Don’t Tax Your Customers

Don't Tax The Customer | by Jeff Mankoff

Want to win repeat customers that will come back to your establishment time and time again? Rewards marketing can be a good strategy for providing both value-added benefits and as a means of differentiating from the competition. However, many businesses, in their rush to build a rewards program themselves often forget the cardinal rule of rewards marketing:

Make it easy.

Nothing kills a rewards program faster than inconvenience.

Don’t Impose a Brain Tax on Your Customers

In the United States, no one, other than tax preparers and accountants likes the process of paying taxes. The forms are just too hard. In fact, according to a compilation of Gallop polling on this matter, it would be safe to say that a majority of Americans hate the process of paying taxes – regardless of how high, or relatively low they may be. It is the process. Paying taxes should be easy. It is easy in Europe where they have a value added tax, a National sales tax if you will. That is an easy tax, and not many people think about it when they pay, or for that matter complain about it. If I were in charge, I would set up an easy, value added tax, to take the pain out of taxes.

When it comes to businesses, and their interaction with customers, many establishments unknowingly levy another kind of tax – a “brain tax” – measured in time wasted and inconvenience, on their clientele. Worse, many establishments do so without even bothering to notify the populace.

In today’s marketplace, businesses are vying for a share of the public’s attention, and obviously, a piece of their wallet too. Customer loyalty programs are now a must for businesses looking to win new customers, reward loyal ones, and convert fickle buyers into repeat customers. The average consumer is enrolled in an astonishing 18 separate programs, many of which are structured in exactly the same manner, making differentiation a key frustration.

However, what enrollment numbers can’t quantify is the actual level of engagement in the ocean of loyalty programs out there. A study released by Monash University found that the average male actively participated in a grand total of two programs. Females, who are often more heavily targeted for participation, averaged four. That means that out of the many hundreds of rewards programs consumers are exposed to, they only take action on 18, with 14 to 16 of that elite selection languishing in cognitive oblivion. The numbers don’t look good.

The question for many businesses out there remains: How do we improve on these dismal statistics?

Playing the Rewards Game to Win

The key to a rewards program that works is quite simple: simplicity. More specifically, ease of use appears to be the key differentiator. American Banker Magazine reports that the primary driver of customer preference for certain rewards programs was, in fact, determined by how easy those programs were to use.

However, a stunning 81 percent of loyalty members polled don’t even know the program benefits of the programs in which they are enrolled or how and when they will receive rewards. As a result, as much as one third of all rewards dollars and miles, amounting to some 16 billion dollars annually, goes unredeemed, thanks to hurdles and opacity built into many rewards schemes.

This leads to a potentially damaging conclusion in the mind of consumers, “They don’t actually want to reward me.” Or worse, “This is just another marketing scheme.”

Consumer trust in businesses has been on the rocks for decades, and correlates with a decline in general loyalty in the marketplace. As it turns out, consumers don’t like taxes much either, particularly if what they are expending is time and effort. Hurdles, such as long application processes or convoluted rewards hierarchies, effectively function as a brain tax.

Regardless, the fact remains: Businesses looking to implement a successful loyalty program need to make their approach easy to understand, and even easier to use.

4 Ways to Keep Your Rewards Program Nice and Easy

Keep the Customer Informed

85 percent of loyalty members haven’t heard a single word from the establishment or service provider since the day they signed up. That’s an enormous, wasted opportunity. Consumers take action to sign up for a program exactly because they either like the service or product, or see the potential for savings and other forms of value added in the rewards plan. This is a target audience that has taken the first step towards full engagement and given the right attention and incentives, could be ready to take their relationship with the company, or brand, even further.

Don’t Introduce New Rules Willynilly

study done by researchers at the University of Michigan showed that learning new rules is both mentally taxing and potentially costly. The truth is, people today only have so much time and brainpower to devote to any one subject. That means that if the rules of a loyalty program change enough, many consumers will simply cease participating in it.

Help Your Customers On Their Way

When it comes to rewards points, punch cards, and other “buy X number of times, get one free” schemes, nothing is more discouraging for a customer than feeling like the reward itself is impossible, or difficult to obtain. On the flip side, few things can encourage a repeat visit as strongly as a rewards threshold that is on the verge of being met.

Therefore, rather than providing one goal that may require many visits, it is far better to intersperse many smaller benefits along the way to a larger reward. Has the customer been coming less often recently? Give them some points to help them along. Is it their birthday? Go ahead and give them a freebie this time. The point is, don’t make reaching their rewards goal a hassle. Make it easy. By culturing a reward relationship, as opposed to focusing on a singular goal, it encourages constant user engagement.

Provide Some Actual Value

Of course any rewards goal is no good if it isn’t worth the effort. Only 36 percent of consumers received a reward or promotion that actually motivated them to make a second visit. Only 17 percent of U.S. respondents say that loyalty programs are “very influential” in their purchasing decisions. If it’s not worth their time, consumers won’t bother.

A customer’s time is important – and irreplaceable. Make it worth their while, and more importantly, make it quick. Customer attrition numbers cast a rather bleak picture on the efficacy of many loyalty programs.

Considering the inbuilt hurdles, worthless or hard to get rewards, and other forms of cognitive taxes imposed on consumers by many ill-conceived loyalty schemes, it’s small wonder the public is often wary of these programs. As it turns out, proposing a tax on their time and energy is not a winning proposition. Yet many companies still do it, and wonder why their often times expensive loyalty schemes aren’t paying any dividends.

The inconvenient truth is, it’s because they’re program just isn’t convenient enough. In an age of increasing consumer choice, and lessening attention spans as a result, if your loyalty pitch can’t be understood and put to use immediately, no one will care.

How have loyalty programs worked out for you? To learn more about easy loyalty marketing, please visit vPromos at

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