Reward Redemption Pointers
Rewarding customers isn’t easy. If you give your customers points to redeem at a later date, they may or may not use them. If your customers take action, your team will have to continuously define loyalty by assessing how your loyalty program is performing. Creating the right reward structure for your business is key, yet more success can be found when your business hones in on its redemption structure.
Will your customers use their points to receive a percentage off future orders or a specific amount of currency off future orders? Which option is right for the business and why?
Before we go into which option is better for your business, let’s take a look at the famous rule of 100 by Jonah Berger.
“The Rule of 100 says that under 100 percentage discounts seem larger than absolute ones. But over 100, things reverse. Over 100, absolute discounts seem larger than percentage ones.”
- Jonah Berger, Marketing Professor and Author of Contagious
Here’s an example to illustrate this rule. Imagine this: we’re passing the pipe. We tell you you can have 25% of the green if you share five of the ten brownies you’ve made. If you’re prone to holding onto the pipe and sparking outrage within your circle of friends, this deal may be great for you. However, let’s say you only wanted a single puff. Does the deal make sense? Five of the ten brownies you made is 50%. This example shows how people consider rewards.
Jonah Berger’s strategy works best when it is paralleled with either tiered discounts or custom discounts.
What’s the difference?
Tiered discounts refer to the customer reward journey. When your customer opens up their Wallet, they have a series of offers. These offers function as deals. if your customer is willing to spend a certain amount of money, they’ll be rewarded with points. These points can be utilized towards future purchases. If customers choose to redeem their points for percentages off future purchases, your company should give significant discounts such as 25% off purchases of orders over $500 dollars. This will encourage customers to spend more money for a greater discount. A key benefit of this structure is that every customer has access to the same rewards journey. If your customer utilizes their 25% off discount, they may refer a friend to co-purchase.
Custom discounts are special discounts that can be given to customers to either make them feel special or increase customer satisfaction. For example, if a customer complains about services and products received, your businesses’ customer support team can rectify the situation and give more points in the form of a custom discount. Custom discounts can also be used to control inventory. If your operations team is struggling to sell a particular product, use custom discounts to move more units of a specific product. These custom discounts can be given to customers who have completed their tiered discount journey.
The Rule of 100 helps us understand how customers perceive deals. Getting people to spend more than they normally would is an art and a science. Here are three actionable pointers to decide whether your business should give customers the opportunity to redeem their points for percentages off purchase or a specified amount of currency off of purchases.
Creating a Budget For Discounts
Unlike Oprah, most businesses aren’t financially able to give away products. Collaborate with your operations team and supply chain leaders to decide if points should be used for percent off orders or currency off orders. If your business offers absolutes (currency) then you’ll want to consider product margins and profit margins. How much do you pay your supplier for specific products and what is the profit margin from each of those sales?
Unify Sales And Marketing Data
When your customer opens their wallet, they’ll have a journey waiting for them. Some customers may receive special discounts (birthday) while all customers are provided the same reward journey. Alpine IQ unifies all of your data in one place for your business analysts and marketing teams to perform cluster analyses. After implementing specific reward structures, listen to your customers through the data.
Utilize Your PR Team
If your retail team is promoting your loyalty program in-person, use operations data and sales data to discover which budtenders drive the most adoption for your program. Have your team ask customers which they prefer: percentage off or currency off future purchases. You don’t need a public relations firm to help your organization build mutually beneficial relationships with the public. Your budtenders are your primary PR team. Empower them to use Alpine IQ’s online technology to power their offline efforts.
Your company’s financial performance will be sculpted by the type of loyalty program you deploy. To differentiate yourself from your competitors and grow your business, align Alpine IQ’s loyalty technology with your business’ goals to power your most important work and grow your business.