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Loyalty trends and best practices

Single Objective vs. Multi-Objective Loyalty Programs

by Julia Leyrer
November 20, 2015
Single Objective vs. Multi-Objective Loyalty Programs

When it comes to providing initiatives to existing and prospective customers with objectives such as increasing customer retention and acquisition, there are two main approaches that are taken with promotions: single objective and multi-objective approaches. Although each provide a valued initiative to influence a certain customer action, they differ in how customers engage over time and how they’re structured within the business. Below, I address the differences between the two, and when to know which approach to take.

Single objective

As it sounds, single objective approaches are loyalty initiatives that are created around a single objective in mind. This may be retention of at-risk customers through rebates, referrals of new customers with gift certificates, or the addition of benefits to increase overall customer satisfaction. This is commonly seen in the television network industry where companies offer separate initiatives around rebates, discounts, and referral benefits all geared towards different objectives. With this approach, as you release additive promotions with different objectives, you may run into a few issues. Customers are incentivized to do a specific action tied to one potential reward. This may be constraining and not lead to further long-term engagement after reward achievement. Additionally, issues are created around this complexity between simultaneous promotions and expirations, and customers may find ways to “double-dip.” The ability to smoothly transition between initiatives and to assess collective ROI is also limited.

Multi-objective

With a multi-objective approach, initiatives go hand in hand with numerous objectives at a time. This provides a more integrated customer experience with added control over the incentives and promotions offered. This approach is similar to loyalty seen in airlines, hotels, retail, and CPG. A simple example is airlines that offer points to customers for both flying through their airline and shopping with partner retailers, and then providing a selection of airline upgrades, hotel stays, and car rentals for customers to use their aggregated earned points towards. There is limited complexity of promotion overlap as they are interlaced and reward opportunities complement each other to achieve business objectives. The objectives may cover both retention and acquisition, and it is often easier for customers to engage in an array of behaviors that go beyond purchase-only. There is also the ability to drive increased engagement through “surprise and delight” rewards and other non-monetary reward options. Customers are able to engage with the brand over time and choose relevant actions and rewards that work for them. Overall, ROI is easily assessed allowing for structural changes.

When to know which approach to take

Companies need to look at their market and competitors, as well as their current promotional efforts. If there are specific behaviors needed in the short-term or certain KPI’s are performing well and there is a key need in one area, the single objective approach may be the most appropriate approach to take. However, consumers are well aware of which brands add convenience and valuable experiences, so if multi-objective loyalty is currently present in the market and a company is not offering it, they will likely fall behind. On the flip side, if many companies in a market are relying on single additive loyalty initiatives, this may either be appropriate for that specific market, or presents the opportunity for multi-objective loyalty as a clear differentiator. Existing promotional efforts and success are a huge indicator of how customers respond to certain types of initiatives and consequently need to be assessed. Additionally, a transition to a multi-objective approach needs to be managed through ongoing assessments of initiative success and having a clear design of the future program landscape. For more information about strategizing with multiple promotions, please contact us here.



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