Is Your Rewards Program Not Delivering The Results You Want?
In 2024, companies are getting lean and looking for a better way to market and get more revenue. Many teams have come to the thought of implementing a loyalty program. It’s a great idea; you make more money using customers you have already paid to acquire. You probably have tried a rewards program and it probably didn’t work out like you thought it would. Here is why your rewards program has failed.
And you’re right for thinking that.
- It’s 5-25x more expensive to acquire a new customer than to keep an existing one.
- 65% of a company’s revenue comes from the repeat business of existing customers.
- You have a 60-70% chance of selling to an existing customer versus a 5-20% chance of selling to a new prospect.
- A 5% increase in customer retention correlates with a 25% increase in profit.
- The top-performing loyalty programs boost revenue from customers who use them by 15-25% annually.
- 37% of consumers will spend more money with brands with which they have a retail subscription, as will 28% of consumers belonging to membership programs and 27% of loyalty program members.
Do we need to go on? You get the point; a few Google searches will show that rewards programs greatly impact business revenue. They give you what you want as a business owner.
- You work hard to get your customers. You spend a lot of money on ads, marketing, influencers, retailers, etc., to help get your product into customers’ hands. You want those customers to stick around and reduce churn!
- You want to create a community around your brand. No one wants to devalue their brand or develop a lack of connection around the brand. You want a brand that has a strong community of people connecting around your product and niche.
- You want more consistent and reliable sales. No one wants to rely on ads, influencers, or sales to sell products. You need a way to consistently sell products without NEEDING to spend money on these channels.
- You want more customer referrals. Word of Mouth Marketing. It’s the OG, the king of marketing, and you WANT it. You probably NEED it in today’s market and world situation. But how do you get that holy grail?
Most companies turn to a “loyalty program.” This is not a bad move, but open up your thoughts and be open to rethinking “loyalty and rewards” for just a minute.
What is a loyalty point?
Great question… It’s not universal, but it’s almost like a new form of currency that companies create; the value and the rewards are unknown, the rewards are not integrated into the product, and they want you to earn them for purchasing and doing other actions. Then, they hope that the customer will use them on a subsequent purchase for a discount.
Loyalty points are money given back in the form of in-store credit, but instead of giving cashback in in-store credit, it’s a digital currency with an unknown value.
But the purpose of the “loyalty point’ does not match its name… It’s a digital currency for a future discount. The goal and incentive behind it is incentivizing another purchase for a discount.
That doesn’t create “loyalty”. What is “customer loyalty”? Well, it’s an affinity or connection a person has to a brand that makes them choose that brand over competitors. You compare the value of one brand to the next and make your purchasing decision based on that.
- Price is the #1 factor keeping customers loyal to their favorite brands.
Most people value prices so high that is how you gain their loyalty. It’s cheaper than the rest. It’s a sad realization when you realize that’s why you shop where you shop. But there are ways you can buy loyalty.
Brands go about creating a rewards program but here are some stats about the average success.
- Customers belong to 15 reward programs on average, but they’re only active in 6 of them. (Take into acount amazon, costco, delta, etc. there is very few active in a DTC rewards program)
- Most Loyalty Programs have an engagement rate of 40% or less. (Huge wasted opportunity! Imagine if we can get that to 90%!)
- You can see, most reward programs are NOT delivering, but those who have it figured out. It’s their biggest asset. They have it figured out.
I won’t go into detail here, as we have another article about what loyalty really means and how to build it up. But in short, it’s about giving more VALUE. When the value that the customer sees in your brand outweighs the rest of the competition, you build loyalty.
You can add that value in many different ways, and a “rewards program” is a great way to give more value back to the customers.
So when we talk about a “loyalty point,” it’s just a future product discount. This reduces the product’s PRICE, which is the number one factor in creating loyalty.
Let’s look at ways we can improve your rewards program, provide more perceived value to your customers, and get that real loyalty to your brand beyond just a loyalty point.
Integrating Your Rewards Program Into Your Customer Journey
You spend so much time crafting your customer journey and product as a brand. You make it as easy as possible to shop on your brand’s website while conveying your story and your values, which is 100% what you must be doing.
The better you can do that, the better your products will sell. The more you can convey the value of your product, the more likely they are to purchase it.
So telling them the story, how it came to be, the problem it solves, the specs about the product, what makes it unique, and what they’re going to get out of it is all exactly what you need to do.
When you craft this messaging and journey, do you think about your rewards program and talk about what you’re going to be giving them for purchasing? Or is it all about what the product delivers?
To create an excellent rewards program, it NEEDS to be integrated into your customer experience. Think about the rewards programs that drive billions of dollars. Delta, Sephora, Amazon, Costco, etc. It’s all about the Skymiles points and the Costco membership; heck, people couldn’t live without Amazon Prime.
