#538: Are Micro-redemptions All that and a Bag of Chips?

This week’s “Wiser Loyalty” podcast episode has senior faculty members of the Loyalty Academy™, Bill Hanifin and Aaron Dauphinee back together again. This is week two of May that explores constructs taken from the Loyalty Academy™ curriculum for the Loyalty Rewards Strategies & Redemption Experience course (course #108).

In this episode, Bill and Aaron build upon last week’s episode that looked at the importance of attainable rewards but with a tint towards aspirational and experiential redemptions. This week they swing the pendulum to the other end of the redemption spectrum to look at loyalty programs that utilize micro-redemptions and why.

In the Wiser Loyalty series, Bill and Aaron draw a theme each month based on the courses required to earn the Certified Loyalty Marketing Professional™ (CLMP™) designation which is nearing 1,000 individuals across 53 countries worldwide.

Show Notes:

1) ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Aaron Dauphinee⁠⁠⁠⁠

2) ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Bill Hanifin⁠⁠⁠⁠

3)  ⁠⁠⁠⁠⁠⁠⁠The Wise Marketer 

Audio Transcript

Paula: Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m Paula Thomas, the founder and CEO of Let’s Talk Loyalty and also Loyalty TV. If you work in loyalty marketing, you can watch our video interviews every Thursday on www. loyalty. tv. And of course you can listen to our podcasts every Tuesday, every Wednesday, and every Thursday to learn the latest ideas from loyalty experts.

Today’s episode is part of The Wiser Loyalty Series, which is hosted by our partners, The Wise Marketer Group. The Wise Marketer Group is a media education and advisory services company providing resources for loyalty marketers through the Wise Marketer digital publication and The Loyalty Academy program that offers the certified loyalty marketing professional or CLMP designation. I hope you enjoy this weekly podcast, The Wiser Loyalty Series, brought to you by Let’s Talk Loyalty and The Wise Marketer Group.

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Bill: Hi, I’m Bill Hanafin, the CEO of The Wise Marketer Group, and I’m one of the two hosts of The Wiser Loyalty Podcast series. With me is my partner, Aaron Dauphinee, who’s the CMO of WMG. Aaron, how are we today?

Aaron: Good, I’m just here at the middle of a long weekend for Rest Up in Canada, and happy to be chatting with you about this topic today.

Bill: That’s great. So, for, you know, for those of you listening to this series, maybe for the first time, or you need a little bit of a reminder you’ll know that it’s based on The Loyalty Academy curriculum, and so we’ve chosen a course each month, and we’ve created some topics around that course, and we’re doing a different topic every week.

So the the course this time is course 108, which is loyalty reward strategies and reward experiences. And last week, we talked about the range of rewards that are that was really kind of relating to earning velocity and how quickly people can earn and the power of rewards, and, and and how attentive we need to be about how people, what rate that they earn rewards at.

And this time, we’re going to tackle a little different aspect, which is something that we’re talking about calling micro redemption. Is that our term, Aaron, or is that a commonly accepted term in the industry?

Aaron: Yeah, I think it’s a fairly commonly accepted term in the industry at this point it was first kind of introduced, but really we’re talking about the other end of the spectrum, you know, with aspirational and experiential words, which we touched on a little bit in our explanation for last week’s episode, this is going to the opposite end of the spectrum, which is something that is very very tangible very easy to attain in a fairly short, quick period of time.

Bill: Okay. So, and. Thanks for that. And a micro redemption to me. So here’s a good definition. If you needed a definition that you needed to take a note and write down something. To me, it’s when members of the loyalty program earn rewards for minor actions or purchases most often with or in conjunction with a purchase to offset some kind of a component of that transaction with the brand.

So, that can mean a lot of different things. What a lot of people might think about is in QSR or something like the way Starbucks does things. And there are many other examples of this, but, you know, through the Starbucks Rewards program, customers can earn stars for every purchase. They’re accumulated to a point, but they can be redeemed from free drinks, food and other perks.

