Learn from Tim Hortons’ loyalty program revamp and discover how to overcome common challenges loyalty programs face, including customer value, program complexity, and measurement.
Tim Hortons recently updated its loyalty program, More Tims, More Rewards. The program was redesigned to make it easy to get rewarded. The previous Tims Rewards program was visit-based, and guests earned the same points per eligible transaction – whether they made a 50-cent purchase or bought beverages and donuts for the whole family.
In the new program, points are earned for every $0.10. For example, a Tims Rewards member who spends $6.36 will earn 64 Tims Rewards points, whereas previously, they would have earned 10 points. Guests now earn ten points for every dollar they spend on their favorite Tim Hortons products. Loyalty programs function purely as an extension of larger business goals. The redesign of the redemption mechanics reflects this shift.
When implementing a rewards program to keep customers engaged and loyal, one eye must be on the future. Rewards, perks, and interaction methods that won’t scale with your company’s growth can present problems in future years.
The biggest obstacle is winning over the organization and gaining its acceptance and support. You might unknowingly be building the bottleneck preventing your business from creating a meaningful omnichannel connection with your consumers by harboring superficial reservations about loyalty programs.
For your rewards program to be fruitful in the long run, it should be consistently enjoyable for customers to interact with. That should remain true even as your audience increases and individual customers remain with the business for years.
Let’s start by addressing some of the typical issues with loyalty programs that your company could encounter.
Challenge: Loyalty programs lose money
“Loyalty programs are too expensive to implement; they will kill our margins; they are nothing more than loss leader initiatives, and that’s not our company’s game.”
Unless the program is poorly run or created, these statements are myths at best.
These claims are untrue for many businesses offering loyalty programs. The fact is that most firms that launch these programs will experience a return on their investment (ROI).
It all boils down to design and implementation, just as with any company project. Your return on investment is determined by how successfully your loyalty programs are designed and implemented and whether they are carried out per what’s ideal for your business and industry. Customers may find loyalty programs with significant discounts more tempting, but you risk seeing your margins suffer. The opposite is true: clients won’t be enticed to join your loyalty program and divulge their information (data) if you don’t offer them many reward points or price discounts.
Brands must constantly ensure that customer expectation is met. Sanjeev Nichani, Head – CRM and Loyalty at Apparel Group, explains how putting your customer at the center is essential to success. “You know the expectation is not met when a customer returns and tells you,” he said.
To manage customer feedback internally, it must be distributed across teams, customer-facing and otherwise. Loyalty teams must lead this charge, Nichani explains. “You are responsible for ensuring that the customer’s concern has been addressed appropriately. It’s not just the domain of an existing established brand; everyone who intends to drive a repeat customer has to do this,” Nichani adds.
The best strategy is to balance advantages or offers that appeal to customers the most and those with the least negative impact on profit margins. This is one of many reasons your company’s operators and financial staff must sit at the loyalty program table and participate in the discussion.
Challenge: Providing one size fits all value missing the customer value
If each consumer in your sector has distinct expectations, you might not want to offer a one-size-fits-all product or service. People don’t like to pay for something they don’t need, and if you provide one kind of service package or an excessively customized product, you risk making clients feel overpriced. In addition, if other companies in your industry have abandoned the one-size-fits-all approach, your lack of customization may put you at a competitive disadvantage. Customers who know they can obtain what they want from someone else will be left on the table.
“You cannot upsell more robust products and services using the “good, better, best” pricing model when you choose a one-size-fits-all approach. By varying your goods and services, you may access new revenue sources,” says Collin Larijani, Head of Solution Consulting, APAC-MEA Region, at Epsilon.
For instance, imagine how much money Levi’s would save if everyone wore the same size and style of jeans. Regardless of the trend, they would only need one template to work from and fewer and simpler machines and processes to manage the production. Yet we know this is a silly notion. Even with the best intentions and even data to back it up, this is what we frequently see in the loyalty space: A one-size-fits-all program that forgets the customer.
What does Levi’s do?
They invest in powerful machines with integrated processes that allow them to create thousands of combinations across size, style, color, and fabric. Then, they give the customers the power to choose what they want.
What can we, as marketers, do?
- Ensure we have a process and governance that allows for flexibility and can adapt to trends.
- Ensure our flexibility doesn’t ignore cost. The platform should grow alongside your brand and enable the marketing team to execute what they need, not wait for an expensive change request process and customized feature to be developed.
- Ensure we have the right set of diverse opinions, thoughts, and ideas coupled with proper data, insights, and segmentation to give the members the choice they want. The loyalty platform should be the enabler in identifying these insights.
Challenge: Loyalty programs are too complicated
“Complexity is your enemy. Any fool can make something complicated. It is hard to make something simple.” – Richard Branson
Loyalty programs aren’t always complicated. They might be if you build them that way or rely on other parties and several data silos and are compelled to devise some complex, flimsy method of bringing them all together. However, some of the most successful loyalty programs have straightforward designs that align with one or more important corporate objectives.
Examples of frequent metrics are revenue, client retention, and engagement. However, it relies on your business’s requirements, and marketing shouldn’t always be in charge of choosing those goals. Loyalty programs address corporate demands that go beyond those of marketing alone.
Planning a loyalty program with other leadership involvement improves alignment to meaningful business results and measurable business outcomes.
Challenge: Not monitoring the holistic business value of your program
“Oh no. Our member’s wallet share has decreased from last year – the program is doomed.” Not quite. Business value is driven more than any single metric or even a collection of metrics. And this is especially true when it comes to measuring a loyalty program. We have found that a single set of metrics often hides the actual value of a program. Value comes in multiple formats and differs for every brand.
“Start by creating a more holistic view by defining and using a diverse set of metrics at a segment level. To do this, you must activate the knowledge that every customer provides value to your business and use your brand’s unique insights to define a segment-level objective strategy,” says Larijani.
For example, do your best customers advocate engines more than revenue drivers? Are your consistent customers increasing their average spend? Are you measuring your new customer segment separately to ensure it grows and funnels into your repeat customers? Once you have clear objectives, what is the value of an incremental increase for each objective? Does a one percent intake in advocate referrals move the needle?
The technology you have should be embracing your ability to do this. Does it allow you to segment and measure at the segment level? Does it allow you to set benchmarks and alerts? Does it give you granular offer- insights while also providing the C-suite dashboards? If not, it may be time to look for technology that does.
Challenge: Loyalty program efficacy is difficult to measure
It may be easy to think of loyalty programs as solely UX initiatives, making it challenging to quantify their direct effects on a company’s bottom line. However, a well-designed loyalty program has several benefits for the company that you can track and compare against.
Check if your marketing department hasn’t already switched from using operational KPIs to monitoring success using more strategic KPIs. This will guarantee that marketing initiatives are in line with overall corporate goals. It is necessary to use KPIs focused on marketing that correlate with sales growth, client lifetime value, and revenue.
You might need to turn to outside organizations for assistance if your business cannot track and evaluate your marketing activities in this manner.
Conclusion
Brands should constantly search for methods to optimize elements like expiry windows and breaking points to encourage members to improve their behavior, even though it’s vital to incorporate challenges along the path. Finding the ideal limitations is essential to get the maximum additional income. Long after the initial program design, the practice of ongoing optimization continues.
Having the appropriate data to gauge a loyalty programme’s success is the key to unleashing its potential. These helpful activities lay the informational groundwork for additional worthwhile projects like data-driven marketing and enhancing the client experience. Your ability to create efficient redemption obstacles depends on having access to information about specific customers’ historical behavior, just like with any customer segmentation approach.