Their rewards and incentives that get people hooked are DEEPLY integrated into their business model. So you are just installing a widget and hoping it works, but it won’t cut it.
We’re working on an article that will tell you EXACTLY ways you can integrate your offering into your customer journey and make it a real value add that you can give your customers.
But look at your customer journey in detail, and think about how you can educate and market your rewards program and the value it provides through the ENTIRE customer journey. Not just after the fact in the emails.
Mysterious Rewards
What is a “loyalty point” or a reward worth? No one knows. Think about it: how many places do you shop from offer points? What is the value of those points? Of course not.
Brands love to make a mysterious reward point value, but guess what? That only confuses customers. This method works when you have a proven rewards program that people love and use and will put up with. When you already have lots of loyal customers.
But when your rewards program isn’t working, like most programs, you need the value to be CLEAR. Make the point worth a dollar so they can easily recognize it. Or even offer cashback instead of a loyalty point. Everyone loves cashback, and it’s a familiar reward.
- 8 out of 10 consumers surveyed indicated they prefer rewards like cashback rather than points, miles, or other types of credit.
Think about credit cards; people obsess over cashback. It’s a reward they know and love, and your offering gives more VALUE back than your “loyalty point” does, and that’s going to lead to more loyalty, which is people picking you over competitors because of the value you give.
Uncertainty About Your Brand
Many of your customers are trying you out for the first time. That means they need to find out if your loyalty program is something they will benefit from.
- 88% of consumers say it takes three or more purchases to build brand loyalty (Yotpo)
And many need up to 5 purchases to “become loyal.” But this just means you have a product they love, probably a consumable you’re buying a lot.
You have to turn these skeptics into believers, and if you offer loyalty points right out of the gate, they won’t be excited about that. That’s different from the actual value you give them because they want to avoid your points at this stage.
When you have earned their loyalty, you offer points, and they will love them.
Never Earning Enough Points
Since most people don’t know the value of a point, they don’t know if they will stick around, and they have no idea if they will EVER earn enough points to make your “loyalty program” worth it to them.
So they skip over it.
This is the sad reality of most reward programs, but that is exactly what we’re fixing here 🙂
So What Does It Take To Create a Good Rewards Program
Before we tell you what to do with your business, let you know a little about us. We have been in the supplements and CPG space for 30+ years; our main expertise was creating rewards programs that drove sales. So much so that we have driven over $6B in total revenue in our programs.
We took our knowledge and started our own CPG company. We scaled it to $220M a year in revenue and then exited a few years ago. We know how to create community, create sales, and run a business. So take this advice for what it is worth.
Post Purchase Funnel
This is what we call customer-driven sales. It’s about integrating your rewards offering into your business, treating your rewards program like a funnel, and funneling your customers into becoming lifelong advocates and word-of-mouth engines.
Here is a graphic about our funnel.
Here are the steps
- Awareness and Upsell Phase: You can obviously read the graphic, but this is about integrating the rewards program into your product offering and the customer journey. Make them aware that you’re giving them X rewards for supporting your brand. This is a crucial step to getting them into the funnel and progressing to become loyal brand customers and ambassadors.
- Instant Adoption Phase This is crucial; this is the add-to-cart moment for the funnel. We want to get them into the loyalty program, and in this step, we showcase all the rewards they have right as they purchase or even in the checkout process and get them to join the rewards program. The key here is clarifying the value and having the rewards they want. Please read our article about how much value to give.
- Longterm Adoption Phase If they need to sign up right as they purchase, we want to create an email marketing campaign to remind them about their rewards. We could even use SMS to tell them about the missed opportunity and send them a unique offer to get them to buy more.
- Education Phase Now that we got them into the rewards program, we worked on educating them about the rewards program, how it works, and what value they will be getting from it. This is where Kwik shines on educating customers about sharing a link and why they should share. We do this better than anyone.
- Retention Phase This is like marketing campaigns around your rewards. Temporary 2x cashback on all purchases, brand giveaways, 2x commissions, etc. We constantly have new promotions running around your rewards program to keep people excited and engaged about the program.
Conclusion
This seems like a lot, but it’s because creating a successful rewards program is more challenging than installing a widget, no matter what someone wants to sell you. It requires thought, marketing, strategy, etc.
Those programs that CRUSH IT spend BILLIONS of dollars perfecting the program and getting their customers hooked on it.
The upside of creating a community, loyal customers, and a word-of-mouth marketing engine is that you have thousands of people buying and sharing your product on autopilot and becoming obsessed with your brand.
If you want to skip the curve on creating a program that crushes it, we can send you a free custom proposal if you answer a few questions, and you can see what we can do for you without even having to sit on a sales call.
We will even guarantee that our plan will generate AT LEAST a 10% sales boost, or we won’t make any money.
Get a free rewards program proposal here!