What is important when defining plan settings?
Once you have tailored the plan structure to your business needs and data, it is time to activate your account and define your plan and tiers settings.
The following tips can help you make better decisions in your Account and Plan settings:
- Primary & additional markets
If you are going to run your Loyalty plan in several markets (for example, countries or regions), it is highly recommended not to skip this setting. Division between markets allows you to target Loyalty offers and exclusive access by selecting the relevant market. For example, your customers are located in Germany, Austria, and Switzerland, but you are interested in offering a voucher for points only to the German market.
- Reward allocation delay
Make sure you are aligned with your return policy and shipment time.
It is recommended to check your actual return times.
For example, if 90% of the orders are returned within 10 days, it is recommended to add several extra days, meaning a 14 day allocation delay.
- Calculation for tiers
We recommend to always set a reset time, which is an added challenge and incentive to your plan. The option not to perform a tier calculation and thereby eliminate a dropout scenario, is only suitable for unique use cases.
The decision between yearly and X months from joining calculation is dependent on the following:
- Calendar Year:
+ Easy for customers to remember
+ Easier for you to manage and track the plan, since the calculation is on the same day for all customers
- Reset can be done within a short time from the date of joining (e.g., joined in October, reset 31 Dec)
- X months:
+ Fair to the customers, individual calculation to each one
- More difficult for customers to remember the calculation and reset date
- Harder for you to manage and track the plan, since the calculation is different for each customer
- Balance points expiration
- We recommend to always enable balance point expiration. Expiration will drive your Loyalty members to redeem points sooner. Expiration date is based on two main parameters:
- Your product domain
- Purchase frequency days
The following formula includes two parameters, which can help with the definition:
- Parameter X - Number of days between purchases you aim to achieve
- Parameter Y - Your purchase frequency days (strategic dashboard)
Example: your brand sells sneakers - your X = 270 days, Y = 400 days
Calculation: (270 + 400) / 2 = 335 days for Balance point expiration.
- Points about to expire
On the one hand, it is recommended to set a reasonable timeframe to give the customer the opportunity to redeem the points and not to lose them, on the other hand, it is advisable to drive urgency.
The Loyalty team recommends setting it between 7-30 days, depending on your frequency of purchases and Balance points expiration.
- Contact signup process
An Invite makes your loyalty program feel more special and exclusive for your customers. It also reduces the potential number of inactive members, since they choose to join. If your motivation is to add as many contacts as possible into your plan, then you should create an automatic join action. In this case, it is important to know that you are increasing the potential for inactive loyalty members.
- Contact distribution
You can choose from several incentive-based distribution stages when deciding whether to distribute your existing and new contacts among tiers, based on their purchase history when they join the plan. The distribution option allows you to thank and reward your loyal customers (even before the loyalty program has started), from the moment they join. It also allows you to run an effective and focused recruitment campaign that will offer a significant incentive to join.
While we recommend using this capability, your decision will be based on the price you are willing to pay for it.
If you select a multi-tiered program, one of the main decisions you need to make is how to define your tiers. Here are some tips that can help you to make better decisions:
- Number of tiers
- In most cases, we recommend three to four tiers (this is not to say that it is wrong to start with just two tiers). While the first tier is without an entry threshold, the purpose of the second tier is to motivate people and let them feel they can reach a higher level relatively soon. Therefore, we recommend that the second tier will be defined as easy to reach. In contrast, to upgrade to the third tier, members will have to work much harder. The third tier (and beyond) are made to get people into higher lifetime spending levels. If the difference in the threshold between second and third is too large, we recommend adding another tier before the last tier (i.e. fourth tier).
- Tier requirements
When you define tiers requirements, match your expectations to purchase history metrics and set achievable requirements. Maintain balance and gradation between the tiers and do not define a tier that would contain only 10% of your current customers. We highly recommend using the Contact Distribution chart when defining these. Using it, based on your customer's purchase history, you can deduce the ideal number of tiers and values to define. You can also translate the spending required for each tier into points according to the chart parameters.
