Promotional offers and bonuses are a crucial part of a loyalty program strategy. They can help increase participation and motivate customers to take certain actions or behaviors, such as completing tasks or buying more.
Offers like discounts on purchases or earning bonus points on new products or services, help provide value for customers while driving sales and boosting overall engagement. When utilized strategically, promotional offers and bonuses can serve as powerful tools to build customer loyalty.
The ability to evaluate and refine promotional offers and bonuses directly impacts customer engagement, loyalty, and, ultimately, the bottom line. However, putting together a promotional plan can be daunting for marketers. What type of offers or bonuses should they provide? How frequently should they send customers offers? Should different customers receive different offers?
In this article, we'll explore processes and ideas for how to test different promotional offers or bonuses within a loyalty program. Using loyalty program data, marketers can refine their tactics and increase the effectiveness of different member promotions. Businesses will benefit from high performing promotional offers that motivate customers and maximize the financial ROI of their loyalty programs.
Before you dive into testing loyalty program offers, you first need to create offers that resonate with your specific audiences. Start with brainstorming potential customer motivations. Are some customers driven by discounts? Freebies? First access to new product launches or exclusive experiences?
Knowing the 'why' behind customer actions can help you determine 'what' you will offer them. You can use survey results, shopping or behavior data, and demographic information to get more insights into customer preferences.
(Hint: if you’re just beginning to collect or refine customer data, then use broad demographic data points at first, such as loyalty program tier level or demographic information. You can create more tailored and detailed offers once you have detailed customer data insights.)
Once you have a good understanding of customer motivations, focus on the 'when' and 'how' aspects of offers. For some customers, frequent small perks might be more impactful; for others, a significant annual reward is the key to their hearts.
You can use different creative and effective strategies when testing promotional offers or bonuses in your loyalty program. One of the most tried-and-true approaches is A/B testing. A/B testing is when you run two similar but different offers so you can compare which one resonates better with the intended audiences. Here are 4 types of promotional offers or bonuses you can A/B test within your loyalty program.
Urgency is a powerful psychological trigger that compels immediate action. It often earns higher response rates, but its strategic use is non-negotiable. You can evaluate how different urgency levels in your loyalty offers influence conversion rates by testing these offers against different customer segments.
One example of how to run this test would be to create two offers, Offer A and Offer B:
Offer A includes a 24-hour window for redemption.
Offer B allows for a 72-hour window for redemption.
Segment your audience into two equal groups and launch the time-bound offers simultaneously. Measure how many members from each group take up the offer within the designated time frame.
If Offer A outperforms B significantly, you've learned that a more stringent time constraint is effective.
However, be wary of overusing this test. Send too many urgent offers will dilute its importance in the customer's mind and diminish its effects over time.
Another method you can experiment with in your loyalty program is how often members receive offers. If you give customers offers too frequently, they could lose appeal. Too sparsely, and member engagement might dwindle. 'Frequency' tests can help you determine how the send pace and frequency of your loyalty program offers affect overall engagement and redemption rates.
For example, you can experiment with giving customers monthly deals versus quarterly promotions. Over a set period, track member interactions with the different offers. Look for patterns of fatigue or peaks in engagement correlated with the offer cadence.
Your goal is to find the sweet spot where members are neither overwhelmed nor underwhelmed. You want to find the most effective offer send frequency that sustains customer interest without desensitizing recipients.
One of the times loyalty programs fall short is when they treat each customer the same. Customers are diverse individuals and can have different responses to promotional rewards. This is why it's a good idea to test different incentives, offers, and bonus values among your audiences. By doing so you can identify and segment customers who prefer percentage discounts, cashback, bonus points, or flat monetary discounts.
For example, say you create two different offers. Offer A gives a customer a 20% discount after they reach a certain spending threshold. Offer B on the other hand awards customers with $20 cashback after they meet a specific spend amount.
Test these offers by randomly presenting them to groups of similar members and measuring the redemption rates.
How members respond to different offers can show you their preferred incentive types. This allows you to be more targeted and strategic when creating future offers. Instead of running one big offer that some members might redeem, you can create smaller more optimized promotions for specific customer segments.
Increasing customer spending across products or product categories can increase individual customer value significantly. If you notice that some customers buy only one item or stick to one product category, you can experiment with whether certain promotional offers can change their buying habits.
There are different ways you can experiment with motivating members to change their shopping behaviors by buying across different categories. For example, you could create an offer that provides bonus loyalty points for purchasing items in related product categories for a limited time. You could also offer discounts on complementary products during the checkout process.
The important thing is that you closely monitor and control which offers are provided to which test groups so you can properly assess whether they had any impact in driving cross-category purchases. Understanding whether factors like incentive type or convenience drive cross-buying and upselling can inform your future strategies.
The data gleaned from your A/B testing efforts are more than mere numbers; they are guideposts pointing to the most effective strategies for your customer loyalty program. It's imperative to adapt and take your learnings forward to optimize current and future campaigns.
By creating a loyalty program environment of testing and learning, you can increase innovation in your loyalty program. Remember, the art of A/B testing isn't confined to deciphering what worked, but understanding why it worked and how to replicate and scale success. Focus on delivering customer value and elevating the customer experience—one loyalty program offer at a time.
The right loyalty platform is essential for this entire process, from setting up the offers with the right parameters to providing in-depth analysis and reporting of the different outcomes. Brandmovers's customer loyalty platform offers built-in testing capabilities that let you tailor your offers specifically to your loyalty program and customers and drive results.
Reach out to us today if you want to learn more about how A/B testing promotional offers and bonuses within your loyalty program can provide you with more possibilities and opportunities to drive the bottom line.