Personalized Rewards Programs Encourage Customers to Make Buying a Habit

This article was originally published on pymnts.com

Personalized Rewards Programs

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For many retailers, the biggest drop in customer retention happens after the first sale. In some cases, only 20% of customers return to make a second purchase. Of course, if they don’t make a second purchase, they won’t make a third or fourth.

“If you increase this 20% conversion to 25%, it’s not just a 5% increase, because some of those 5% will go on to make a third, fourth and fifth purchase,” Jai Rawat, vice president of product strategy at Zinrelo, told PYMNTS when sharing this data. “So, every percentage increase here may actually mean a 4% or 5% increase in revenue.”

This explains the popularity of loyalty rewards programs. He pointed to credit card companies that offer a bonus to those who spend a certain amount of money in the first three months of using the card — they know that if a new customer gets in the habit of using the card, their lifetime value to the company will be higher than the cost of the points that were given away.

Similarly, a retailer with a low conversion rate might offer new customers a special incentive that can be redeemed on a second purchase. The customer then thinks, “You know what, I’ve got $5 available for my second purchase; I’d better use it,” Rawat said.

Rewarding Customers for Specific Actions

Zinrelo offers a loyalty rewards platform that helps retailers and B2B companies implement such programs. Any company that is selling products that people buy frequently can benefit from a loyalty rewards program, Rawat said.

In addition to retailers, B2B customers implement loyalty rewards programs. Rawat gave the example of enterprise software B2B companies that might reward customers for implementing the software and starting to use specific features.

“What are the customer behaviors that are predictive of long-term value? If you’re selling a piece of software, how quickly do the customers implement it? If they don’t implement it on time, chances are that at renewal time, it’s going to drop,” Rawat said.

Zinrelo’s platform is omnichannel — it rewards customers for purchases made online, in store and over the phone. It integrates with the major eCommerce shopping carts, point-of-sale (POS) systems and order management systems that are typically used to record phone orders. For brands, the platform also offers receipt scanning; if consumers purchase the brand’s product at a retailer, they can submit a photo of the receipt to earn rewards from the brand.

Adding Other Values Beyond Transactions

In addition to transactions, the platform rewards other forms of user engagement. For consumers, this may include writing a review, talking about the company on social media, referring a friend or participating in a survey. To implement this, retailers ask customers to share their email addresses and social media handles; Zinrelo can then find and reward the activity.

“We’ve built a platform that is able to track any kind of user engagement, and then you can establish a rewards program to reward that kind of engagement,” Rawat said.

Similarly, companies might reward B2B customers for taking a reference call, visiting the booth at a trade show, participating in a case study or attending a webinar. “We’re seeing some interesting use cases in the B2B space as well,” Rawat noted.

Each company’s loyalty rewards program is customized. Zinrelo requests access to historical data and analyzes it to understand the customer journey, the average order value and the drop-offs. When it finds patterns, it suggests incentives to offer at the right time. Customers can choose the actions they want to reward, the kind of rewards they want to offer, whether they want to have a tier-based program and whether they want an opt-in or opt-out program.

Offering Different Programs for Different Customer Segments

In addition, programs can be tailored to a retailer’s different customer segments. If historical data shows that some customers hunt for deals, they can be offered discounts. If other customers want to be the first ones to try new products, they can be offered early access.

“Different customer segments may value different things,” Rawat said. “Therefore, over time, you want to start learning the behaviors of those customers and start customizing the program and personalizing it. That really makes a big difference in the overall success of the program.”

Overall, Rawat said that while customers have flocked to eCommerce during the pandemic, they’ve also become fickle in their loyalty to stores or brands. For online retailers in particular, this has made it a challenge to keep the momentum going and make sure customers don’t go away.

“The loyalty programs are becoming more and more important, because customers are more willing to switch brands these days than they ever were,” Rawat said. “The No. 1 thing the loyalty programs do is help them increase their retention rates.”