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©2019 by Lutav | Sérgio Tavares, ph.D.

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A framework for building your loyalty program, based on best practices and gaming theory

#CX #UserExperience #LoyaltyPrograms

#ServiceDesign #BusinessDesign #StrategicDesign

Frequently, big companies focus in solving the back-end of a complex loyalty programs, and forget the front-end part: the very essential customer experience.

It might comes as a surprise, but customers may be feeling a little overwhelmed with THINGS — and even ethically challenge by having MORE things.

I have worked with clothing companies, fashion industry, consumer goods and airlines — and the bottomline is that the first forgotten part is how the end people feel about the points, coins, returns, cents or prizes they get.

At times, it feels impossible to get the prizes.

At times, it feels irrelevant to win those rewards.

at times, it feels difficult to understand how they work.

At times, why would I even care to swipe my card?

This framework can really help designers to create loyalty programs that stick, add value and keep retention high.

 

It has been built with elements from the best programs around, and based on videogames studies on challenge-reward systems that free dopamine in the brain. Yeah, it's dope!

 

 

A lot of reports have been warning companies that partnerships are the new "liquid currency" customers are after. The industry has also boldly moved towards personalisation with Machine Learning (1/3 of Amazon's revenue come from AI-based recommendations!). That's all must haves and they go without saying. But how to make it, put simply, stimulating enough to keep people loyal? 

A framework for Loyalty and Attrition

Along the years, I came up with a framework that can create a mix of elements that, when put together, can generate quite strong hypotheses for positive customer behaviour enforcement.

It's simple, but not too simple.

 

NOTICE: This canvas does not address the functionalities of your Marketing Automation Platform, nor the segmentation you may want to create.

1/4 How to use triggers? 

The main idea is to approach people (the end customer) according to their "calendar" needs. I have divided the calendar in layers: INSIDE-OUT, LIFE & CULTURE and CONSISTENCY TRIGGERS.

INSIDE-OUT are triggers that come from you. They are a break of protocol in design thinking, actually. People are not interested in them, but you have to live with them. For example, when shippings arrive or when you decide to make a big sale, or when a new hire at the office happens. There is a double work, here: to design actions that will make your trigger relevant to customers.

LIFE & CULTURE TRIGGERS are both general and personalised, depending on the data you have from customers. You will use common triggers like Christmas, Black Friday or Back to Work seasons to activate your triggers. But furthermore, there are personal trigger you may act upon, such as birthday, family members' birthdays, anniversaries, moving to a new place and so forth.

Thirdly, CONSISTENCY TRIGGERS are the lease thought of. They reward the consistency of interactions people have with the business. For example, a person's 10th purchase, the 10th consecutive week of purchase or a year since their first deal. Companies like Google or Facebook play with "the best times" and "friendversaries", so this is a similar way of exploring these events.

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categories OF INCENTIVES help you to estimate costs of rewards, and get people to explore new behaviors.

2/4 Using TOKENS/INCENTIVES

 

Tokens, or incentives, are simply your prime matter with which you reward people. I have classified them into three main categories, so it can spark ideas on how to bring up more tokens.

MONETARY, SERVICE, PRODUCT INCENTIVES

The point of the categories, as well, is to make it easier to estimate which ones are more expensive, and which yield better returns.

 

For example, discount in different categories may help customers to try new behaviours. ("I may buy garden stuff from you, even though I used to buy only kitchenware here").

Over time, you may want to ditch expensive categories of tokens, and stick with the ones your customers respond the most to.

If you discover other categories, even better. 

These examples of tokens come from Nordstrom, Sephora, GAP, Espresso House, H&M, McDonald’s, Harrod’s, The North Face, Amazon, Starbucks, REI, TOMS, Apple, CVS, Barnes & Noble, Target, Bloomingdale’s, Michael Kors, Marriot, Lululemon, Kohl’s,  DSW, Tarte and more.

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3/4 DISTRIBUTION

One of the most important processes of reward systems is how they are distributed. That where the gaming soul of loyalty programs make it, or break it. 

In order to be engaging, tokens must play "hard to get", and reach a denial-and-reward balance, in order to stay entertaining. 

You may want to test and balance, from the beginning, with less expensive rewards up to the more premium ones.

Distribution is not only about time, but also about creating beneficial segmentations. A few rewards could be only accessible to Bronze, Silver and Platinum members. 

A good question is: how will this relationship evolve, in order for people to keep interested in it? Season 1 cannot offer the same things as season 13!

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4/4 ELEMENTS

For the lack of a better name, these are transversal elements that should be present in order to spice up and reinforce the traction of your system.

It comes from research in videogame industry, should to release dopamine in the brain of active players. That doesn't mean that your bonus card will release dopamine in the brain of your customers. But it does signal you are following a system that works according to our mental structure.

Elements are, on purpose, miscellaneous. They are an extra polish you may insert into the system to make the engines well oiled. You may checklist if they are in place at any point, and refresh, pick and mix in order to create change.

The entire secret of good loyalty systems is the tension between predictability and surprise.

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About SIGNATURE MOMENTS

The sum of all these actions, together, should have something in common. What is it? Once you have spotted that essence, you may reinforce its uniqueness. Your signature moments start to rise. And that means your way of working, what customers expect from you. That means trust on your consistency, lower thresholds to try new things and hassle-free integration with whichever new idea you may come up with.

DOWNLOAD THE LOYALTY PROGRAM DESIGN CANVAS

You may create your own canvas, but this is a working model I have used with many businesses, from small to big. 

Enjoy, and share if it was helpful!

P.S.: I don't have a newsletter. But I share a lot on LinkedIn. Connect with me there