How to build the right reward program?
WisePass has 4 activities, awareness, engagement, promotion and loyalty. This article will focus on loyalty.
Many businesses are running successfully with a large transaction volume until something goes wrong. Competition starts to heat up, other options for customers pop up around the corner or you simply need to drive revenue up and one of the most cost effective way is to rely on your existing customer base.
Quickly, many solutions pop up and among them the word reward or loyalty may pop up. The problem with that is the following, it is poorly designed and rushed. This article intends to focus on solving such problem for people looking to build an effective reward program that will lead to clear and sustainable revenue increase.
WisePass will feature 5 important aspects in the design of a reward program and will later introduce some case study for businesses to look at.
With its Membership Rewards, American Express is one of the best rewards program designed in the world
1 Defining Goals and Metrics
Clarity and Alignment: The reward system's goals must align with the overall vision and be clearly communicated. Lack of clarity leads to confusion and undermines effectiveness.
Measuring Desired Behaviors: Identifying the specific behaviors you want to encourage can be tricky. Focusing on outcomes alone might miss valuable efforts or create unintended consequences.
Data Availability and Accuracy: Reliable data is crucial for tracking progress and awarding rewards fairly. Lack of data creates ambiguity and potential bias.
2 Designing the Reward Structure
Intrinsic vs. Extrinsic Motivation: Consider the balance between intrinsic (enjoyment of the task) and extrinsic (external rewards) motivation. Overreliance on extrinsic rewards can diminish intrinsic motivation.
Reward Fairness and Equity: Subjective judgment in reward allocation can lead to perceived unfairness and demotivation. Establish clear criteria and objective measures for reward distribution.
Reward Value and Variety: Rewards should be valuable and meaningful to the recipients. Consider diversity in rewards to cater to individual preferences and avoid demotivation due to limited options.
3 Implementation and Management
Communication and Transparency: Clear communication about the reward system's purpose, rules, and criteria is essential to gain buy-in and trust.
Consistency and Enforcement: Inconsistent application of the system erodes trust and diminishes its effectiveness. Ensure consistent evaluation and reward application across individuals and situations.
Cost and Resource Allocation: Implementing and managing a reward system requires resources. Consider the cost-benefit analysis and ensure sustainable funding for long-term success.
Chase as a bank has released one of the most successful rewards program in the US market
4 Unforeseen Challenges
Unintended Consequences: Reward systems can sometimes have unintended consequences.For example, rewarding individual performance might hinder teamwork or creativity.
Gaming the System: Some individuals may try to "game" the system by focusing on achieving rewards rather than the desired behaviors. Design the system to be robust against such manipulation.
External Factors: Economic fluctuations, changes in company culture, or new market trends can impact the effectiveness of the reward system. Regular evaluation and adaptation are crucial.
5 Additional Considerations
Target Audience: Tailoring the reward system to the specific needs and preferences of the target audience (e.g., employees, customers) is key.
Personalization: Consider incorporating personalized elements in the reward system to increase its relevance and effectiveness.
Technological Integration: Technology can simplify reward system management, data collection, and communication. However, ensuring user-friendliness and addressing potential security concerns is important.
By understanding these challenges and carefully planning your reward system, you can increase its effectiveness and achieve your desired outcomes. Remember, the ideal reward system is flexible, adaptable, and continuously evaluated to ensure its alignment with evolving needs and goals.
