How to Build a Better Incentive Program: Developing Incentive Management Platform Strategies
Guide Description:
In part two, we will assist you in setting the expectations for the research needed to create strategies for your organization’s loyalty incentive program. It’s clear from part one that loyalty and incentive programs are essential. Here, we will evaluate the required internal metrics and employee and customer behavior connected to motivations that drive the outcomes of your loyalty management platforms.
Table of Contents:
– Fact-finding and involvement
– Financial modeling
– Conduct user surveys
– Define business objectives
– Conclusion
Fact-finding and Involvement
The first step is establishing the foundations of your incentive and loyalty management platforms by conducting internal research on business operations, employees, current customers, and competitors.
A program is always more effective if you can get input from representatives of the participant audience. Inviting input on the program’s rules, rewards, and other aspects will increase ownership and engagement in your research. What programs are running now? Can they be improved upon? Do the participating managers have the resources they need to run their program? Do they need a loyalty or incentive program?
Set Goals and Objectives
Meet with departments across the organization to identify what goal/objective needs to be accomplished through incentive and loyalty management platforms. Examples might include increased sales, improved attendance, healthier employees, etc.
The objectives must be simple, specific, and obtainable. Begin with not more than five clearly, briefly stated objectives.
Identify the Audience
While setting goals, identify which individuals or teams can achieve that department’s organizational goals and objectives; those are each department’s program participants. Sales should focus on customers and sales channels, and HR wants to engage employees. Marketing concentrates on generating leads and creating product promotions, etc.
Program Structure & Budget
Work with management to carefully build the foundation of incentive and loyalty management platforms, expanding on the methodology to be used. You will help them understand whether they need an open-ended or closed-ended program design and identify the organization’s fixed and variable costs.
A closed-ended program is easier to budget. It may allow for offering higher perceived value rewards because there is a set number of participants or winners. Still, it may not motivate the participant audience if the rules are not carefully structured.
An open-ended program is harder to budget for but is fundable with incremental sales or other gains. If they have programs up and running, get a better understanding of them. Can you improve on the operational efficiencies of your loyalty management platform?
Reward Selection
Rewards should be consistent with participant demographics and the organization’s brand and appeal to the participant audience. Has management surveyed the participants? The more input from your audience on rewards they’ll appreciate, the more effective your organization’s incentive and loyalty management platforms will be. Of course, your reward management technology solution must fit within the budget parameters you’ve set.
Administration and Tracking
Ask them which elements in their programs need to be tracked and measured. Your goal is to fill gaps and enhance or build a system to meet their needs. The administration could account for approximately 20% of their program budget. If the organization has the right platform – it can help to reduce the time spent on administration.
Measure and Evaluate
Is your loyalty management platform achieving its goals and objectives? Were the audience participants motivated to change their behavioral outcomes? Were there outside factors that contributed to the program’s success (or not)?
Every measured element can influence your next program parameters to ensure greater success in the future. What reporting and insights is the incentive system providing them? What are they compiling manually?
Incentive and Reward Management Technology
Does their program use technology? Check out how company incentive technology is operating. Is it outdated? Does your loyalty management platform meet their individual needs? Is it integrated, and if not, why? Is the system secure?
When incentivizing program participants, the more immediate the participant receives the reward, the better for the participants and the program. Technological advances allow participants to redeem rewards online, transacting in real time.
Explore how participants receive rewards with the current technology that oversees your incentive management platform. Can the process and rewards of your loyalty management platform be improved? Participants expect digital rewards whenever possible. Are they being used? And the web services used should be mobile-first and responsive – are they?
Financial Modeling
Financial modeling is an essential part of the buying process. Determining the ROI of loyalty and incentive programs can be complex. It will be necessary to partner with your organization’s finance team to identify and build out the key metric models.
Engagement
Focus on five key metrics of engagement in your loyalty management platform:
- Attrition
- Retention
- Satisfaction
- Reviews
- Active social ambassadors
- Absenteeism
Revenue
Focus on three key internal metrics: repeat purchase rate, average order value, and customer lifetime value.
The financial models should showcase the risks and rewards of a loyalty management platform. Consider various variables, including transactional and reward costs, data storage, regulatory, liability, churn prediction, and more. You need to understand your KPIs to project ROI and determine how your redemption schemes and points economy will offer value to your participants, customers, and your organization.
Conduct User Surveys
If a loyalty management platform isn’t providing the analytics and qualitative behavioral insights you need, a participant or consumer (participants) survey can help. Because emotion drives action, understanding your participant’s sentiment offers insight into how your program performs. Organizations need to account for how their users feel about your brand and how they act toward it.
Ask participants in their respective incentive silos what they care about and what they’d want from your brand’s loyalty and incentive management platforms. Share the survey to drive engagement.
For repeat participants, you might ask questions such as:
- What benefits would you like to see in a loyalty and incentive program?
- What would you prefer to redeem points on: brand experiences or product redemptions?
- Do you prefer SMS reward product redemption to email?
- Do you prefer to redeem for digital or physical reward products?
- What reward products do you prefer?
- What VIP experiences would you enjoy?
For non-active participants, you might ask questions such as:
- What would excite you to increase participation frequency?
- What would incline you to make another purchase?
- What products do you prefer?
- How do you prefer to engage with the brand?
- What type of reward products do you prefer?
Define Business Objectives
Define the business objectives you want to achieve with a loyalty and incentive program, from increased revenue to deeper emotional connections with the participants.
