Online Rewards: Lower Program Costs, Give More Back to the Customers

Online rewards programs offer the kind of extraordinary savings to companies and higher customer satisfaction that are very real and too good to pass up.

Perhaps more importantly, the programs and the immediate information online surveys can provide create a means to capture greater customer share by discovering what's on customers' minds faster.

In the realm of program costs, even smaller brands can implement loyalty programs when you eliminate the expense of program mailings with online communications.

Creative. Postage. Paper. With a typical loyalty program that relies on mailings, you're looking at a tab of $350 to $600 per thousand names per mailing. Set up an online rewards program, however, and your incremental cost for communicating with customers via e-mail is virtually free.

Ditto for the savings in time and money when you conduct online surveys vs. mailed questionnaires, phone-based interviewing or focus groups. Any one of those can cost upward of $30,000. Executed online, you can save up to 50 percent or more. However, a poorly designed Internet-based loyalty program can undermine your ultimate goal. So the question is, what do you need to know to create an effective online rewards program?

First and foremost, know your customer. That means understanding what rewards offer the most appealing value proposition to them. Are they oriented to value and utility? Fun? Do they want to make a fashion statement? Pre-program research will answer those questions. At the same time, a company must construct a rewards program that balances the attainable and the aspirational. This means surveying customers first to discover what premiums are most appealing, setting entry-level premium awards at a level most frequent customers can attain, then establishing higher value rewards to which heavier purchases can aspire.

Should you offer monetary or nonmonetary rewards? To control costs and manage consumer satisfaction better, it's best to offer nonmonetary rewards where the perceived value can be made to appear greater than the actual cost of the item (research, again!).

Knowing your customers not only means understanding what they like but identifying which of them is most valuable to you. That effort should consist of segmenting customers by purchasing frequency and brand loyalty attributes. Perhaps more importantly, it pays to find out which segments hold the greatest incremental profit potential. It may be more productive to appeal to loyal frequent purchasers with no brand preference, for example, than attempt to motivate moderate or light users of your product or service.

And by all means, look into what makes your competitors' loyals tick. Consumer research among heavy users of a product or service using online research panels is central to discovering what makes them brand loyal and what can make them jump ship.

Tracking studies are indispensable in gauging rewards programs, and the more real-time those studies are the better. Using Internet-based electronic tracking gives marketers the advantage of seeing near-instantaneous measurements of consumer awareness, participation/redemption and attitude. Loyalty programs for branded credit card usage, for instance, track purchases of food, gas or other items — data that is collected by the card's issuing bank. It then can be fed via the Internet back to the loyalty program administrator for daily tracking, awards accounting and analysis of purchase patterns indicating reward preferences.

These online insights convey how they feel about your brand and whether its image conforms to their image of themselves. It also may tell you if they're likely to increase their loyalty in the future and boost sales through positive word of mouth.

A well-planned online rewards program is one that shares value with a customer in proportion to the value the customer's loyalty creates for the company.

In other words, you get what you give. But when this exchange is conducted electronically, the right online rewards program can get marketers what they want even faster. And with fewer resources needed for program costs, you can afford more and/or better program premiums.

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