News & Thinking

HEARTtruths: The rules of rewarding so customers never want to leave

  • News
HEART by MTM News 3 Apr

HEART by MTM is a proprietary growth framework for healthy acquisition and retention across entertainment, Telco, FoodTech, TravelTech and FinTech sectors.

To peel back another layer on HEART’s seven experience drivers, we continue our conversation Michele Galli, Senior Product Manager at Wise. Read on to be inspired by another  lively Q&A between Michele and Jonathan Stone, MTM’s Director of Tech & Telco.

As every parent knows, rewards work. If you eat your greens, you can have pudding. If you play nicely with your brother, you can put a sticker on your chart. And if you do your chores, you will get your pocket money. Most children will comply, but one of the problems with rewards is that they tend to deliver diminishing returns. Once the excitement of the star sticker wears off, children are likely to up the ante and demand bigger and better rewards.

More importantly, as parents also know, rewards don’t encourage intrinsic motivation – the child isn’t changing their behaviour because they have learnt to enjoy broccoli, love their brother or embrace housework, but because they want to get the treat. By providing rewards, brands can manipulate customers into doing something they aren’t genuinely motivated to do, which can be unhealthy and unsustainable in the long term.

Many digital service brands use rewards as tools for retention, but the same issues can arise. As a result of a behavioural bias, known as hedonic adaptation, we experience positive feelings from getting a reward, and that level of happiness becomes our new normal. We then need something extra to get our next hit of joy. So, the question is, how should brands reward customers in ways that motivate them to stay for the right reasons?

What sort of rewards work?

Done well, rewards such as discounts, loyalty points or access to offers can all encourage repeat business and keep customers engaged.

The best rewards have contextual relevance – this means rewarding in a way that adds value to the category experience. For example, Sky Piggybank is a Sky Mobile rewards scheme that rolls over any unused data at the end of the month – already a benefit – and convert it into credit to spend on Sky Mobile devices or accessories. When the customer’s contract is coming up for contract renewal, they can easily recall these rewards, because they have contextual relevance.

Contrast this with rewards schemes common in the banking sector, such as Santander Boosts, which offers money off on a wide range of third-party retailers. These schemes don’t do the work of linking the reward to the core service offer. Take the half price pizza offer. Everyone loves pizza, so this seems like a winner. But: customers don’t think of Santander Boosts when they are thinking about which restaurant to go to because there isn’t an obvious association. If they are looking for dining discounts, they are more likely to go to an app like Tastecard. Interestingly, Santander also offers ‘My Home Manager’ for mortgage customers, which includes home energy solutions, insurance, etc., which does have higher contextual relevance. Schemes with lower contextual relevance can work, such as American Express Travel Rewards and O2 Priority, however then take significant time and money to build the associations.

Being rewarded is different from being valued

Although it is important for customers to be rewarded, it is even more important for them to feel valued. MTM’s HEART framework shows that the digital service brands that score the highest for healthy acquisition and retention are those that treat people as individuals and make the experience feel personal. This can include communications, offers and rewards, but it also has a more emotive element. HEART shows that the top performing brands align with peoples’ values, are perceived to be going from strength to strength, and offer distinctive benefits. It is about feeling like a brand cares about you, that it treats you as a person and not a statistic, that is worth investing time and money in, and that you feel a connection with.

When rewards go wrong

One of the quickest ways to destroy customers’ feelings of being valued is to treat new customers better than existing ones or offer them better deals. Rewards that increase over time via membership or subscription schemes mean that not only is the brand investing in the relationship with the customer, but that the customer is invested too. The fear of losing rewards that have built up over time is a powerful psychological reason to stay.

Rewards should enhance an already positive relationship rather than attempt to plaster over the cracks of one that is failing. It’s counterproductive to continue to dish out rewards while failing to value the customer in other ways, such as with poor customer service, generic communications, or ignoring their feedback.

In conclusion

It is the combination of being rewarded and feeling valued that is so powerful in retention terms. MTM’s HEART framework enables brands to address the most existential challenges of any subscription or digital services business — acquisition and retention — providing tangible insights so brands can focus on the actions that matter most for driving growth.

Our HEART framework is based on structural equation modelling and regression analysis of 5,000 quantitative interviews covering 50 brands in eight categories: gaming, travel, finance, music, food, sport, video on demand and telecoms.

Take a closer look at HEART

To find out more about HEART or to take the temperature of your brand’s subscription or membership model, email us at