How to test the impact of different customer rewards programs with marketing experiments: A step by step guide

Evaluating the impact of different customer rewards programs can be achieved through well-planned and executed marketing experiments. The process is quite similar to the previous guide. Here’s a step-by-step guide:

Step 1: Define your Objective

Firstly, define what you want to achieve with your rewards program. It could be increasing customer loyalty, improving customer retention, increasing purchase frequency, boosting average transaction value, or something else. Your objective will guide the design of your rewards programs and the key performance indicators (KPIs) you’ll track.

Step 2: Design Different Rewards Programs

Based on your objective, design different rewards programs. These could vary in terms of the type of reward (discounts, exclusive products, experiences), the structure of the program (points-based, tiers, etc.), or the conditions for rewards (purchase frequency, total spend, referral of new customers).

Step 3: Determine Your Experimental Group and Control Group

Randomly divide your customer base into different groups. One will be the control group, which will continue with the existing rewards program (if any). The other groups will each receive one of the new rewards programs.

Step 4: Launch the Programs

Launch your different rewards programs to the respective groups. Make sure customers understand how their specific program works and what they need to do to earn and redeem rewards.

Step 5: Monitor and Collect Data

Monitor the customer behavior and collect data related to your objective. This could include purchase frequency, average transaction value, customer retention rate, etc. Ensure you collect a sufficient amount of data to draw valid conclusions.

Step 6: Analyze the Data

After a set period (which can depend on your sales cycle), analyze the data. Compare the performance of each rewards program in relation to your objective.

Step 7: Draw Conclusions

Identify which rewards program performed the best. If there’s no clear winner, try to identify elements from each program that worked well or poorly. You may need to run further tests with revised rewards programs.

Step 8: Implement the Winning Program

Roll out the best performing rewards program to all your customers. Monitor the performance to ensure it continues to meet your objectives.

Step 9: Continuous Improvement

Remember that your rewards program may need to be tweaked over time as customer preferences and market conditions change. Keep monitoring your KPIs and be ready to adjust your rewards program as necessary.

Remember to conduct these experiments in line with any regulations or best practices regarding customer data privacy and consent. Always ensure your experiments are ethical and respect your customers’ rights.