We Have the Ultimate Answer.
The first year of the pandemic has been devastating, not only for us but also for the world’s economy. Finally, we are starting to see light at the end of the tunnel. The US economy is expected to make a very strong recovery in 2021. And with it comes structural economic change, especially in the way consumers interact and shop with brands. The changing economic landscape thus calls for companies to renew their strategies and their traditional loyalty programs.
The big question arises, what can brands do to keep up with the inevitable change? How can they adapt and differentiate from their competitors?
When uncertain economic change happens, innovation tends to be the answer. This is something we see a lot following economic recessions. As old adage goes, never let a good crisis go to waste. This economic disruption provides a once-in-a-lifetime opportunity for companies to bring true innovation to their loyalty programs and, as a result, attract and retain consumers in new ways.
One innovative reward currency that is the perfect addition to any loyalty program is fractional shares of stock, or as we call them, Stock Rewards. Not only do Stock Rewards prove to motivate consumers to shop more frequently and spend more, but they improved engagement between consumers and the brands rewarding them. If you want to move ahead of your rivals as a company, you should reward your consumers for their loyalty with fractional shares of stock.
To understand how Stock Rewards can fit into your loyalty program as a company, this article lists up the most popular earn models, rewards programs use at the moment before explaining the three common Stock Rewards use cases. As the final and most important part of the article, we answer how to exactly integrate Stock Rewards into your earn model to engage and motivate your customers in an exciting new way.
Let’s first take a look at the most popular earn models rewards programs currently use, to grasp how to successfully integrate Stock Rewards into traditional loyalty programs:
1. Membership Earn Model
Members enter a program to enjoy benefits in this model. Benefits are only available to members, not to non-members. A good example is the Barnes and Noble Membership. Amazon Prime, however, is more commonly used, as users get plenty of advantages just for signing up.
2. Threshold Earn Model
Members that meet predetermined targets or tiers are rewarded and get unique benefits. A prime example, therefore, is the Airline loyalty scheme. Achieving Gold or Diamond status gives you extra rewards, including upgrades, free checked luggage, and priority boarding.
3. The Interval Earn Model
Members are rewarded at regular intervals, which are determined mainly by sales or time/tenure. The Starbucks Rewards program is a prime example of using an interval earn strategy to engage customers.
4. Stored Value Earn Model
This is the most complicated model, in which members accumulate value over time as a result of their experiences with the brand and their purchases. Most commonly, value is defined in terms of dollars or redeemable points. Next to major retailer programs, many credit card schemes, including Adidas' Creator's Club and Best Buy Reward Zone, use the stored value model.
Most traditional loyalty programs use a combination of these models to encourage members to become more engaged with the brand, but the main ingredient is missing. Many members are becoming tired of the "same old" loyalty experience at each brand. The majority of citizens are participants of 10 or more reward schemes, but only use half of them. A traditional recipe used multiple times needs to be adjusted to the changing preferences of the people eating the dish to keep it alive.
Similarly, loyalty programs need a new ingredient to revive traditional loyalty programs and get people to participate in them. It is time to mix up the recipe and add new spice in line with what customers want and ask for today – a new, different kind of reward!
Today, community is a key value to customers. They expect a brand to invest in their employees and communities and show how much they care for their customers in ways other than sales promotions and discounts. Next to that, they expect their favorite brands, especially those they want to be loyal to, stand out, and participate by taking political and social issues. Without strong stances on issues, it is harder to get your customers to engage and participate in your brand culture.
We at Bits of Stock believe the magic ingredient and answer for brands is to invest in your customers and your partnership with them through Stock Rewards - fractional shares of stock.
As a next step, let's dive into the three common Stock Rewards use cases to understand how to integrate Stock Rewards into the above-mentioned earn models.
Percent Transaction Reward: Using a percent transaction (e.g., 1%) earn model to reward a customer for a purchase. If a customer spends, let’s say $100, he or she will receive $1.00 in fractional shares of stock. Amazon for example, uses this rewards system by giving back 3% to 5% in points for each $1 of purchases made with the Amazon card account.
