Welcome to our latest blog covering everything about conditional rewards in loyalty programmes. We’ll take a look at the main benefits, the different types of conditional rewards, and how to effectively implement them. Discovering their influence on customer engagement, long term customer relationships and Lifetime Value (LTV).
The ability of a loyalty programme to achieve higher customer retention and increase Lifetime Value (LTV) depends on its anatomy. There needs to be a structure that aligns with the Customer Journey. A sequence of conditional rewards that strike a balance of fairness and achievement, irresistible relevancy and compelling incentives.
What are Conditional Rewards?
First impressions of “conditional rewards”? They’re self-explanatory. It doesn’t take a rocket scientist to guess (accurately) that the term means exactly what it describes. Customers are rewarded when they meet certain conditions. You do X and in return we give you the Y.
But their importance runs far deeper than a simple definition. Businesses need to offer a powerful motivator behind their Y.
After all, 74% of consumers recognise their loyalty is won through meaningful experiences with brands.
Consider what consumers are telling businesses. It’s not about points or discounts. They find value in feeling understood, appreciated and seen as an individual. And this is where the benefits of conditional rewards begin to shine.
What are the Benefits of Conditional Rewards?
Conditional rewards provide a nuanced and targeted approach to customer engagement in loyalty and reward programmes. By aligning incentives with specific behaviour and preferences, you can create a more personalised, effective, and adaptive loyalty experience, ultimately developing stronger relationships with your customers.
Increased Lifetime Value
Conditional rewards are designed to encourage specific behaviours and outcomes. For example extending contracts, membership tier upgrades or referring friends in exchange for rewards help the business generate more revenue through increased lifetime value - the customer is retained and continues to spend.
Better conditional rewards with more leverage (due to their relevance to customers) improves the chances of customers fulfilling the action your business requires.
Businesses manage costs more effectively by offering rewards that are based on specific conditions. As a result, companies allocate resources efficiently and ensure rewards are offered to customers contributing most to the business's success.
Conditional rewards enhance customer loyalty, creating a sense of exclusivity and achievement. Customers, knowing that they will receive special rewards for meeting certain criteria, remain loyal and continue to engage with the brand.
Conditional rewards also create a sense of anticipation and excitement among customers. The chance to earn special rewards by meeting specific conditions incentivises ongoing engagement, especially when the experience is rewarding.
Flexibility and Adaptability
Conditional rewards provide businesses with the flexibility to adapt their loyalty programmes to:
- Changing market conditions.
- Customer preferences.
- Business goals.
High adaptability ensures the loyalty programme remains relevant, effective over time and in a process of evolution.
Types of Conditional Rewards
Conditional rewards can literally be anything. But they must be personalised, engaging, and encourage long term retention.
At the very least, your conditional offers should be personalised. The unique rewards you map out in personalised customer journeys should be relevant, backed by data, and tailored specifically to the individual. That’s where value resides in the mind of the consumer. That’s what will compel them to fulfil your preset conditions which shows:
The rewards you promise, resonate with them. This manifests as customers adopting behaviours that achieve desirable commercial outcomes for you.
The individual is engaged and loyal to your brand.
From this, you get a measure of your value proposition, and the effectiveness of the customer journey that you’ve built.
JD Gyms loyalty and reward programme allows the brand to configure conditional rewards based on a members behaviour, transactions or data - "unlock these rewards by upgrading a membership tier"
One of the tasks of conditional rewards is to engage your customer base. Gamification sets the standard for long term, successful engagement.
According to a study by Research and Markets, it increases engagement and loyalty by 30%.
In addition, gamifying the actions that customers need to take to receive rewards makes participating fun and interactive. It makes the effort of earning rewards and demonstrating loyalty feel effortless. Your brand will stay front of mind, compelling people to return and engage with fulfilling, unforgettable experiences.
Ensure to set realistic targets for the customer to redeem the rewards. Overly complex conditions and unobtainable targets could mean the 'desirable outcome' isn't achieved as your customer loses interest.
