Rewarding customers isn’t easy. If you give your customers points to redeem later, they may or may not use them. If your customers take action, your team will have to continuously define loyalty by assessing how your loyalty program is performing. Creating the proper reward structure for your business is key, yet more success can be found when your business hones in on its redemption structure. 

Will your customers use their points to receive a percentage off future orders or a specific amount of currency off future orders? Which option is right for the business and why? 

Before we discuss which option is better for your business, let’s consider Jonah Berger’s famous rule of 100. 

“The Rule of 100 says that under 100 percent discounts seem larger than absolute ones.  But over 100, things reverse.  Over 100, absolute discounts seem larger than percentage ones.”

• Jonah Berger, Marketing Professor and Author of Contagious 

Jonah Berger’s strategy works best when it is paralleled with either tiered discounts or custom discounts. 

What’s the difference? 

Tiered discounts refer to the customer reward journey. When customers open their Wallet, they have a series of offers. These offers function as deals. if your customer is willing to spend a certain amount of money, they’ll be rewarded with points. These points can be utilized towards future purchases.  If customers choose to redeem their points for percentages off future purchases, your company should give significant discounts such as 25% off purchases of orders over $500 dollars. This will encourage customers to spend more money for a greater discount. A key benefit of this structure is that every customer has access to the same rewards journey. If your customer utilizes their 25% discount, they may refer a friend to co-purchase. 

Custom discounts are special discounts that can be given to customers to either make them feel special or increase customer satisfaction. For example, if a customer complains about services and products received, your business’s customer support team can rectify the situation and give more points through a custom discount. Custom discounts can also be used to control inventory. If your operations team struggles to sell a particular product, use custom discounts to move more units of a specific product. These custom discounts can be given to customers who have completed their tiered discount journey.  

The Rule of 100 helps us understand how customers perceive deals. Getting people to spend more than they normally would is an art and a science. Here are three actionable pointers to help you decide whether your business should give customers the opportunity to redeem their points for percentages off purchases or a specified amount of currency off purchases. 

Creating a Budget For Discounts  

Unlike Oprah, most businesses aren’t financially able to give away products. Collaborate with your operations team and supply chain leaders to decide if points should be used for percent off orders or currency off orders. If your business offers absolutes (currency) then you’ll want to consider product margins and profit margins. How much do you pay your supplier for specific products, and what is the profit margin from each of those sales? 

Unify Sales And Marketing Data  

When your customers open their wallets, they’ll have a journey waiting for them. Some customers may receive special discounts (birthday), while all customers are provided the same reward journey. Alpine IQ unifies all of your data in one place for your business analysts and marketing teams to perform cluster analyses. After implementing specific reward structures, listen to your customers through the data. 

Utilize Your PR Team 

If your retail team promotes your loyalty program in person, use operations and sales data to discover which clerks drive the most adoption for your program. Have your team ask customers which they prefer: percentage off or currency off future purchases. You don’t need a public relations firm to help your organization build mutually beneficial relationships with the public. Your clerks are your primary PR team. Empower them to use Alpine IQ’s online technology to power their offline efforts. 

Your company’s financial performance will be sculpted by the type of loyalty program you deploy. To differentiate yourself from your competitors and grow your business, align Alpine IQ’s loyalty technology with your business’ goals to power your most important work and grow your business.

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