But it’s not just maybe even for Starbucks, what they would call a big quote unquote reward, which might be 400 stars for merchandise or package coffee, or 200 stars for a lunch sandwich or salad but, a micro redemption to me, I think about when you say, Hey, I can burn 25 stars for an extra shot of dairy substitute a syrup or sauce, something like that.

So it’s an extra little treat. It literally is a cherry on top of the sundae or the little syrup shot in the coffee. Just maybe historical point is when we first talked about micro redemptions, one of the 1st things I thought about was when the airlines, or a couple airlines that have done this, they knew that there were an awful lot of members of their frequent flyer program that couldn’t reach the level or hadn’t reached to be able to redeem for a flight.

And so they had organized all the merchants and restaurants within the particular airports, one of them I think about is continental at Newark in New Jersey. And they were allowing people to burn really small numbers of air miles to buy a coffee, buy a sandwich, sort of things like that. But that’s that is a very particular application of this micro redemption idea.

And the one we’re talking about tonight is something quite different. Right?

Aaron: Yeah, I mean, it’s a same but different is how I probably phrase it, Bill. I think about it, you know, the low mileage redemption options for us up here in Canada and Air Miles like it was a as a path to moving away from the aspirational reward to get to something more tangible.

And so that sounds similar with in terms of the example you said for Continental, and I guess the question is just like how, where does the low reward versus a micro reward come into play? And that’s, I think, in our industry, we often get in our own way and trip up over ourselves a little bit. I get into the way of jargon.

So what we might think is a micro redemption. Maybe it’s slightly different than others in the industry. But when I think about it, from my perspective, personally, I think about it in the programs that are developing and coming out new. And QSR is a great sector to be thinking about new programs that are coming into existence.

You know, they’re already starting with a frequency level that isn’t as high typically. So it’s kind of that mid, even sometimes low frequency. And so they really need to structure the program design in a way that allows for the individual member of the program to truly be able to say, Hey, I can get something out of this.

This is why I’m going to participate. Even if it’s only a fairly infrequent amount of time. And so like building off of that, an example, McDonald’s has got a ton of great press in terms of the success of their program that they’ve launched with the My McDonald’s rewards program and that they’re taking, you know, around the world.

And, but really when you think about what they’ve done there, they haven’t said per se micro redemptions up, you know, like, like Starbucks with the shot of syrup or dairy product, like that you mentioned, but they just set their structure up in a way that it is quite easy to earn something. So, you know, for a hundred, I think it’s a, for every dollar you spend, you get a hundred points.

And for 1500 points, you’re getting a McChicken sandwich or a cheeseburger or a vanilla cone or something like that. And then that ranges to kind of that quote unquote high end, which is only 6, 000 points to get a big Mac or a Quarter Pounder. And then they’ve got, you know, redemption tiers in between.

But when you think about it from that perspective, the way they’ve structured it is strong. Because literally they have created these options available for their members that are at a low threshold to to be attained at. So, and similarly in terms of the QSR, cause it’s just a fascinating category for this particular topic.

I like my pizza wars. I like Pizza Hut and I like Domino’s as well too. And recently I’ve noticed that because their structures were pretty much the same in terms of the reward programs that they each had, there was, you know, you redeem and you eventually get a free pizza. Cause that’s, the nature of the beast for those two particular proprietors.

But recently I noticed with Domino’s that they have now stimulated and used to get a pizza for 60 points here in Canada. And now for 40 points, you can get Parmesan bites or something like a, like one of the side snacks. And for 20 points, you can get a ginger ale or a pop of sort of pop of some sort.

So they’ve come in and created this differentiation now from what the competitor has. And, you know, it caught my eye right away because typically I have saved up for a pizza or whatever. It’s, you know, five or six purchases essentially is what you’re getting. So you get that free pizza.

Now one of the irritating things that I get is to pay for an extra pop. So just, you know, 20 points and burn them off quickly. I’m going to think about that next time. So, you know, that in and of itself is kind of a small and micro and that’s on the currency basis, I’d say. We often always focus on the currency and it doesn’t necessarily need to be around the redemption being about a specific currency, it can be about a benefit that the members actually receiving.

