Choosing the Right Reward: Is Money Still Number One?
Usually the incentive for consumers is some sort of monetary reward like a coupon or discount. But is money really the best motivator?
Yes. And… no.
Let me explain.
Saving money is a big concern for the majority of the population. And it’s true that the appeal of a discount can draw in new customers. But extrinsic rewards like coupons and discounts are temporary — and with everyone from Ma & Pa shops to major corporations offering some sort of money based reward program, how do you stand out? And how do you create sustainable customer loyalty?
Experience based awards might be the answer.
Hear me out.
Remember that guy Maslow and his hierarchy of needs? If you only provide extrinsic rewards, you’re only satisfying the lowest level of the hierarchy (food, shelter etc). You’re not tapping into other aspects of human need. You aren’t creating other motivators.
The Problem with Monetary Rewards
Discounts appeal to the very bottom of Maslow's hierarchy. They motivate us through access to food and shelter. Basic things that in today’s society are very easily found.
Because those lower needs are so easily met, they aren’t an effective motivation to keep consumer coming back to your brand.
It’s a bit like dangling a carrot in front of a horse and expecting it to keep running, even though there are buckets of carrots all around.
All monetary rewards do is make your customers come to expect better and better discounts. And if you don’t have the lowest price, customers will just jump ship and buy a competitor's product.
That’s not loyalty. And it’s definitely not sustainable.
For your loyalty program to inspire long term brand loyalty, it has to appeal to higher levels of Maslow’s hierarchy, like esteem and self-actualization.
And that’s where experiential rewards come in.
The New Number One: Experience Based Rewards
Experiential rewards appeal to higher needs on Maslow’s hierarchy like esteem and self-actualization by creating participatory experiences and communities while appealing to social responsibility.
These motivators are harder to satisfy than basic ones like food or shelter. So appealing to them is a stronger motivation for consumers. They make consumers feel rewarded without having to discount your products.
And they help create an emotional connection between customers and your brand.
Sustainable Brand Loyalty: Making an Emotional Connection
Experiential rewards play on our emotions by appealing to an intrinsic need to belong, be creative, and feel fulfilled. Those kind of feelings create an emotional connection between a brand and a consumer.
It’s the reason people wear TOMs shoes even though they aren’t comfortable and they fall apart in the rain. The company engages people in a common cause that appeals to their psychological needs to belong to a community (other people who believe the same things) and feel accomplished (like they are making a difference in the world).
The brand becomes intertwined with people’s identity.
And that’s a lot stronger than just knocking a few bucks off the price tag.
In Demand: Attracting Millennials
If you are trying to attract a millennial audience, experience based rewards are critical. A recent study by COLLOQUY offered some insights about Millennial participation in loyalty programs:
72% said they would rather spend money on experiences than products
63% said it’s important for loyalty programs to support their lifestyle preferences such as wellness programs, sustainability efforts or charities compared to 53% of Gen-Xers and 46% of Baby Boomers
25% said they joined a loyalty program in the past year because it had access to member only events, versus 16% of the general population
But for experiential rewards to work, you have to take the time to understand your target audience.
Know Your Target Audience
Unlike monetary rewards, experiential rewards won’t appeal to everyone. That’s why it’s important to take the time to understand your target audience.
The best experience based rewards are personal — not generic. Things that seem exciting to one group of people may be commonplace to another.
For example, if your consumers tend to be passionate about eco-friendliness then maybe have an option where they can earn points for donating to an environmental charity. Or swap it and let them redeem points as donations.
Another consideration is exclusiveness. All rewards should have some level of exclusivity to them, otherwise your consumer won’t want them. But higher levels of exclusivity appeal to different demographics. A high income demographic would find VIP experiences more appealing, since status is more important to them than saving money. But other demographics care less about exclusiveness and more about the reward itself.
Knowing your target audience is key to offering great experience based rewards.
Conclusion: Combine and Conquer
Adding experiential rewards to your loyalty program doesn’t mean getting rid of the monetary based ones. It just means having multiple avenues for customers to engage with your brand and build loyalty.
When you only offer discounts as loyalty rewards, you only attract bargain hunters. And bargain hunters are a notoriously un-loyal group. If the competition has a better coupon, they’re going to buy there.
They aren’t loyal to you. They’re loyal to the discount.
Experience based rewards help create an emotional connection with your consumer. They appeal to the things we think define us. They tie consumers’ idea of self with your brand.
And that lasts a lot longer than a coupon.