• March 6, 2017
  • By Lee Barnes, leader, Data Insights team, Paytronix

Modifying Your Rewards Program? Use These 3 Design Principles

Finally, consider guest behavior. Are you encouraging good behavior and discouraging bad behavior? The definition 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. Your program should reward this. Your best customers should be rewarded the best, and the customer that comes in and buys the cheapest item on your menu should not be rewarded the same as the person that comes in and buys dinner for their whole family.

Visit-based programs that don’t regulate what constitutes as a visit may find themselves rewarding bad behavior, particularly if their menu contains items with a wide range of prices. If there are no restrictions in place to prevent customers from buying the cheapest menu items, only to redeem their earned reward for the most expensive menu item, chances are some of them are going to exploit that loophole.

Regardless of the concept, any loyalty program has two goals: drive members to visit more often and spend more when they visit. If your program isn’t encouraging members to perform the latter, then they probably won’t. A rewards program isn’t going to compel someone to buy more than their standard purchase if the member is not incentivized to do so. And if the member does buy more, and if they know they can receive additional visit credits if they pay for their items in separate transactions, they may do just that. Now your lines are slowing down, and your customers waiting to pay for their purchases are getting increasingly angry, thus making your program a detriment to the guest experience.

OK, I get it. I need to change my program. Now what?

If your program doesn’t meet one or more of the program design principles and you decide to make a change, it’s time to start exploring how to go about initiating that change. These three elements are relatively easy to change, but can make a big impact on your program’s viability:

Reward threshold. What does it take for your members to earn a reward? How much do they have to spend? How often do they have to visit? You can answer these questions regardless of your core program. By reviewing program members’ average spend per visit, spend-based programs can determine how many visits it will take for members to earn a reward, and visit-based programs can determine how much members will spend. If it’s too easy for members to earn a reward, you may be losing money. If members have to do too much to earn a reward, they don’t feel like earning a reward is worth it. Visit-based programs may see members try to game the system to reduce the cost of earning a reward. If the reward threshold is reset to a number that makes more financial sense, the program can become more viable.

Reward value. What’s the value of the program member’s earned reward? Are they receiving too much? Too little? Now that you know the core program value benchmarks discussed earlier in this paper, you can answer this question. This goes hand-in-hand with the reward threshold. Higher reward thresholds should ensure that the reward value keeps the core program value between 5 and 8 percent.

Birthday rewards. This is an easy thing to change and can go a long way toward helping your program earn a more positive reputation. If you improve the birthday reward, you may give members a greater incentive to use that reward and spend more during that birthday visit.

When you decide it’s time to change your rewards program, look to these elements first to ease the transition.

Data analytics expert Lee Barnes leads the Data Insights team at Paytronix , a leading provider of reward program solutions whose guest engagement platform helps more than 300 restaurant and retail chains manage and grow more than $18 billion in guest spend. Barnes is a self-confessed data geek that can often be found digging into the data with his team to optimize guest engagement with more than 165 million loyal guests—through mobile, social and today’s most innovative digital marketing tools. His mathematics degree and his MBA from Harvard Business School gives him the unusual ability to both execute complex analyses and translate the results into ideas that business leaders can use.

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