Constructing a Reward Program

By Mark Romanelli, VP of Product Development at Wolfe Rewards & Loyalty

Reward programs that are launched without proper planning have a high probability of failing or accruing undue costs.

Most businesses believe that providing an additional reward or incentive to customers or employees can give their organization a lift. Reward programs are everywhere nowadays and companies of all sizes are jumping on the bandwagon. Want proof? Just take a look at the number of social deal sites (Groupon, LivingSocial, etc) that has popped up in recent years with no shortage of ‘daily deal’ incentives being offered by small retailers.

Unfortunately though, many businesses look at a reward program as a Band-Aid and implement them hastily when there is a problem. Sales are down, employee turnover is too high, customer satisfaction is low, or production output needs to increase; let’s slap together an incentive program to fix the problem right now.

Think of structuring a reward program as if you were building a house. The size of the house depends on the number of participants in the program (employees, customers, etc) as well as the support staff to run it. If it’s a small program say for a small team project goal, maybe you are building a tree house and planning is pretty straight forward. If you are talking about a corporate wide initiative that touches thousands of people or multiple departments, you’d better put on your architect hat first.

Every business and program will have its own unique attributes but at the core there are general best practices to consider when planning the program. We’ll cover those in a moment.

But first there are three guiding questions that we recommend you ask yourself while crafting your program. They are what we can the three M’s:

Is my program…

Measurable: Can I attribute specific data to the results and progress of our program? Not just an assumption such as ‘Employee morale seems to be way up’.
Motivating: Will my target audience respond to the actions required of them for the reward I’m providing? You need to appeal to people’s inherent sense of ‘What’s in it for me’.
Manageable: Do you have the necessary resources available to set up and run the program? Big ideas are easy to come up with but may not be practical for a variety of reasons.

With these questions in mind, let’s take a look at the fundamental steps to design your rewards program.

Step 1: Outline the Objective(s)

What is it that you are trying to solve for or accomplish? This is the overall business issue or opportunity. These are typically going to be easy to define and attribute specific metrics to. Examples may include:

Increasing sales
Reducing production costs
Decreasing employee turnover
Penetrating a new market
Improving customer retention

It's common for there to be multiple objectives that you wish to accomplish through a single program. But be cautious not to try and solve for too many at once. That could complicate the program and make user adoption more difficult.

Step 2: Conduct Assessment

Define the individual Issues or Opportunities that are driving your top level objectives. What are the factors that influence those objectives directly or indirectly? Before we can establish our goals for the program, we need to understand the root cause of the problem and areas that can be capitalized on.

We have a client whose objective was to increase sales. They provide a service that has become extremely competitive over the years. The major issues they defined in their assessment included:

Cost of new client acquisition had increased over the past 3 years
Existing customers were not aware of all the services they provided
A large portion of the customers were not loyal to their service and frequently shopped around

Knowing these issues, they obviously decided to concentrate their efforts on Customer Loyalty.

Step 3: Set Goals

As referenced earlier, your goals need to be concrete and measurable. Typically no more than 3-6 overall goals that are defined in quick statements that your team is going to drive towards. These goals are the end result of your program and are not necessarily going to be what you require the reward participants to do.

For example, building on the scenario in Step 2, if we are concentrating on Custom Loyalty our overall goals may be:

Increase existing client sales by 10% per quarter
Increase usage of our client portal by 20% through educational webinars and industry information provide in the client interface
Reduce client churn by 10%

Step 4: Design Behavior Changes through Incentives

The above goals sound great but now you need to provide incentives or rewards on how to make this a reality. Ongoing incentive program are typically run by either a point system where the user earns points which are eventually cashed in, or a minimum requirements threshold that once reached the reward is instant. Personally I prefer that latter as it’s clearer to the user and generally easier to administer.

You don’t have to have a bunch of ways a user can earn a reward. If one or two requirements can help meet your goals then don’t overreach. The easier the better. We have a handful of clients who offer ongoing services and their program provides a reward for increasing their purchase month-over-month or quarter-over-quarter and it works great for them.

However many methods you have to offer your users, just make sure they are simple. Here are a few of my favorite unique examples from some of our clients that are part of their larger overall program:

In an effort to increase cable TV subscriptions, a regional Digital TV provider began rewarding leasing agents and apartment managers for referring tenants who subscribed to their Digital Cable Service.
One of the largest national freight shipping companies introduced a customer loyalty program in 2009 that rewards customers simply for increasing their number of shipments in a given month over the same month's shipments for the previous year. Customers both large and small are eligible and rewarded on an ongoing basis for doing just a little more business with them each year.
In order to promote employee engagement, collaboration, and innovation, one of the world’s largest financial institutions created an internal system for employees to submit new ideas or contribute suggestions on existing challenges. Employees earn points for participation and how well their ideas are received. Points are then redeemed for a prepaid card each month.

Step 5: Launch & Manage

Hopefully by the time you have reached this step you have already identified who in your organization is going to own your program. This person should be empowered to make decisions on all variables that can affect the program positively or negatively. Typically a manager or director will take ownership of the program to make decisions and employ a staff member to act as the Program Manager to handle the day-to-day functions. The Program Owner and Program Manager should be responsible for:

Marketing & Promotion Materials
Training Materials
Participant Feedback & Support
Reporting on your Measurable items
Alterations to the program

Reward & incentive program are always launched with the best of intentions but the ideas alone will not make them successful. Take the time upfront to plan out your program and put the proper structure in place. Good luck!

Email Questions or Comments about this article to Mark at mark.romanelli@wolfe.com
Follow on Twitter: @mark_romanelli