Activity-Based Reward: Rewarding a customer for completing a single or sequence of single-action tasks. Badges, challenges, and other activities like in many loyalty programs, for example, are designed to encourage customers to intensify their relationship with a brand in exchange for rewards. A brand that successfully rewarded its customers was Pay-Pal with its famous refer-a-friend program. In this case, a brand might offer a customer $1.00 in fractional shares of stock in exchange for recommending a friend.
Existing Points Conversion Reward: Allows customers to trade in their accumulated points for fractional shares of stock at a fixed exchange rate. Many loyalty programs, for example, employ marketplaces, travel hubs, or other methods to allow customers to spend or trade their points. Organizations will encourage customers to trade in their existing points for fractional ownership shares.
As you can see, Stock Rewards, including points, stars, or other values, are a highly flexible loyalty tool. The rewards activation for a fractional stock reward is the same as the existing reward activations in a loyalty program. That may throw up the question: “Why use stocks for these simple use cases when your program is already based on points, miles, or another rewards currency?”
The answer is simple. Stock Rewards inspire people in various ways. They give them a feeling of ownership. Being part of that ownership community increases the will to gain intimate knowledge about that stock or company, as we discussed in a previous blog post. Ownership mentality, moreover, has a direct effect on efficacy, self-identity, and belonging. People establish their identity by the certain things they buy and own. Further, studies show customers often never redeem their points and miles or they expire, plus those rewards won’t gain value over time as Stock Rewards might do. These reasons, among others, make ownership more exciting than traditional rewards.
Let us finally get to the juicy part of this article and answer the most critical question of how to exactly integrate Stock Rewards into your earn model analyzed in your existing loyalty program.
The best way is to use one of these three common reward scenarios:
In a Membership Model, members are rewarded once they become "members of the club". Envision yourself (as a program owner) by offering a new reward to your participants. The opportunity to earn Stock Rewards from purchases made with your brand will now be included in that reward. You may also suggest developing a curated marketplace of deals that allows your loyal members to purchase with non-competitive and/or substitute brands while still earning Stock Rewards. This approach supports two important member initiatives: direct revenue growth for your brand and the value of your loyalty program to members through the "halo" of all the benefits they will receive as a result of their relationship with you.
In a Threshold Model, when members hit new tiers through their spending and loyalty, they earn more. With Stock Rewards, members will receive transaction-based rewards for any order, resulting in higher reward percentages, as well as one-time rewards for reaching a new tier or exceeding an earning threshold. This benefit could be used in place of or in addition to existing points. Imagine allowing your members to make their own choices and giving them a more personalized experience, adding the important ingredient of personality and authenticity!
Members of an Interval Program receive prizes at fixed intervals, including when they spend a certain number of times or when they hit a milestone, such as an anniversary. Customers create a points bank in a Stored Value Program by staying loyal. These earning models are often used in tandem. Imagine consumers can win extra bonus fractional rewards or turn points into fractional shares instead of another reward at predetermined times or after accumulating enough points. We may incorporate personalization whilst driving interaction and enthusiasm for anniversaries, a set number of purchases, or other favorable member activity such as tenure, engagement, and spend in this scenario.
All in all – and regardless of your earn model or the combination of structures you use today, Stock Rewards will fit smoothly into an established rewards program. In every mentioned earn model, Stock Rewards open up new engagement scenarios and business opportunities by rewarding customers for earning and allowing for small-point redemptions. There are two reasons this is vital: Firstly, it engages consumers who might never meet the higher thresholds needed for more substantial rewards. This increases customer satisfaction and makes them feel valued for their loyalty, even though their lifestyle does not allow for more enticing rewards. Secondly, when a member transfers points to fractional shares, he or she is not effectively zeroing out a points balance and becoming a "loyalty-free agent." Instead, a customer has "reinvested" in his or her business relationship.
Not only that, but Stock Rewards are the highly focused and community-driven innovation consumers yearn for while making a good business case. Stock Rewards are exciting, they are new, they are bold - all of which will amaze and encourage your customers in a never-before-seen way.