookings, they don't necessarily create genuine loyalty. Loyalty, we argue, is a deeply emotional connection rather than just a series of repeat transactions.

We explore the psychological principles behind why customers participate in rewards programs and why they might hoard rewards rather than redeem them. A concept called Medium Maximization explains why people often "save" points or miles, viewing them as a bridge to future rewards and experiencing reluctance to part with them. This phenomenon works in favor of companies, as it increases customer engagement without necessarily incurring a cost.

Additionally, the Goal Gradient Hypothesis illustrates how people accelerate their efforts toward a reward as they approach it, which is why punch-card systems, for example, are so effective.

While rewards programs have significant benefits, they can also have downsides. Complex or restrictive redemption policies can damage the customer experience, as can the use of extrinsic motivations that may unintentionally reduce intrinsic motivations.

For instance, when a daycare chain imposed a fine on late pickups, late arrivals increased as parents viewed it as a trade-off rather than a rule. Companies should, therefore, be cautious about unintentionally undermining genuine, behavior-based loyalty with overly complicated or restrictive rewards systems.

In this episode, we discuss customer loyalty programs' true purpose and impact. Ultimately, we recommend keeping loyalty programs simple and transparent. Avoid blackout dates or complicated redemption processes, as these can frustrate customers and reduce the program's value. At their core, loyalty schemes are tools to encourage spending rather than create loyalty, so Deborah—and you—should design them with that goal in mind.

Additional Takeaways to Listen for In This Episode:

  • How extrinsic rewards, like points, can decrease intrinsic motivation and affect customer behaviors.

  • The importance of aligning a rewards program with customer behavior patterns and preferences.

  • How Idiosyncratic Fit influences customers to engage more deeply in programs where they feel they have an advantage.

  • Examples of how poorly designed loyalty schemes can backfire and damage customer relationships.

  • The pros and cons of different reward types, like points versus cashback, and how this impacts customer satisfaction.

  • Understanding competitive rewards programs can help you refine your offering to stand out.

  continue reading

393 episoder

Artwork
iconDela
 
Manage episode 454279365 series 2984018
Innehåll tillhandahållet av Colin Shaw and Beyond Philosophy LLC. Allt poddinnehåll inklusive avsnitt, grafik och podcastbeskrivningar laddas upp och tillhandahålls direkt av Colin Shaw and Beyond Philosophy LLC eller deras podcastplattformspartner. Om du tror att någon använder ditt upphovsrättsskyddade verk utan din tillåtelse kan du följa processen som beskrivs här https://sv.player.fm/legal.

Deborah has a pickle. She is considering implementing a Loyalty Scheme but isn't sure when and how to do so. She thought we could help.

We can help. The first question, then, is easy. Now. These things work. They don't create real loyalty, but they get people to keep buying from you, giving you more chances to earn loyalty.

It's the second question, how, that's a little trickier.

Many companies create these programs to foster loyalty, but often, they work more as reward systems, encouraging repeat transactions rather than building emotional attachment.

For example, although frequent flyer points, like Delta's SkyMiles, incentivize repeat bookings, they don't necessarily create genuine loyalty. Loyalty, we argue, is a deeply emotional connection rather than just a series of repeat transactions.

We explore the psychological principles behind why customers participate in rewards programs and why they might hoard rewards rather than redeem them. A concept called Medium Maximization explains why people often "save" points or miles, viewing them as a bridge to future rewards and experiencing reluctance to part with them. This phenomenon works in favor of companies, as it increases customer engagement without necessarily incurring a cost.

Additionally, the Goal Gradient Hypothesis illustrates how people accelerate their efforts toward a reward as they approach it, which is why punch-card systems, for example, are so effective.

While rewards programs have significant benefits, they can also have downsides. Complex or restrictive redemption policies can damage the customer experience, as can the use of extrinsic motivations that may unintentionally reduce intrinsic motivations.

For instance, when a daycare chain imposed a fine on late pickups, late arrivals increased as parents viewed it as a trade-off rather than a rule. Companies should, therefore, be cautious about unintentionally undermining genuine, behavior-based loyalty with overly complicated or restrictive rewards systems.

In this episode, we discuss customer loyalty programs' true purpose and impact. Ultimately, we recommend keeping loyalty programs simple and transparent. Avoid blackout dates or complicated redemption processes, as these can frustrate customers and reduce the program's value. At their core, loyalty schemes are tools to encourage spending rather than create loyalty, so Deborah—and you—should design them with that goal in mind.

Additional Takeaways to Listen for In This Episode:

  • How extrinsic rewards, like points, can decrease intrinsic motivation and affect customer behaviors.

  • The importance of aligning a rewards program with customer behavior patterns and preferences.

  • How Idiosyncratic Fit influences customers to engage more deeply in programs where they feel they have an advantage.

  • Examples of how poorly designed loyalty schemes can backfire and damage customer relationships.

  • The pros and cons of different reward types, like points versus cashback, and how this impacts customer satisfaction.

  • Understanding competitive rewards programs can help you refine your offering to stand out.

  continue reading

393 episoder

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