Don Adams: We believe that any company, B2C or B2B, has opportunities to surprise and delight their customers, whether they offer a published loyalty program or not. Our focus here will be how and when the strategy can be more effective within a published program and when it may not.
First, a note of explanation. We thought we’d add a little twist (and broader perspective) to this blog with a couple of our team members, me and Jon Parise, collaborating on the post. We’ve had several discussions in the office about the pros and cons of a surprise-and-delight strategy in rewards programs and this post captures those ideas.
Jon Parise: Traditional loyalty programs are based on an easy to understand value proposition; put simply: spend-and-get. And, as has been noted often in this blog and can be seen throughout the rDialogue web site, the spend-and-get model is a tired one that in isolation does little to motivate consumers to spend more with your business let alone engage customers with your brand.
Surprise-and-delight feels new, exciting and different. It’s (supposedly) a fun way for customers to shop with you. Instead of “Spend $X with us and we’ll give you Y,” it’s “Spend with us and we’ll give you something down the road. Trust us!” MyPanera is currently the most well-known example of a surprise-and-delight strategy in the market. As you know, Don, I always identify myself at the register in the hopes of getting that free cookie or smoothie. But did the fact that I’m a MyPanera member make me choose to eat at Panera over another option? While I can’t speak for my subconscious, I don’t think it did.
The ultimate goal of most loyalty programs is to generate incremental sales from customers. So the question should be - has Panera generated incremental sales from me because of MyPanera Rewards? Or have they just periodically given me free stuff that I would have bought anyway? And from a brand perspective, what’s the impact of me leaving the store disappointed-and-annoyed when I don't get a surprise-and-delight? Where’s my free cookie?!?
Don: Jon, your experience with Panera underscores some key questions that should be in the minds of marketers as they consider whether and how much surprise-and-delight (let’s call it S&D) to inject into their loyalty program.
Let’s step back and think about what might qualify as “S&D” within the context of published loyalty programs. MyPanera represents one end of the spectrum with what looks and feels like a traditional loyalty program with enrollment and a member card, but with no published schedule of earning and redeeming rewards. Put simply, you never know what you’re going to get and when you’re going to get it.
On the other end of the spectrum, we might look at the old-school stamp book or punch card programs with a strictly earn-and-burn value proposition with any additional service or benefits delivered in spite of the program, not because of it.
Then anything in between would offer a mix to varying degrees of published rewards and S&D components.
Jon: It’s true that surprise-and-delight components add that “something special” to rewards programs and there are multiple benefits. Panera is collecting all kinds of data on me and every other MyPanera member because we’re identifying ourselves at the register in hopes for that free smoothie. This ultimately leads to smarter marketing. Here are a few thoughts on some of the other benefits of an S&D strategy:
Flexibility – Published programs are just that – published for all the world to see. Your company is bound to a contract with the customer and once it’s out there, you have little wiggle room to change the program
Testing – unpublished rewards give the company opportunities to test different offers and attempt to influence customer behavior. If I’m always buying pants from your store, don’t give me an offer to buy more pants. Give me an offer to buy a shirt
Brand engagement - if spend-and-get is tired, then it's true that an S&D strategy can be a fun way to keep customers guessing and stay engaged with your brand
Opportunities to be more relevant – with published programs, the reward or rewards you offer might not be of interest to all of your customers. The promise of a reward that is tailored to me personally, even though I don’t know what that might be, is more intriguing to me than earning a reward I don’t really care about
While there are certainly benefits, let’s revisit incrementality. I’ll concede that I may be going to Panera more often in hopes that I might get something free. The strategy appears to work well with high frequency customers and Panera has many of those. From an ROI perspective, Panera can probably afford to give away a free cup of coffee every once in a while. The business case for S&D greatly differs given the industry, the type of customer and the type of rewards being offered.
Don: Right you are, Jon. So how might different kinds of companies in different sectors consider how they approach S&D as part of a published loyalty program? We think it boils down to one word, albeit an important one: engagement. A high-end retailer or hotel chain can afford to rely on a higher degree of S&D given the higher degree of engagement for those categories as well as more opportunities to deliver on S&D. A fast-food or even fast-casual restaurant chain (a la Panera) or a grocery store, however, not so much.
Don’t get us wrong. As we said before, all companies have opportunities to surprise and delight their customers and there are many benefits to doing so. They just need to be careful about how much they rely on S&D to profitably drive incremental sales as part of a loyalty program value proposition.