The biggest decision customers have in the buying cycle is "who."

Who has earned their business? Who should they select for the purchase of a product or service?

Sometimes, that decision is easy, decided by competitive pricing, better service or faster delivery. But when there is little difference between two or more providers, the incentive of rewards through a loyalty program can often help to influence the final decision.

That is, of course, if the rewards themselves are appealing. But sadly, more often than not the opportunity is missed and the difference is negligible. Brands offer the same earn and burn (redemption) opportunities, through the same set of partners.

Loyalty programs are a valuable source of insight into the customer and their needs. As personalization of the core customer proposition becomes more prevalent (with brands seeking to use data they have on the customer to make their offer relevant), the role of the loyalty program in generating that data is key.

But for this to work, the customer needs to feel that sharing their data with the brand is worth it; and the rewards offered have to have sufficient appeal to the customer.

Choice in Redemption to Fuel Loyalty

Of course, innovation and understanding from the loyalty program provider regarding the options of choice presented to the customer are absolutely essential.

With greater demands for relevance from members, loyalty programs often need a loyalty partner with access to a rewards network that has the scale and depth to satisfy all member requirements. While many travel brands already have a broad range of associated partners, a reward program that offers true relevance and attainability for all of its members often requires third-party support.

To build on this, the shift towards more customer choice isn’t only restricted to loyalty programs.

The rise in mobile device usage is another area where choice plays an important role. As payments via mobile rises, services like Apple Pay or Google Wallet are encouraging customers to use their phones in the same way they’ve previously used cash, debit/credit cards and also how they keep track of the reward programs they have signed up for.

Again, it is differentiation — this time by payment choice and device — that is helping to keep customers locked into a program, but more crucially keep them buying.

A successful example here is the retailer Best Buy, which allows customers to earn points via tapping into its proprietary app while in-store and also offering mobile-exclusive deals to encourage downloads of the app.

The app is then used to track points and redeem when needed — via mobile payments. The retailer, previously focused on price-comparison, has now turned to mobile to differentiate but also offers in-store incentives. It also integrates its loyalty program through the online and offline world.

Going the Extra Mile for the Customer  

Loyalty programs and choice are by no means just restricted to the retail industry. The travel industry has always played a major role in the origins and development of loyalty programs, with early frequent flyer programs dating back to the late 1970s and early 1980s, with the likes of Texas International and American Airlines, respectively.

Despite the travel industry being such an influencer and early adopter of loyalty and reward programs, it’s fair to say that many consumers would, from a topline perspective, view a lot of today’s travel programs as “quite similar” in terms of approach and value.

With airlines competing on pricing, schedules and the customer experience, it’s amazing just how alike their frequent flyer programs are. Earn and burn (redemption) opportunities are often the same, with the same partners and broadly the same offers. Offering a wider choice of rewards is a key (and relatively simple) way a program can differentiate itself from others.

Our recent study looking at the Value of Redemption echoes this. It revealed that more than 60 percent of travel loyalty program members actively look for more choice of reward options when selecting/joining a loyalty program provider.

It also showed that members are more likely to continue spending with a brand after they have redeemed points/miles on items that are out of the usual core redemption categories of flights, hotel stays and upgrades (77 percent compared to 71 percent), something often referred to as non-core inventory.

Specifically looking at the behavior Collinson Latitude describes as "burning drives earning," members have voiced their preference for more choice and program providers can clearly see the value add. In short, the selection of an increased (but relevant) choice of rewards in a redemption program, through the successful interpretation of data, results in happy loyalty members and happy participating brands.

Redemption to Build the Value Proposition

Essentially, any loyalty program needs to drive up the value proposition in the eyes of the customer - whether that comes through greater choice of rewards, payment via mobile, customer exclusivity or to fulfill a need for convenience and choice.

Ultimately, it is differentiation in the offering, fueled by clever data, which drives this forward. Choice in particular, as we’ve seen from the real-life business examples discussed, is a key driver – empowering the customer to make the most of the loyalty program – the mantra ‘spend more and thou shall be rewarded’ springs to mind.

The best experiences in life promote advocacy — this halo effect promotes further engagement and results in a thriving program.

Some of the best loyalty programs implemented have had the advantage of not needing much time to establish themselves — the reward on offer is desirable from the outset – playing into the need state of the customer.

From a brand’s perspective, this type of advocacy protects them from the threat of needing to compete in price wars — a sure-fire way to encourage one-off purchase at best.

In the eyes of the customer, a loyalty program needs to add value to the base expectation and be a part of a positive, attainable user experience.

This value proposition is far greater an attraction than anything that can be filtered on price. It’s an approach, from a long-term business perspective, that can fuel sustainable growth through loyalty and value generation (or similar).

This value proposition can be strengthened further by giving the customer the choice they crave, to redeem on the rewards they want, enabling an anytime, anywhere shopping experience — that is rooted in customer data and insight at its very core.

Title image "People" (CC BY-SA 2.0) by Hernan Piñera