How Stock Rewards Can Fit into your Loyalty Program, Part 2
As we discussed in our last post, many traditional loyalty programs are challenged to attract and engage consumers, thus ultimately struggling to drive the businesses forward. Most loyalty programs rely on one of four common earn models to engage consumers and reward them for their loyalty. No matter the earn model (or combination of earn models) that your program may utilize, stock rewards can fit seamlessly into your program to engage and motivate your consumers in new and exciting ways.
First, let’s review three common stock rewards use cases:
- Percent Transaction Reward: Rewarding a consumer for a purchase utilizing a percent transaction (e.g., 1 percent) earn model. For example, if a consumer makes a purchase of $100, that consumer would be rewarded $1.00 in fractional shares of stock.
- Activity-based Reward: Rewarding a consumer for taking a one-time or series of one-time actions. For example, as with many loyalty programs, challenges, badges, and other actions are designed to motivate consumers to deepen their relationship with a brand in exchange for rewards. In this instance, a brand could reward a consumer for referring a friend with $1.00 in fractional shares of stock.
- Existing Points Conversion Reward: Enabling consumers to exchange an accrued bank of points for fractional shares of stock at a predetermined exchange value. For example, many loyalty programs utilize marketplaces, travel hubs, or other means to enable consumers to spend or exchange their points bank. Organizations can allow consumers to exchange existing points for fractional shares of ownership in a similar fashion.
As demonstrated, stock rewards are a highly flexible loyalty mechanism, just like points, stars, or other values. The rewards trigger for a fractional stock reward is no different than the reward activations already present in a loyalty program today. You may wonder though, “Why utilize stock for these basic use cases when your program may already rely on points, miles, or another reward currency?”
Simply, stock rewards motivate consumers differently. In a February 2020 survey of existing Bumped users, around 88 percent of users think ownership is more exciting than traditional rewards when asked how they felt about ownership (stock), compared to traditional rewards like points or cash back. Furthermore, 88 percent also reported that they would participate in loyalty programs if the brands they love gave them the chance to be rewarded in stock.
When analyzing the earn model in your existing loyalty program, consider the following ways you could integrate stock rewards utilizing one of these three common reward scenarios:
In a Membership Model, members are rewarded once they are “part of the club.” As an owner of a program, imagine offering a new reward to your members. That reward can now include the ability to earn stock rewards from purchases with your brand. You can also think about creating a curated marketplace of offers, enabling your loyalty members to shop with non-competitive and/or complimentary brands and be rewarded in stock. This strategy drives two key member initiatives - direct sales growth with your brand and making your loyalty program more valuable to members via the “halo” of all the perks they can earn because of their relationship with you.
In a Threshold Model, members earn more when they reach new tiers through their spending and their loyalty. With stock rewards, members can earn transaction-based rewards for every purchase, earning into higher reward percentages, and one-time rewards for hitting a new tier or passing an earn threshold. This perk could be in addition to or in lieu of existing points. Envision letting your members choose, adding an element of personalization to the member experience!
In an Interval Program, members earn rewards at regularly determined points - either by purchasing a set number of times or reaching a milestone, like an anniversary. In a Stored Value Program, customers build a points bank through their loyalty. Many times, these earn models are utilized together in some combination. Now, visualize that at defined intervals or once a customer has accrued enough points, customers can earn additional bonus fractional rewards or earn into being able to convert points into fractional shares instead of another benefit. Under this scenario, we can introduce personalization while driving engagement and excitement for anniversaries, a defined number of purchases, or other desirable member behavior - tenure, engagement, and spend.
For all models, stock rewards unlock new engagement scenarios, rewarding consumers for earning and introducing small-point redemption opportunities. This is particularly important for two reasons: One, it engages customers who may never reach higher thresholds required for more significant perks. This boosts retention and helps customers feel they are being rewarded for their loyalty, even if their lifestyle does not enable more lucrative rewards. Second, when a member converts points into fractional shares, that member is not zero-ing out a points balance into nothing, potentially becoming a “loyalty free agent.” Instead, a consumer has “reinvested” in his/her relationship with your business through ownership.
Stock rewards create a number of exciting scenarios, innovation moments, and opportunities to drive business value. They can also help solve a number of unique business challenges plaguing loyalty programs such as low member engagement, alternative redemption opportunities, choice and personalization, and zero-ing out or becoming a loyalty free agent.
No matter the earn model or combination of models you utilize in your loyalty program, stock rewards can fit into your toolkit. As the February 2020 survey of Bumped users told us, 68 percent of consumers feel more loyal to the brands that they get stock rewards from, compared to those with traditional rewards. Isn’t loyalty the end goal?
Interested in learning more about stock rewards and having a conversation with our experts? Reach us at [email protected]!