Five Considerations When Designing a Rewards Program
Rewards programs can invigorate your brand, increase revenue, and improve profitability. By enticing customers to visit more often and spend more with each visit, a rewards program can deliver outstanding financial returns.
However, there are many different types of rewards programs, which makes it challenging to choose which one is best suited for your brand. Ultimately, there are five considerations to always keep in mind when designing a rewards program:
1. Design for "silver" customers
These are your 50th to 80th percentile customers. They will typically visit about twice every month. Silver members are the rewards program’s sweet spot because they have indicated some preference for your brand, but you are likely just one of several in their consideration set. A well-designed program can act as a tiebreaker and drive them to your locations.
2. Get customers to their reward, fast
Customers should earn their first reward quickly. When someone enrolls in your program, they need to see immediate value in it. Their first reward needs to happen within the first couple of visits so the customer can see the value in being a member. If customers enroll in your program and do not see the value in it within the first couple of times they are active in your program, they could fall off and stop being participants in the program. By providing customers with a quick reward after enrollment, you are able to demonstrate the benefits of participating necessary to keep them active.
Additionally, targeted silver customers should be earning their rewards fairly frequently. This is because this group is the bread-and-butter of rewards programs. Keeping these customers happy and active will make the largest impact to your program. If you are doing a points program, have low-value redemption options such as coffee or candy that they can earn every four to six visits, at least.
4. Reward good behavior
Are you encouraging good behavior and discouraging bad behavior? The definitions of good and bad behavior will vary for each concept, but good behavior at your brand likely involves visiting more often and buying more on each visit. Customers who come in once every four months and buy the cheapest items in the store should not be rewarded the same as those who come into the store once a week to purchase items and gas. Those who engage most frequently and spend the most should earn the biggest rewards.
5. Leverage vendor funding to drive your results
Vendors’ interests are not always well aligned with your bottom line. If their promotion switches volume from, say, Coke to Pepsi, then that’s great for Pepsi. But if it didn’t drive any extra traffic into your store or any incremental spending, then what did it do for you? Think about who owns the customer. They are yours, not the vendor. Vendor funding can be used in different and unique ways in order to drive more visits and spend. A good use of vendor funding would be to leverage those funds to drive more purchases of an item and, in return, reward the customer with bonus points.
Regardless of the concept, any rewards program has two goals: drive members to visit more often; and spend more when they visit.
Your customers have choices about where they shop. Make your convenience store their favorite destination with an enticing program that inspires regular visits and cultivates a long-term connection.
Editor’s note: The opinions expressed in this column are the author’s and do not necessarily reflect the views of Convenience Store News.