Have you seen How To SELL Anything?

This incredible sales handbook distils an expert's lifetime of sales and marketing experience and hands it to you on a platter, in a simple, easy-to-follow format. With existing customers being the most valuable source of income for any business, this book will teach you how to increase your return business and make more profit from your most loyal customers - and even how to reduce the costs of dealing with your least profitable customers.

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Toward a stronger rewards catalogue: The final steps

In the previous articles (see click here and click here), we discussed the factors which make a catalogue attractive to a programme member. In this article we explore the main approaches to building a catalogue, and the ways in which you can ensure that the effective range of choice is attractive to all members, regardless of their points balance.

Three main approaches
In developing a rewards catalogue and allocating the number of items available to members with various levels of points, you could follow any of the following three basic approaches:

1. Proportional allocation;
2. Equal allocation;
3. Reverse pyramid allocation.

All the approaches involve the division of the member base into certain intervals based on their past earnings (or projected earnings) and then deciding on the number of rewards items available to each interval. Here we assume a quintile division - this is, the total number of members in the program will be divided into five groups based on their current points earnings. (There is also a much more rigorous method to determine the number of intervals depending on the number of members and the range but that would be beyond the scope of this article.)

The example used here takes a hypothetical case of 50 members enrolled in a loyalty programme, each having a different number of points earned. Based on the number of points earned by each member, the points range is split into five intervals as follows:

Proportional allocation approach
The proportional allocation approach takes a democratic view of designing the catalogue. Let us assume for the moment that we will have 100 items in the rewards catalogue for this programme. We look at the summary table above and find that there are 20 members in interval 1 and so the number of items allocated to this interval is 40. Similarly, interval 2 gets 20 items, interval 3 gets 16 items, interval 4 gets 14 items, and interval 5 gets 10 items.

But the problem with this approach is that it tends to limit the number of reward options available for the star performers - the biggest earners. Why should those who contribute the least to the programme operator have all the choice? One obvious answer, of course, is that the star performers are quite at liberty to choose rewards at lower points values, while the 'base-of-pyramid' members don't have access to anything that is above their earning capacity.

Equal allocation approach
The second approach to designing reward catalogues is the equal allocation approach, which aims to make sure that all members of the program have an equally wide choice, regardless of their points-earning capacity. In this way, the top member and the bottom member will both have an equal number of choices in their ideal points range.

This approach is favoured by many loyalty programme owners because they qualify their members before being enrolled in the programme, and only the most valuable customers are ever enrolled. In this case, where membership is more of a privilege, the range of reward redemption options should definitely be uniform across the programme's tiers.

Reverse pyramid allocation approach
This approach is possibly the most radical of all possible options. Since one of the key aims of a loyalty programme is to encourage consumption and engagement with the brand, this method seeks to pamper the best customers (who have already proved that they are profitable) by giving them the widest choice of all.

This approach uses a multiplier to arrive at the rewards for each tier, calculated by dividing the average earnings in each interval by the average earnings at the lowest interval. Once this multiplier is calculated, it then follows a proportional allocation based on the multiplier. The table below shows our example membership, allocated in this way:

How to decide on your approach
Which of these approaches you should use depends purely on the loyalty programme strategy that you wish to adopt: For example, do you want to make the programme attractive to the lower level customers in order to migrate them up over time? Or do you want to reward your star performers and make the programme more 'elite' or aspirational?

But deciding on your approach to catalogue reward options is only the first step toward building a successful and effective rewards catalogue. SurfGold's seven basic steps that will help you build the most attractive rewards catalogue are as follows:

1. Determine your approach to and determine the number of reward items for each level within the catalogue (as discussed above).
2. Pull out the member profile from your sales records or from your advertising department. Come to a clear understanding of the expectations and aspirations of these groups. Ideally, you should do some research with your target audience before launching a loyalty programme, asking them about the kind of rewards they would like to be offered. Do they want utility items or fancy items? Do they want defined products or do they want custom-designed experiences? Which category appeals to them the most (lifestyle, personal care, travel, durables, automobiles, and so on)?
3. Pull out your master catalogue and look at the items in there. See how many of the items in the master catalogue meet the criteria set out by your members in the research you did in step two. Remove all of those items that are not favoured by your members. This leaves you with a catalogue that is suitable for your members, and contains only reward options that are likely to be redeemed.
4. Next, look at points interval 1 and look at the points range. Find all of the reward items that fall within that range. You can now start choosing items from the catalogue and start populating your final catalogue, with the appropriate number of reward options for each of the intervals defined.
5. Repeat this process for each reward category you plan to offer.
6. With the catalogue complete, divide it into different categories and see if all the categories desired by your programme members are adequately represented in the catalogue. If so, you have a successful catalogue. Not just good, but great.
7. If there are still a number of items that are not really desired by programme members, you may have to run through the selection process again, this time dropping the less desired items and replacing them with more appropriate ones.

It is never easy building an attractive loyalty rewards catalogue, but the results will justify the effort you put in. When the season for redemptions comes along, you'll be smiling all the way to the warehouse.

Have you seen How To SELL Anything?

This incredible sales handbook distils an expert's lifetime of sales and marketing experience and hands it to you on a platter, in a simple, easy-to-follow format.

With existing customers being the most valuable source of income for any business, this book will teach you how to increase your return business and make more profit from your most loyal customers - and even how to reduce the costs of dealing with your least profitable customers.

You'll learn to sell yourself, sell your products, and sell your brand on the internet, writing high-conversion landing pages, social media posts, and more. You'll start attracting customers you didn’t even know existed, and learn the top trade secrets for customer retention.

You'll become a lean, mean selling machine. See how the experts do it and learn to adapt what they've done for your own profit. You'll learn to write strong, powerful, effective sales copy, whether it's for a sales script, sales letter, flyer, insert, advert or just about anything else.

You'll learn how to sell whether you're selling by telephone, by mail, or even meeting prospects face-to-face. You'll find out how to size them up, present yourself, nail down their true needs, close the sale, and learn to tackle the tricky ones.

You'll discover the biggest secrets of successful direct mail sellers, sales letter writers, and how to segment and choose the right prospects for each campaign.

Get it on Amazon (Kindle/Print)