Do you need to reinvigorate your brand, increase revenue, and improve profitability? Upgrading your rewards program may help. However, proceed with caution. Upgrade only when you know the new program will better align the program with corporate strategic goals and likely produce large financial benefits.
There is never a perfect time to change your program. When clear signs arise, give a program upgrade serious consideration. Look for any of these four signs:
1. Declining loyalty penetration and new member enrollment. If the share of checks associated with your loyalty program is declining, it could signify that tenured members are lapsing and that the program is no longer motivating them to come in. If new member enrollment is down, it could be because new guests are not interested in the program or that team members in the store have stopped promoting it.
Your program should achieve a minimum of 15 percent loyalty penetration. This means at least 15 percent of your checks should be associated with the loyalty program, and according to many top brands, their loyalty penetration numbers far exceed the 15 percent benchmark. For example, in an July 2016 earnings call, Panera president Drew Madsen said that 50 percent of company transactions were associated with the My Panera program. If you notice your loyalty penetration rate dropping, and particularly if it dips below 15 percent, it may be time for a change.
2. Evidence that customers are “gaming” the program to their advantage. Have customers figured out a loophole in your program that they use to their advantage? Is your visit-based program increasing the number of split checks, and slowing down operations? Are customers buying low-priced items to earn points, and then redeeming them for expensive items?
Look at the member average check value and watch which direction it trends over time. If your average checks are declining in value, your program members may have realized that they can spend less per visit to achieve the same result. If your program mirrors the old Starbucks® model and you give credit for each visit and reward one free menu item of any value, pay attention to the value of the redeemed rewards and match it against what they spent to earn that reward. If you notice the gap between average member spend and redeemed reward value closing, you likely have members who have figured out how to spend the least to earn the most.
3. Franchisees and operators increasingly complain that you’re just running a discounting program. This often goes hand in hand with the above signals. Have you been reporting positive results to the field? Is your program enabling you to run targeted promotions to drive profitable incremental sales? If not, operations may be unclear on why you have a program, and you may need to make some changes to get them back on board.
4. Your program is conflicting with your corporate strategic objectives. Menus change, concepts evolve, and priorities shift. It is imperative that your program is always aligned with corporate strategic objectives. If your brand’s overall priorities changed and the program did not change with them, it may not be benefiting the organization as well as it should.
When you launched the program, perhaps you were focusing on driving visits, but now you’re focused on driving attach rates for add-on items. You may have launched a visit-based program that did a good job driving visits but did not encourage additional purchases. If your program is not rewarding the activity you’re trying to encourage, then it probably needs modifying.
For more information about successful rewards programs click here.