Your Loyalty Program Is Betraying You by Joseph C. Nunes and Xavier Drèze in the Harvard Business Review laid out numerous key insights related to why many rewards and incentive programs fail and why many win.
To summarize what I thought was the biggest challenge described in the article, how do we [companies] find incentives good enough to change behavior, but not so generous that they erode margins?
And it’s not that companies have a hard time understanding this concept, it’s that they have a hard time sticking to it and evolving with it in a manner that doesn’t sway from the vision.
How often do you think executives coming to the end of a fiscal quarter or year ask a marketing manager to come up with a lever they can pull for a quick win in terms of an increase in sales and revenue? In the tough retail environment, it is probably more often that we would like to admit. And facing this situation one of the simplest levers to pull is to inundate your best customers with a strong offer or incentive to buy now. It’s this type of short term thinking, I think adds to the erosion of a lot of loyalty programs and marketing managers need to manage it carefully.