A loyalty program’s reward catalog is crucial to its success, so why do so many programs fail at offering a kick ass catalog? Don’t worry, with a little research and thought we can put lackluster catalogs to bed.
A common misconception is that rewarding the best customers drives the best customer behavior towards the brand. If the rewards catalog is such a critical part of a loyalty program, then why is the catalog the least understood and most neglected part of the loyalty toolkit? What marketing managers have to understand is that the rewards catalog is the most important weapon at their disposal. It can influence participation levels and therefore the success of customer loyalty programs.
Often the approach to the rewards catalog is an afterthought and is relegated to the program manager to come up with the best catalog they can manage, or the catalog is quickly thrown together. Meaning that there is little discussion about the attractiveness of the rewards to the company’s target audience. The catalog is quickly wrapped up so the program can be rolled out. Therein lies the biggest misstep.
A rewards catalog has the potential to have a tremendous impact on a loyalty program – for good or bad. Just as a well conceived and properly curated rewards catalog can boost response rates phenomenally, a poorly chosen catalog can drive response rates down drastically.
But the impact doesn’t end with response rates. In the mildest cases it can lead to what is known as “redemption inertia” (where participants in the program accumulate enough points but never redeem them because the rewards just aren’t exciting enough). It can also result in poor participation, high attrition, and most importantly, frustration among the program members. Needless to say, this will adversely affect future initiatives and derail the loyalty program altogether.
You might ask, what factors lead to redemption inertia and low participation levels? At a high level it boils down to a lack of attention being paid to the selection of the rewards for the catalog. More specifically, the main reasons are:
- Minimal excitement value – Rewards catalogs often fall short because they don’t excite the members. Sadly, this is one of the most common reasons for low redemptions
- Lack of variety – A catalog that contains only a few items in each redemption level provides very little choice and leads to redemption inertia
- Reward intervals – The points gap between different items in the catalog and what it takes to attain the next level has an effect on redemptions. Reward intervals that are too far apart will lead to irritation amongst program members, in addition to banking large unusable points balances
- No aspirational rewards – Related to the excitement value, the aspirational threshold determines the affect the catalog has on engagement. In other words, if there are no aspirational items (or if they are unattainable), the threshold can become a depressant for engagement. Leaving consumers feeling like there is no point in attempting to earn the big rewards
How do you curate an incredible rewards catalog that invigorates members into action? Unfortunately, there is no magic formula for creating a powerful catalog, other than putting in the work. But there are a few simple steps you can follow that can significantly improve the effectiveness of your program:
- Profiling – Characterize the program members in painstaking detail. This includes demographic characteristics and their likes and dislikes. The more information the better.
- Analyze the past – If you have an existing program, study the redemption patterns in your current database. Which items were redeemed the most? Which were ignored the most? What were the point values of the top performing rewards? This will help you determine which rewards should make up the new catalog and what the point values should be.
- Member distribution – Study the distribution of your program members across different purchase levels. How many of them fall into the lowest and highest purchase thresholds? What is the average purchase level for the target audience? This will help you determine the reward intervals and where to have the most reward choice.
- Rewards catalog selection – This is the final step in the catalog building process. Study the information on member profiles and their points earning capacity to understand their aspirations. What is the maximum number of points that they can earn during the program lifetime or points cycle? What is the best reward that you can afford to offer for this value?
Curate your rewards catalog carefully based on questions like these and make sure that you have a solid combination of fun, useful and aspirational items in the catalog.
Creating a rewards catalog is a grueling task. The rewards catalog is perhaps the most misunderstood and underutilized tool at the loyalty manager’s disposal. But it is also one of the most persuasive mechanisms if used properly. A well researched and planned catalog can make the difference between a mediocre or wildly successful loyalty program.