What should I consider when running a customer reward/loyalty program?

Our target customers are Millennials in India. Avg. annual income of a millennial (software engineer) in India is Rs. 6 lac (i.e 10,000 USD). And we are offering them budget vacations under Rs. 30K (i.e 500 USD). So, there is room for repeat purchases. We are a startup with a nominal funding of 500K USD, tight on cash. Wondering how we can run a loyalty/rewards program to start growing our customer base?


Since cashflow is an issue, here's my advice:

* Get the rewards from someone else. *

There's no need for you to pay for these perks. Find partners in complimentary fields, and approach them with the offer that you will connect them with your buyers list (a very valuable thing) in exchange for their rewards.

When it comes to Cost of Customer Acquisition, this could be an incredibly smart thing to do from the reward provider's viewpoint. They get access to proven buyers in the related field for whatever their rewards cost...and they can figure out how to make money and Lifetime Customer Value from that pretty quickly (some from your list are going to buy from them...CCA = $X rewards...LTV = $Y bought... LTV - CCA = margin per customer.)

"It's not magic, it's math!"

Answered 7 years ago

Hello Team,

Firstly, the holiday/vacation travel space, especially the budgeted segments are becoming more sought after, not only by the category of individuals that you've listed out, but they're being sought out by college students, individuals, couples, honeymooners and the like.

You could offer a points system, where they receive a certain number of points, depending on the amount they spend, which can be redeemed after reaching a certain amount (ex. A makes payment for a trip through you worth rupees 30K and they can receive 1000 points) (Again this amount is for your team to finalize and figure out depending on how much you're willing to cut into your margins). Once a customer makes 2000-3000 points, they can redeem the amount on their next trip purchase, the points redeemed will basically be a deduction of a certain amount of the total fee, eg. 2000 points = 500-1000 rupees, so they get a discount of 1000 rupees on their total purchase.

While this is not a bad way to start, without having to burn cash out-of-pocket, it might be a slow way to build your customer base.

The other alternative, and I say this from personal experience, is providing a valuable customer experience, be it priority check-in at hotels, spas or the airport or just the ability to check into a hotel room at any time and not follow the 12-12 (24 hour check out) system. Tying up with hotels and the like will help you establish yourself as a strong player in the market because of the positive reviews your existing customers will give you.

You could also offer un-married couples the ability to check-into hotel rooms without hassle in the lower segment hotels, which would incentivise them to repeatedly choose your services.

You could also offer people a referral reward.

Tying up with alcohol vendors on vacations, so that customers can pick up liquor at a discounted rates, only through your service is again a good idea. Besides, in such a model, you will end up making a certain % of the proceeds on liquor sales through the agreement with the vendor, rather than having out of pocket expenses.

Try closing corporate accounts, school accounts, etc. Today more organizations and schools organize trips for their employees and students respectively, which will defintely help you grow your customer base without having to burn too much money. The only cost involved will be the cold calls, email campagins and the cost of transport to get to the meetings to close the deals..

Apart from this, another solution that comes to mind is tying up with credit card companies to help people purchase the trip and convert the total amount into a no-cost emi. People love to make small payments rather than blowing a chunk of cash in one go and this will further help you incentivise your existing and potential customers.

While all this is easier said than done, implementation is key.

Hope this helps.


Answered 7 years ago

The challenge for a new company in this space is managing the points/loyalty program.

I've worked extensively in this space and wrote a book in 2014 about loyalty points called Credit Card Advantage.

I would recommend you go one of two ways until you've grown the business and can invest in your own full-fledged program:

A: Buy points in someone else's program. Simply give your customers some points in another program that they may enjoy such as an airline loyalty program.

B: Use simple coupons. Once a client has returned from vacation, send them a thank-you package which includes a coupon which can be used in several ways such as a small discount on re-booking, or for example, save up 3 coupons and redeem for a gift (perhaps a travel-related item such as beach bag or day-pack, etc.)

The idea is to give either an immediate reason to re-book with you (the discount) or create an investment in the relationship (if they earn two coupons and want the beach bag you can bet they'll be back to get the last one)

You could also get creative and send them a coupon to give away to a friend who has never traveled before with your company.

Arrange a call if you'd like to brainstorm some other ideas.


Answered 7 years ago

You Will Get Nowhere By Doing What Everybody Else Is Doing.

Here is a simple and quick answer, but value is not determined by the number of words.

Whatever system you do, don't do it immediately. Send a letter to the guest one month after their stay. When people get back home, they are too tired to pay attention. On checkin, their is simply too much going on.

So, send a letter with the points earned and say, "We would like to double the offer, please send the enclosed link to a friend or family member and they will get the same amount
of points listed on this letter."

Good Luck,
Michael Von Irvin

Answered 7 years ago

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