Loyalty programs work; they are the most effective tactic when it comes to increasing customer lifetime value. In the past, many small businesses and brick and mortar companies couldn’t compete with the well developed reward and loyalty programs that big box stores were bringing to the table. But, thanks to web based loyalty programs and even third party reward apps, these smaller organizations no longer have to settle for simplistic and less effective approaches, like the age old punch cards.
Examining Mobile Loyalty Programs
Why Do Loyalty Programs Work?
There is a lot of interesting psychology behind loyalty programs, which allows them to work a lot better than some other marketing strategies. Mainly, these programs thrive because of what is known as the Endowed Progress Effect. This psychological happening occurs when people are working towards a goal or objective. In terms of loyalty programs, this objective is obtaining rewards.
In essence, the Endowed Progress Effect supposes that the more points or progress that a customer or person has made, towards obtaining their reward or goal, the greater their commitment becomes. While this psychological theory gives us a lot of information as to why loyalty programs work, it also gives us some insight into how we can make them better and more effective at maintaining this commitment.
What Makes a Loyalty Program Irresistible?
Most marketing experts will suggest that there are two absolutely essential components to a successful loyalty program: how easy is it to track progress and how valuable and relevant are the rewards to your customers. A third necessity, that isn’t often brought up is the creativity of your program. It should be similar, but different than what customers have seen before. Handing them another punch card to clutter their wallet may be effective, but it isn’t irresistible. Your loyalty program has to have some panache.
How easy it is for customers to track the progress of their rewards goes back to the Endowed Progress Effect. They need to be able to perceive and physically see their progress towards their reward goals to stay committed. When there isn’t an easy way to see this progress, it is easy for customers to be disenchanted and abandon their efforts. This is especially important with point-based loyalty programs where it isn’t immediately recognizable how many more points or dollars spent will earn you the desired reward, whereas traditional punch cards achieve this very easily.
Luckily, a mobile app-based loyalty program offers a great environment where consumers can interact with their progress and see it directly. It is very simple, yet effective, to implement a progress bar on the loyalty tab of your mobile app that represents how much headway a consumer has made towards their rewards. They can even change the desired reward to see how close they are to achieving other offerings.
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The second component, the types, value and relevance of your rewards, is also key. After all, if no one wants the rewards that your loyalty program offers, then no one is going to sign up. In terms of value, it is important to have different tiers of rewards. While an ultra valuable reward is often desirable and will keep customers engaged with your loyalty program for a long time, smaller rewards are equally important, as they are easier to obtain and cater to an individual who may not be interested in making that long-term commitment for a beach vacation in Aruba.
Your rewards should also be relevant to your brand, products and company. According to an MIT study that dissected a number of loyalty programs to determine what works and what doesn’t, irrelevant rewards have a negative effect on the success of these programs. Sure, everyone likes a freebie, but your reward offerings shouldn’t just be random things you think your consumers would want. In other words, if you are going to give away that Aruba vacation, tie it into your brand — make it an Aruba Beach [Your Brand Name Here] Experience.
Why Do Loyalty Programs and Mobile Work So Well Together?
Your mobile app is the ideal home for your potential loyalty program because the benefits work front to back. To expand, not only is the mobile environment going to help the success of your loyalty program, but conversely, offering a mobile loyalty program is going to help the success of your mobile app.
Loyalty programs simply work better in the mobile environment. It is easier for users to see their progress, which under the Endowed Progress Effect, improves their commitment to continue shopping with your company and earning those loyalty points. It also makes it easier for a user to access their loyalty account. Additionally, you can leverage the effectiveness of push notifications to notify customers when there are new rewards that they can achieve or special periods of time where spending earns them bonus reward points.
On the other end, offering a mobile-based loyalty program can have a dramatic effect on how many downloads your app receives. It creates a customer-focused incentive feature to your app that will encourage more people to hit that download button, while simultaneously attracting consumers who may not have downloaded your app before, but want to now because they are interested in your loyalty program.
The boost in usage that a loyalty program can have on your mobile app can also increase its popularity. This affects your app’s ranking in the Apple App Store, Google Play and other similar app marketplaces. The higher the ranking, the more visibility your app is going to have and the more natural discovery downloads it will receive.
Since their earliest form, loyalty programs have had a powerful impact on a company’s ability to develop hyper loyal customers. Not only are these types of customers more valuable, but they are also more active, in terms of brand promoting and word-of-mouth business. Mobile apps present a good environment to house your loyalty program due to their interactive nature. Today’s consumer desires brands that are willing to reward long-term loyalty through such a program. This, in turn, can also improve your app’s success, by encouraging more customers to download it and become active users of the app’s features. Ultimately, this will increase its number of downloads, both natural and otherwise.
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