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Shock and Awesome: Why surprise rewards work

April 9, 2014

By Caitlin Whitehurst, Staff Writer and Social Media Manager, COLLOQUY

Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty marketing publishing, education and research since 1990.

In 2000, Neil Gussman was making frequent business trips to Asia. He was flying with Cathay Pacific and was enjoying business class tickets courtesy of his employer.

"One day I got a blue slip in the mail that entitled me to a class upgrade on any trip on any partner airline," recalls Mr. Gussman. He cashed in the surprise reward for an upgrade to first class — his first time in first — during an 18-hour trip to Hong Kong. "It was lie-flat bed wonderful!" he said.

Surprise rewards work as long as two conditions are met, said Dr. Josh Klapow, chief behavioral scientist for ChipRewards, an incentive an engagement company. They work if they are novel to the individual and they are reinforcing and rewarding.

The following are three examples of how major brands bring unexpected pleasures to their loyalty members:

  • In January 2010, Expedia surprised a control group of its Elite Plus members with a $100 coupon. Only 10 percent of those receiving the coupon used it, but the entire group increased its transaction with Expedia by nearly 10 percent.
  • Guests enrolling in the new Caribou Coffee's Perks program earn a free medium drink for registering. Members who opt-in to receive email or text messages are notified each time they earn rewards, which Caribou says will always be a surprise. Rewards may include a beverage size upgrade, an item from the bakery case or a favorite Caribou drink.

    "We feel the 'surprise and delight' model aligns well with the personality of the Caribou brand, which focuses on making our coffeehouses feel comfortable and cozy, and doesn't take ourselves too seriously," Michele Vig, Caribou's vice president of marketing, said in an email. "Additionally, we've found that not every guest wants the same reward, so offering a free latte when a guest reaches a certain amount of points isn't going to be attractive and rewarding by everyone."
  • Under its Priceless Surprises program launched earlier this year, MasterCard customers who tweet under #PricelessSurprises have the chance to be treated to an escalating tier of awards such as speakers, headphones, music downloads, free Uber transportation and a day with Justin Timberlake. Surprises are based on the customer's day-to-day card use and social media interaction.

    "With a 'surprise' it truly becomes about the individual and his or her experience and that's where we want to play as a brand," said Lilian Tomovich, SVP of consumer marketing at MasterCard. "It's not about one size fits all or reaching the masses, but rather how we touch our cardholders individually in a way that is meaningful to them."

 

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Discussion Questions:

Should unexpected rewards be a much larger part of retailers' loyalty rewards efforts? What type of "surprise-and-delight" tactics would work at retail?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Should surprise awards be used more or less than they are currently at retail?

Comments:

While the Cracker Jacks "prize" is essentially worthless, there is something about that surprise inside that makes it intriguing.

In order for surprise awards to work as part of retailers' loyalty programs, the award has to be perceived as "meaningful" or "valuable" by consumers. That could be a challenge depending upon the diversity of the retailer's customer base.

It is difficult, and potentially expensive to offer "surprise-and-delight" awards that are actual merchandise, especially if the awards are going to the best/most loyal consumers.

Perhaps retailers need to pilot surprise-and-delight award concepts based on unique levels of service, or special shopping hours for preferred customers, or even something as basic as free shipping/delivery to your home.

The absolute requirement for any surprise-and-delight award is that has to be easily understood (by both consumers and retail staff), and flawlessly executable by the retailer.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

I think it shows the retailer cares about your business (and I've been the recipient of a number of these surprises). I do think it's important that the surprise be meaningful and easy to use. One restaurant offers me a free dessert with two meals purchased - not nearly as meaningful as another that offers me a BOGO.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

Like anyone, I greatly admire an effective and original "surprise-and-delight" (S&D) program, but I lament the fact that relatively few retailers make the effort to link it to their CRM system.

Doing S&D activities to "random" customers is generally ineffective: they are probably low value customers to begin with, so you can't move the needle very much. But focusing only on the high end is also ineffective and can be an annoyance to "platinum" customers who don't need any more incentive to strengthen their relationships. Finding the sweet spot in between is hard, but it's worth some analysis and experimentation to get there.

Likewise, retailer need to do more critical thinking on the back-end: how did the S&D effort change the customer's lifetime value? This is an exceedingly rare analysis, but very important. Outside of pure PR effects (which are getting weaker and weaker as everybody plays the S&D game), it is essential to quantify how much value was created by the campaign, and how it varies by type of customer, type of execution, and other contextual factors.

There should be some real science in S&D activities, but ironically, too many retailers are deploying S&D in a far less scientific way than the way they run most other customer-facing activities. Right now it's a fun novelty, but that can't last for long....

