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Going beyond rewards: The key to a successful loyalty programme

Loyalty programmes are like bottoms these days, everyone has one. Retailers, airlines, banks, telcos, restaurants; almost anyone who has customers has some form of a loyalty programme.

However, a loyalty programme alone is not going to cut it anymore; loyalty as consumers know it today – ruled by points, discounts and rewards – is dead. It is what companies do with customer insights gained from the programme or purchase behaviour to create a more engaging and relevant experience that counts. With this in mind, Digital Alchemy most recently clinched the gold award for Most Innovative Loyalty Programme during the Loyalty & Engagement Awards 2018.

This post was done in conjunction with Digital Alchemy. 

The problem

Carrot Rewards was struggling with low engagement in its loyalty programme and low redemption rates. Members would join the programme during a promotional event and then completely disengage when the discount was withdrawn.

The competitive loyalty landscape was also not to be overlooked, but the key problem holding the programme back was the lack of a coherent strategy. While elementary, it is a common reason why loyalty programmes fail to create loyal members and become commercially viable.

All of this led to a daisy chain of downstream reasons why the programme was not working which resulted in the challenges Carrot Rewards engaged Digital Alchemy (DA) to fix.

The solution

The new programme, rebranded Rabbit Rewards, has a core strategy revolving around three key strategic pillars – generosity, simplicity and relevance.

Generosity:

DA found an innovative way to uncouple transaction value away from points earned by using its analytics strength. The new points-earned system would no longer accrue points to transaction value, rather earning points would now be tied to transaction behaviour. Which simply translates to tapping and paying with the Rabbit Card and encouraging more usage of the card as payment method.

The second part is the aspiration of providing a reward to every member at least once a month. By increasing the generosity of points and bringing down the cost of a redemption item, a meaningful everyday reward can be earned within a couple of uses of the card.

Third, by incentivising frequent use, an increasing amount of transaction history data will become available which can be analysed for merchants. Customer profiles can be built and data-driven insights and decisions executed with look-a-like customers and self-learning optimisation. Automation and optimisation will work in tandem to deliver the best earn/redeem offers to drive additional members and revenue to merchants.

Simplicity:

The simplified message taken to market is five points for every payment with the card.

Furthermore, the registration process was slimmed down from 20-plus form fields to under five and redemptions transformed from paper-based postage delivery to a digital mobile-first experience.

Relevance:

A scalable and modular one-to-one database marketing strategy was developed and a custom-built technology infrastructure was implemented.

This strategy maps out key touch-points of a member and ensures there is a relevant communication for every interaction and its subsequent response or lack of response.

A key step was implementing DA’s customer life cycle value management (LVM) framework. The framework ensures that messages, merchants and offers presented to members are the ones most likely to be relevant based on transaction history, personas and behavioural profiles.

Objective

Combining these strategies resulted in a three-way win for members, merchants and Rabbit:

  1. Increase membership to the programme and merchants.
  2. Increase transactions for the Rabbit Card and merchants plus increased redemption frequency for members.
  3. Better targeting and communications for members resulting in better offers and rewards.

Execution

Rabbit Rewards has launched in tandem with the new communications programme to ensure the strategic pillars of generosity, simplicity and relevance will become synonymous with Rabbit Rewards.

The key message of five points for every payment with the card has been heavily promoted, along with other messages that highlight the programme’s generosity, such as “one reward a month” and the brand promise of “changing every day to a reward”.

Key touch-points have been simplified and the redemption process transitioned to an easy to use mobile-centric process which requires zero integration from merchants.

Optimisation took place by data analysis which demonstrated  there were different personas with varying transaction and redemption behaviours. Personas spanned from those who were not engaged versus very engaged to those with low incomes versus high incomes. Key behavioural subsets included promotion hunters, frequent redeemers and accumulators.

Solutions for each key behavioural subset will be executed via DA’s LVM framework. The framework guides a customer through the phases of acquisition, onboarding, growth, retention, and if necessary, win-back, in combination with DA’s decisioning tool uDecide™.

uDecide™ is driven by artificial intelligence (AI) and ensures that only the most relevant content is presented to each individual member.

Selection of communications are automatically served based off modelled data, and scored using uDecide™. uDecide™ takes each member’s response history, persona, online behaviour history, historical transactional and redemption data, and other behavioural data sets into account.

In tandem, a merchant communications strategy is implemented. This strategy couples the targeting of desirable segments with merchant business objectives from acquisition to growth in spending and frequency to reactivating dormant and lost customers. The merchant customer life cycles will be integrated within the overall LVM framework.

This technology stack enables customer-centric marketing. Members will receive offers and messages based on what is most likely to interest them, rather than what is important to Rabbit Rewards according to its campaign calendar. Simultaneously, it allows Rabbit Rewards to provide far more value to merchants.

Results

It took Carrot Rewards more than four years to reach 1.8 million members. Rabbit Rewards more than doubled the membership within 12 months to almost four million and acquisition is now over six digits per month.

Rabbit Rewards has not only proven to maintain the activity of new and reactivated members acquired from both promotion events and organically, but also increased their transaction spend over a six-month period and beyond.

With a new redemption store focusing on everyday rewards, the redemption count has also increased by five times. On average, members redeem 1.7 rewards over three months now.

The programme’s communications are among best practice, with open rates sitting over 30%, click rates over 15%, and incremental response rates well over two times. Monthly website visits have broken 4.5 million from a modest 100,000 in 2016.

Last, and most importantly, Rabbit Rewards has learned how to grow sustainable transactions (that is, unsubsidised transactions), something the programme wasn’t able to do before.

During the recent Loyalty & Engagement 2018 awards, Eddie Lui director, Rabbit Rewards, shared his thoughts on winning gold for Most Innovative Loyalty Programme and what made the campaign such a huge success. Meanwhile, Szu Lin Tng, account director, Digital Alchemy also talked about the agency’s upcoming plans. Check out the video here: