Loyalty and CRM

Cascading rewards: Reinforce customer loyalty, boost revenue

Cascading rewards: Reinforce customer loyalty, boost revenue

Forget the mistake, but remember the lesson. Sometimes, a brilliant idea goes to waste, or becomes pure evil, when used for the wrong purposes. However, the magic of human resilience lies in the fact that we are able to pick up positive lessons from even the worst of situations and apply them for effecting a positive change.

Blue whale – a shady mobile app game which gives you 50 adverse tasks to complete, eventually driving you to depression and possibly suicide – has been grabbing headlines recently and it is all predictably for the wrong reasons. Let's be clear: the game is illegal in some countries and we do not wish to promote it, or support it by any means. It is unfortunate that all the misanthropy and sadism which was evident in the creation of the game has drowned out an impressive implementation of gamification that has gone into it. Taking a closer look, one can see the program displayed how gamification can help maintain customer loyalty through principles that can be positively replicated in a business context.

Earn and burn cycle of cascading rewards

Conventionally, the cycle begins with an activity related to the brand (staying in a particular hotel, flying a specific airline, or generally making a repeat purchase) that earns you points, and ends with a reward which you achieve by "burning" the points you earned. There is limited scope for residual engagement, except for piling up unused points in hopes of a major reward later on. While gamification in loyalty has been extensively studied in this white paper from IBS, there are further related possibilities which can enhance engagement of a customer through the concept of cascading rewards.

Cascading rewards are supplementary rewards which you earn while completing a milestone in the process of taking advantage of a reward you have already earned. These can be seen as "sweeteners" for a deal to increase customer adoption of the "burn" opportunities provided in a loyalty program. It is essential to customize these diligently, making use of historic usage data from the customer or by collecting information from the customer about the nature of his/her transaction with the brand.

Elements of the cascading rewards strategy

Imagine a customer who has just checked into his/her hotel room at 2 o clock in the afternoon. Whether through a specialized app, or a good old text message, the hotel can subtly invite him/her to use the bar through a reminder that happy hours begins at 5 o clock, and he/she can get the first drink at a discount on account of being a guest. Let's say the customer (or maybe a couple or more) readily complies and reaches the bar for a drink. As happy hours draw to a close by say 8 o clock, he/she might receive another message promising to extend happy hour rules for another half an hour (exclusively for that customer) contingent to an additional order of say three drinks at the table. Instantaneous rewards to promote quick purchase decisions, in addition to a residual sense of achievement to keep them going !

For another example, let's consider the customer referral program of a major hotel brand. If the data shows an inordinate number of referrals coming from one particular id, that indicates that the person is in a position of some sort of power to influence hotel booking divisions - maybe he/she mans the travel booking desk of a company. So if the customer has touched 15 referrals in the year so far, earning say 100 points each, the loyalty program may be customized for him/her exclusively to make it 150 points for each referral, contingent to making 5 more referrals in the same year!

Once again, this brings us back to the importance of diligent customization. Sending a drink coupon to a teetotaler (or worse, an under-age customer) may backfire. Asking a customer to refer a friend right after he/she has made a serious complaint against service will also cause issues. In other words, cascading rewards work best with your best customers.

But in a sense, they also help generate great customers who are loyal to the brand. This is because, if implemented in an effective manner, such a strategy rewarding active completion of "tasks" (composed of time-bound goals and expiring tokens) would lead to better utilization of hotel amenities, thereby increasing revenues. Customizing the rewards to each guest would also lead to a better customer experience and increased adoption of the "game". 

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Friday, 21 June 2024

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