Allocating your rewards and benefits into tiers drives customer retention. Tiered loyalty plays a central role in several crucial areas. Firstly, it’s a great way of structuring your customer base into segments based on their loyalty. This gives you a clear picture of the state of loyalty in your audience.
Secondly, it promotes a culture of achievement and exclusivity. Fear of missing out (FOMO) is a powerful psychological motivator. We want things that we deem valuable, even more so when someone else has it.
That’s exactly why conditional rewards work exceptionally well in effectively designed tiered structures. Which brings us to our final point…
If the value of rewards scale with progress, your customers will want to meet the conditions to obtain and keep them. Once they’ve earned something of great value, they won’t be so quick to abandon it. Which gives tiered conditional rewards their almost magnetic ability of retaining customers.
Implementing Conditional Rewards Effectively
Implementing conditional rewards into a loyalty programme involves a strategic approach to incentivise specific member behaviours. Here's a step-by-step guide on how to effectively introduce conditional rewards:
1. Define Programme Objectives:
Clearly outline the objectives of your loyalty programme. Identify the specific behaviours or actions you want to encourage among your members. These could include making purchases, referring friends, upgrading subscription tiers, extending contracts or participating in certain activities.
2. Use Personalisation - Segment Your Audience:
Understand your customers and segment them based on demographics, preferences, and behaviours. This segmentation will help personalise conditional rewards to different groups, ensuring relevance and effectiveness.
3. Identify Desired Behaviours:
Determine the behaviours that align with your programme objectives. These could be actions that drive business growth, increase engagement, or contribute to specific strategic goals. Clearly define what constitutes each desired behaviour.
4. Design Reward Structures:
Create a variety of reward structures based on the identified behaviours. Establish conditions that members need to meet to qualify for rewards. For example, set thresholds for purchase amounts, frequency of engagement, or successful referrals.
5. Choose Appropriate Rewards:
Select rewards that resonate with your audience and motivate them to take the desired actions. Consider offering a mix of tangible incentives such as discounts, exclusive access, freebies, or personalised experiences. Make sure they are financially viable.
6. Communicate Clearly:
Clearly communicate the conditional rewards and how members can earn them. Use multiple communication channels, including email, in-app messages, and social media, to inform members about the new incentive structures.
7. Introduce Gamification:
Introducing gamified elements into your loyalty programme to make the experience more enjoyable. This could include progress bars, badges, or other visual indicators that showcase members' advancement toward earning conditional rewards.
8. Implement Technology Solutions:
Use technology solutions, such as a robust loyalty management platform, to automate the tracking of customer behaviours and the fulfilment of rewards. Automation ensures accuracy and efficiency in reward redemption delivery.
Additionally, loyalty solutions should integrate with your existing CRM systems for a clear view of customer data, interactions and behaviour to help configure the conditions and reward triggers.
9. Track & Measure Results:
Regularly track and measure the results of your conditional rewards. Tracking should be available from the reporting dashboards in your loyalty and reward programme.
Analyse key performance indicators (KPIs) such as member engagement, conversion rates, and the overall impact on your business objectives.
10. Optimise Over Time:
Continuously optimise your conditional reward programme based on member feedback, changes in your business objectives and evolving member preferences.
Following these principles of conditional rewards improves retention and LTV
Conditional rewards drive customer retention and lifetime value because they offer a reason to stick with your brand. Particularly when they are integrated into a loyalty programme that follows the best practices we’ve explored.
Personalised rewards that are relevant to the customer and scale in terms of relevancy and where they are on the customer journey with your brand, make customers feel respected, valued and appreciated.
Gamified elements drive engagement, adding a degree of interactivity to the customer journey. The process of taking actions to unlock rewards is made fun and increases customer satisfaction.
Where personalisation drives retention, tiered benefits secure it. Conditional rewards are leverage on the customer. A promise made that they stand to gain something even more valuable if they meet the next criteria. Ultimately, this encourages positive commercial behaviours and improves the lifetime value of customers.