Rewards programs are a popular tactic used by marketers working to increase customer engagement and retention, and yet many of these programs fail to yield desired changes in customer behavior, driving little ROI or in many cases, appearing as a cost center on a company’s balance sheet. Forrester research’s 2013 State of Loyalty Programs report revealed that less than half of customers (45%) join offered loyalty programs, and of those only 16% are actively engaged, earning and redeeming rewards. this bleak data serves as a reminder that the modern consumer is savvy—capable of seeing through marketing “window dressing” that provide them with irrelevant benefits and little real value. Marketers working to influence customer behavior through a rewards program must approach program design and execution thoughtfully, taking time to fully weigh the tradeoffs of various program structures and components to ensure fit for their customer base and company.
This white paper delves into a foundational structural component of rewards programs: Earn Models. Earn Models determine how customers earn value in the form of benefits, rewards, or currency—points, dollars, etc. The dynamics of how customers earn value will not only significantly impact their experience of the program, but implicitly help or hinder a marketers control over various retention levers. In addition to their impact on customer experience, Earn Models are the primary driver of program costs. understanding the different types of Earn Models, and the associated tradeoffs, is imperative for the creation of successful programs that mitigate the risks of low customer engagement and costly operations.
There are four primary Earn Models explored in this white paper:
1. Membership
2. threshold
3. Interval
4. Stored Value
When analyzing these Earn Models, companies should choose one that will “anchor” the program. this anchor model will dictate the customer’s primary earning experience and most heavily affect their perceived program value. Although many programs are ultimately a hybrid of two models, choosing a model to anchor on is one of the most important steps of rewards program design, and should be done based on consideration of the particular Earn Model’s ability to drive unique objectives.
This paper equips marketers with the tools to evaluate the tradeoffs of each Earn Model—including operational complexity, ability to impact retention levers, and general pros and cons—in order to pick the one that best suits your company and customers.
Lenati is a marketing and sales strategy consultancy that helps companies acquire, grow, and retain customers. Lenati helps clients build market leadership, whether through radical innovation or intelligent evolution. Lenati’s services span five primary areas of expertise, including, Go-To-Market Strategy, Customer Experience, Digital Customer Engagement, Customer Retention and Loyalty and Sales Performance.