Gather participatory and earn rates, redemption value, and engagement data as you analyze current participant behavior. It’s essential to build a complete understanding of your participants, not just their point transactions, to understand how they connect with your brand and their motivations.
Important Questions to Consider
Understand current business operations when starting the foundational work to establish an incentive and loyalty management platform. The research is not complicated, but what you collect should be thoroughly gathered. Work with teams to evaluate the sales and engagement journey funnels, then consult the analytics and relevant team influencers. The goal should be to establish a baseline understanding of current participant behavior.
- What are our program participants doing today?
- What do we want participants to do tomorrow?
- How can we effectively motivate our participants to change their behavior?
Analyze existing data, conduct good market research, and use tactical modeling to establish your framework.
Key Metrics
Hopefully, there is an endless supply of data your team can evaluate to understand behavioral insights. To simplify, the following are the key metrics your team should use to understand current participant retention.
- Repeat Behavior Rate: What percentage of current participants repeat the desired behavior (purchase, sale, claim) within your incentive management platform?
- Behavior Frequency: What is the average frequency of the behavior per participant per behavior?
- The Number of Items: How many items does a participant purchase or redeem per transaction?
- Average Earn Rate: What is the average number of points or rewards earned day/week/month/year?
- Average Action Value: How much does a participant spend or redeem per transaction?
It’s critical to build a program that achieves business objectives and effectively appeals to a customer’s motivations. Determine reward incentives that will drive engagement and inspire participation within your loyalty management platform.
Many organizations fail to build a program that can work because they don’t find the loyalty formula that fits their organization’s needs. Or they fall back on a “forget it” approach because they can’t adapt to changing business needs or shifts in consumer behaviors because of their lack of understanding.
You must choose a loyalty and incentive management platform that aligns with your business goals while effectively and continuously engaging participants with meaningful experiences, even as their priorities and interests change.
Program Type
Incentive programs have similar components, including:
- Points
- Codes
- Batch files
- Games
- Redemptions
- Claims
- Validations
- QA
- Tiers
- Rewards
- Fulfillment
However, they’re engineered differently based on what goals your business wants to achieve and the value exchange you can provide. Identify and quantify the behavioral outcomes your organization requires and the value your incentive management platform can provide in return.
Start by understanding what behaviors drive high-value participants. For example, a manufacturer that sells in multiple categories may realize that customers willing to purchase in one product category are also probably ready to shop in three adjacent categories. This business can design loyalty management platform incentives to drive specific behavior by knowing their customer behavior attributes.
By evaluating their engagement analytics, companies can identify specific behaviors they want to encourage through their loyalty and incentive management platforms. By acting on these insights, businesses can drive relevant engagement without giving their strategy to the customer.
Expected Outcomes
Define the loyalty your organization wants and what it will look like. Identify which participant category cohorts to target and what behavior outcomes you’d like to see from them, like:
- Employees living a healthier lifestyle and selling more company products
- Customers purchasing more profitable products
- Shoppers increasing their cart size with each transaction.
Ensure that your organization’s strategy and brand messaging work toward meeting your business objectives and goals. After undertaking the necessary research and determining program types, your business can expect the following outcomes.
Customers:
Connection to Brand Values
Use loyalty to educate customers about business brand values in your incentive management platform. According to research conducted by All Digital Rewards, over 80% of consumers do business activities with companies that align with their values.
If your organization partners with a foundation or is mission-driven, consider incentivizing actions that support those causes, such as rewarding donations with points. Your company can also consider inviting higher-tier VIP members to function as ambassadors for your brand and mission in return for exclusive experiences.
Share of Wallet
Define the essential milestones internally to reward customers and encourage incremental habits within your loyalty management platform, like increasing purchase frequency and order size.
Consider leveraging a strategy to maximize average order value and continually increase wallet share with your loyalty program.
Deeper Emotional Loyalty
Emotional loyalty should be a critical qualitative performance indicator of how well your loyalty management platform works. The program should foster a sense of exclusivity and belonging. Consider creating a community specifically for loyal members who agree to be a part of your brand’s story.
Customers who feel connected to the incentive program will advocate for your brand by leaving positive reviews, referring friends and family to the program, and engaging with your brand on social media. Emotional loyalty should be a marketing channel for your incentive management platform.
Participants:
Drive Engagement
When employees are appreciated, spirits uplift. They feel recognized and, in turn, become engaged in their work. More importantly, it fosters trust. Employees who trust their managers and leaders are more involved in the workplace.
Increased Productivity
Employees disengage themselves from work once they become demotivated. However, when they are appreciated and praised for their contribution, it increases their motivation, which drives their focus towards achieving their workplace duties and goals.
Better Employee Retention
A disengaged or hostile work environment can prove costly for an organization. For instance, if an organization is experiencing a higher-than-average loss of employees, the costs of hiring and training new ones can affect the company’s bottom line.
Foster a Good Workplace Culture
When team members are praised, appreciated, and recognized for their contributions, it goes a long way toward adding to a workplace where they want to be. It helps create a healthy and happy environment.
Conclusion
Gathering valuable foundational information and creating internal metrics to work towards the organization will see employee and customer behavior connect to motivations that drive the outcomes of an organization to meet its business objectives and goals successfully.
In the third part of our discussion about incentive and loyalty management platforms, you’ll learn how to evaluate incentive and reward providers.
