I am such a big fan of using rewards on a smartphone. There is no better way to communicate with a customer than with the device they are carrying around in their pocket. The next evolution for rewards programs is moving from a card in the hand or a punch card mentality to devices that allow even smaller businesses to compete against bigger competitors.
Smartphones and loyalty apps have begun offering small businesses enhanced program features and automated administration capabilities once affordable only to large companies like airlines and hotel chains. These capabilities also offer the equivalent of a real-world psychology lab for easily evaluating the effects of offerings and incentives on customer loyalty.
The key to any reward program is to capture data about a customers behavior. If your program isn't allowing you to capture transactional level data in conjunction with the program, there may be a need to consider this approach. If only to capture the amount spend and the date, this will allow a lot more opportunity for the business. As I wrote in The True Purpose of a Loyalty Rewards Program, it is imperative to have a program that incentivizes a customer to share their data with you, but not over-incentivize. The key is to drive behavior by targeting the customer, rather than giving everyone the same rewards.
“Clearly, this is the best of times for loyalty programs,” said Mr. Bolden of the Boston Consulting Group, who recommended that small businesses “focus on the non-earn-and-burn aspects of the program.” He suggested that spas consider a separate waiting room for their app-identified best customers.
“Or when the treatment is over, you hand the customer a glass of Champagne and strawberries,” he added. “If you’re an apparel retailer and you get in a new line from a new designer, invite the top 5 percent of your customers in first so they can see it before anyone else.” The point is that many effective rewards need not cost much to bestow.
Driving behavior is not all about a discount. Understanding what your customers want and delivering them an experience is more important than a discount. Because a customer that is coming just for a discount is more than likely not your most loyal customer.
“With apps you now can target specific customers and influence specific behaviors and keep track of all the results and understand the results,” Mr. Smylie said. “Because the check-level detail is now tied to a customer’s profile, we can understand what their purchasing behavior is, what their interests are and cross-reference that against their social media profiles and market to them more effectively and involve them at a deeper level with our brand.”