And so, in the case of Dropbox, for those of you who are familiar with the service to be able to, you know, load your files into storage and share them around with others. They have a referral program that allows users to get additional storage space by referring friends to the service, pretty basic. So when you think about that, you know, in the purest sense, it’s pretty basic.

It’s not a micro redemption, quote unquote, but it really is along the same lines because the individual is taking a small action, something very easy to do. They’re the referral in and of itself and the results are a tangible benefit, you know, that extra storage. So it’s not in the currency of the program, but it is certainly taking actions and behaviors that the brand would get benefit from.

So, you know, that expenditure of the currency doesn’t necessarily need to be there, but the actions that the members are doing to get to that soft benefit are also kind of in this wheelhouse, I guess, of thinking about micro redemptions.

Bill: You know, when those are all really good examples. And I was just thinking about some pros and cons.

So that isn’t the obvious pro would be this meeting the need of immediate gratification. So people want something sooner than later. They’d like to have it in the moment. What a delight that you can get a free topping or free syrup shot or something like that. It’s almost like rounding up your experience to the next level, right?

Maybe you were going to get something. You’re going to buy a certain item of coffee or buy a pizza, but you weren’t sure you’re going to put all those topics. But now you get to say, like, you know, I want it exactly the way I want it. And so there’s a great deal of satisfaction in those sort of things. So I think that’s the big upside probably.

And. And I think on the maybe on the engagement retention side for the brand, there’s a big pro right there, because you’re keeping people interested in every moment, every purchase with the opportunity to redeem and to make that a little bit more special, like you were talking about. And I mean, the only con that I can think about, maybe you have another one is just to be careful not to commoditize.

Not to allow currency to be burned off in small increments, and it’s just sort of happening without the customer feeling like they got something special or, you know, it would almost be the idea. I knew of one program that allowed people to redeem cash against their purchase, but they would literally allow people to redeem an odd number, like 3 dollars and 45 cents, and it just sort of went unnoticed. So that’s probably something to watch out. I would say.

Aaron: Yeah, I think that’s a fair critique as well, too. And you think about it from the perspective of it, you know, your rewards catalog needs to be a spectrum, right? And you just make need to make sure that the options aren’t too far out of reach and that individuals can do that quick math in terms of how they’ll get there.

And so in that particular example, you cite like the oddity of the redemption being off, like it just, it doesn’t, it’s, it seems unnatural or illogical, whereas if you keep it simple, stupid, so to speak, the KISS principle, you know, that always tends to work. But yeah, I would say just as kind of a final thought for me you know, some programs are you know, they’re just not using redemptions of currency to reward customers.

They’re also looking at means where they can take the rewarding with the software benefits to take actions, and that’ll help them to increase the brand’s customer base and increase revenues as well, too. Like, it’s more than just using the currency, but we’re now into the steps that we’ve talked about before of getting to the mindset of big LLT versus the little LLT.

Bill: That’s perfect. That’s a good way to wrap it up. So if you’ve been listening, or if you caught us right in the middle of this thing, we’ve been talking about loyalty reward strategies and reward experiences this month with which ties to course number 108 in The Loyalty Academy. This is all part of The Wiser Loyalty Series with Let’s Talk Loyalty, of course, and so far this month, we’ve covered attainability with rewards.

We’ve talked about micro redemptions, and we’ve got a couple really rewarding experiences to come in the next 2 segments. So stay tuned for that.

Aaron: Thanks, Bill. Have a good night. We’ll talk to you soon. Be well, everyone.

Paula: This show is sponsored by Wise Marketer Group, publisher of the Wise Marketer, the premier digital customer loyalty marketing resource for industry relevant news, insights, and research. Wise Marketer Group also offers loyalty education and training globally through its Loyalty Academy, which has certified nearly 900 marketers and executives in 49 countries as certified loyalty marketing professionals.

For global coverage of customer engagement and loyalty, check out thewisemarketer.com and become a wiser marketer or subscriber. Learn more about global loyalty education for individuals or corporate training programs at loyaltyacademy.org.

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