• February 8, 2017
  • By Lee Barnes, leader, Data Insights team, Paytronix

Time to Change Your Rewards Program? Here Are 4 Signs

Making a change to your rewards program can reinvigorate your brand, increase revenue, and improve profitability. However, changing programs is a large undertaking and should only be done when you know the new program will produce substantial benefits.

There likely will never be a perfect time to upgrade your program, but there are some signals that suggest it’s time to give it serious consideration. Here are four signs to look for:

1. Declining loyalty penetration and new member enrollment. If the share of checks associated with your loyalty program is declining, it could signify that tenured members are lapsing, and that the program is no longer motivating them to come in. If new member enrollment is down, it could be because new guests are not interested in the program, or that team members in the store have stopped promoting it.

Your program should achieve a minimum of 15 percent loyalty penetration. This means at least 15 percent of your checks should be associated with the loyalty program. Many top brands have loyalty penetration numbers that far exceed the 15 percent benchmark. Panera, for example, has 50 percent loyalty penetration. If you notice your loyalty penetration rate dropping, it may be time to change your program. If it dips below 15 percent, it’s probably past time to make changes to your program.

2. Evidence that customers are “gaming” the program to their advantage. Have customers figured out a loophole in your program that they are using to their advantage? Is your visit-based program increasing the number of split checks, and slowing down your operations? Are customers buying low-priced items to earn points, and then redeeming them for expensive items? 

Look at the average check value of your program members and watch which direction it trends over time. If your average checks are declining in value, chances are your program members have realized that they can spend less per visit to achieve the same result. If your program mirrors the classic Starbucks model and you give credit for each visit and reward one free menu item of any value, pay attention to the value of the redeemed rewards and match it against what they spent to earn that reward. If you notice the gap between average member spend and redeemed reward value closing, you likely have members who have figured out how to spend the least to earn the most.

3. Franchisees and operators increasingly complain that you’re just running a discounting program. This often goes hand in hand with the above signals. Have you been reporting positive results to the field? Is your program enabling you to run targeted promotions to drive profitable incremental sales? If not, operations may be unclear on why you have a program, and you may need to make some changes to get them back on board.

There are two things to look at. First, evaluate member spend versus nonmember spending. If the former group’s average check is equal to or less than the latter group’s, your franchisees and operators may be onto something. Next, look at your program’s growth rate. If you are not converting 15 percent of nonmembers to members in a given time period, your brand is not enrolling new program members at the rate that it should, and it may be because your franchisees and operators have lost confidence in the program.

4. Your program is conflicting with your corporate strategic objectives. Menus change, concepts evolve, and priorities shift.  It’s imperative that your program is always aligned with corporate strategic objectives; if your brand’s overall priorities changed and the program didn’t, then that's a problem.

When you launched the program, perhaps you were focusing on driving visits, but now you’re focused on driving attach rates for add-on items. You may have launched a visit-based program that did a good job driving visits but did not encourage additional purchases. If your program is not rewarding the activity you’re trying to encourage, then it probably needs modifying.

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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