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Peter Fader, Professor of Marketing, The Wharton School of the Univ. of Pennsylvania

The value of periodic and randomly scheduled "reward" was something we learned training white rats in Experimental Psychology 101. And we know pleasant surprises works for humans too.

Most will think the surprise reward should stay in-house - a coffee shop gives a free coffee, a clothier gives a coupon for its own store, etc. But believe it or not, giving a reward "out of scope" can often have an even greater "memory factor." Diners want to take the leftover meat home for the dog. The waitress hears this conversation and returns with a coupon for a brand of dog biscuits as well. A family is given a two for one movie coupon to a local Disney feature. Even better if you can do surprise cross-over promotions. A clothing store with a dry cleaner and vice versa for example.

One of the most effective things to keep in mind is that you will make more impact if, instead of rewarding the direct customer, you do something for those most dear to them - their kids, spouse, pet. That is remembered and appreciated far longer. The key in all of this is to make the reward memorable...and it's mostly the surprise that will do that. Won't get into it here, but that disruption of pattern is a neurological thing.

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Ian Percy, President, The Ian Percy Corporation

The more that retailers loyalty efforts are published, the more they ultimately defuse the value of loyalty marketing: that not all customers are equal in (realized or potential) value and thus should be treated, invested in, and rewarded differently. It's why we define loyalty marketing as "paying attention to customers and acting accordingly." It also explains the value of "big data," CRM and giving customers a better experience.

But the sad reality, which Wharton's Professor Fader aptly notes, is that most retailers' loyalty efforts are essentially mass market discount programs.

Our view is that loyalty "programs" should absolutely not be fully published. Like any relationship, it gets stale when everything is formulaic and expected.

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Phil Rubin, CEO, rDialogue

The same thought should be applied to the employee "loyalty program." Every once in a while with no preset plan or schedule, we give our small staff a gift card for a dinner on us. It has a great result.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I love the "surprise-and-delight" concept, but it does have its perils. Remember when Zappos used to surprise and delight its customers with express shipping? Now, you could call them the ones who ruined it for everyone. Surprise and delight strategies work best when the type of reward, not just the timing, is unpredictable (ala Caribou and MasterCard). Otherwise, small delights might morph into great expectations!

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Carol Spieckerman, President, newmarketbuilders

I was recently at a smallish store that I'll not name on an end of the month weekend near closing time. About a half hour before closing an announcement came over the loud speaker: "Thank you, our loyal customers who are here with us on a cold and rainy night. At checkout you'll be getting 15% off every item in your basket from now until the store closes." This nice surprise (and carrot) warmed and lit up the faces of every shopper within eyesight. Only a few minutes before I had waffled over whether to buy four rather costly plates, or only get two and wait till the other two might go on sale. Bottom line: I went home with four, was a very happy camper, and the store moved out some merchandise.

'Liatt'

Many folks are aware of a long-standing tradition among merchants in New Orleans called the "lagniappe" - a little something extra intended as a tangible thank you to customers. A good example would be adding a 13th beignet to a dozen.

Unannounced upgrades, free shipping vouchers, a free music download, free clothing alterations, a free loaf of artisan bread at the supermarket, and many other lagniappes we could think up all fit nicely into this approach. The more personal it feels to the recipient, the better.

Here's the tricky part: As companies scale this up into a program that they promote, they risk undermining its perceived value and inviting participants to game the system. Useless rewards - like discounts on high-dollar purchases that will never be made - can create cynicism and resentment. Some medium-activity customers may even start thinking they are not receiving their fair share of appreciation.

Rewarding your richest customers with high-ticket surprises is a rational choice, but for goodness sakes, don't advertise that on TV so your other 99% can see just how much they don't make the grade with your company.

Surprise rewards are a terrific arrow in the quiver of the customer marketer, but use them judiciously and when it counts, so that expectations do not grow to exceed the actual value of the experience.

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James Tenser, Principal, VSN Strategies

The are no limits to what CPG and retail brands can do to drive loyalty. Unexpected rewards are one way to differentiate from competition. And, they need not be expensive to implement. In a supermarket, apparel store, DIY... ANY type of store... wouldn't it be great to get "something for nothing" because you shop that store so often? Say, at checkout at a DIY store, the POS terminal prints a coupon for a free product in the category that you have made purchases before. That coupon would compel you to come back to the store and perhaps pick up additional impulse items on that trip.

The point to be made is...try it! Experiment!

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Large or small, expensive or inexpensive, it doesn't matter. It's the thought that counts. Keep in mind that the concern is that the surprise sets a new and unrealistic expectation.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

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