The following table can help you to understand the logic we recommend:
Join reward + points value of AOV x 2
Alternatively, if the number of purchases are defined as a threshold:
Join reward + AOV x 2 + 2 purchases
|Minimum 10% of top customers
- Tier calculation
Starting from the second tier you can select if a specific tier will be included in the calculation for tiers, or that calculation and dropout scenario are not available for this tier. When in most cases customers choose not to use this option, some of them want to use it especially when it comes to the last two tiers.
A four-tier plan when there is no calculation and dropout scenario on the third tier:
On the one hand this is to reward the customers who have worked hard to upgrade the third tier and allow them to maintain the status and benefits they have earned. On the other hand, there is still a possibility to encourage them to upgrade to the fourth tier (from which they can drop out again to the third tier).
- Points from purchases
In the Loyalty team’s experience, it is best to keep the value of your points low and let customers accumulate them in large numbers. The most recommended definition is 1 point earned per $1/1 spent. If you run a plan that supports multiple currencies, the flexibility of the system allows you to change both values (X points earned per $ / spent). You have complete control over the value of points when you define the number of points required to redeem vouchers or benefits. As points are the currency of the loyalty plan for all members, make sure you keep a uniform point value in all currencies.
Consider giving a higher point value as an incentive for purchases for your higher tiers.
If you manage a Spend & Benefits plan, treat points as the currency equivalent [1:1].
- Additional points
We recommend you to assign additional points or a different rate of points on a category or a brand level on your product catalog. You can use this to promote a specific category or brand, but you can also assign a different rate of points on full priced items and on discounted items. If your catalog structure allows this, you can use this feature in a variety of ways.
Benefits & Rewards
The concept of all loyalty programs is based on incentives and rewards that can be provided in three ways:
We recommend creating a list of all the rewards you are interested in offering to your loyalty members. Make sure you are able to provide and support these rewards, as this is your responsibility and commitment to your customers. Once the list is ready, for each reward set its cost from your side. In addition, mark which of these rewards you already offer currently and what the incentive is.
For example: Today I offer 15% off = newsletter signup
This can help you to decide which rewards you would like to offer as fixed benefits and which for actions and other activities. Sorting by value can help you to decide what reward to offer for each incentive and what is the value of each one in points.
Maintaining gradation in the fixed benefits offered to the tiers creates incentive steps that keep members highly motivated.
Example for a generic fixed benefits table:
|Reward for joining
X or low value
2x or medium value
3x or high value
|Exclusive access to products and sales
If you select a plan that includes redemption, it is especially important to understand the significance of its definitions on the success of your program.
Common misconceptions and their counterarguments:
- Redemption harms the exclusivity of the program.
- When offering exclusive rewards for points, it unequivocally increases the level of exclusivity and engagement in your program. VIP services, Exclusive access and primacy are examples of such rewards.
- High percentages of redemptions hurt profits.
- Redemption rate is a leading indicator of your loyalty program’s success. The redemption rate helps you to see whether your program is engaging enough and encourages members to return and buy more often. Make sure you balance the redemption offers between vouchers for the next purchase (e.g., free shipping, discount) with exclusive rewards. As for today, the average rewards program has a redemption rate of 13.67%. Overall, a high redemption percentage increases revenue.
- Allow redemption only for the high tiers and for those who have accumulated a considerable number of points.
- One of the most common mistakes is to set a very high redemption value for the first proposal. It will usually take a long time for members to accumulate the amount of points required for a high-value redemption offer, which can lead to frustration for them. Customers want to get something back in return for their effort. The sooner it comes, the faster they will be engaged. Therefore, it is advisable to allow early point redemption even if it is for small gifts of low value.
- We recommend setting the cost (value in point) for a low value reward to be achievable after a Join and First Loyalty purchase actions. Set the rewards offered gradually as low value, medium value, high value, etc.
- You can start with the following three offers:
- Low value reward
- High value reward
- Exclusive access
This logic is relevant to both single-tier and multi-tiered plans. By a single-tier plan, this is actually the only incentive for points accumulation.
You can track your redemption rate on the Loyalty dashboard under Engagement rates.