Reward Program Strategy

Designing Rewards Programs for Customer Segmentation: Pragmatics

Since retail has spread beyond the borders of brick and mortar stores and into the digital realm, shoppers seem to have a near limitless number of products to choose from in virtually every category.  This makes it more and more difficult for any one brand to control, attain, and influence customer loyalty. With so many similar voices advertising equally similar products, brands run the risk of becoming clones of each other unless they can find a way to differentiate themselves.

customer segmentation pragmatics one size fits alls

The answer is simple: customer rewards.  While the answer may seem a bit convenient, it still holds true.  Since the early 1900s, brands have been using rewards and loyalty programs as a way of creating a differentiator that keeps customers coming back to their brand.  That being said, while a rewards program might be the answer, just offering one isn’t a full solution.  To maximize the success and impact of the program, you need to offer rewards that customers actually want.  Like anything else, rewards are not a one size fits all solution, and understanding your customer’s diverse desires is the key to long-term success.

 

 

Understanding Customer Segments

Although this may seem obvious, it’s worth repeating: not all customers are the same.  Based on their socio-economic status, past consumer experiences, and age (among many other factors), customers are more likely to exhibit certain buying behaviors than others.  These trends were examined and discussed in-depth by Youngme Moon, a professor at the Harvard Business School.  

customer segmentation pragmatics segments

Throughout her career, Moon has dedicated years to understanding the way shoppers and brands interact in fluctuating markets, and has become an industry expert  in a number of different behaviors and trends.  In her book Different, Moon divides customers into five distinct segments based on their attitude towards a given brand or brand category: pragmatics, reluctants, connoisseurs, savvy opportunists, and brand loyalists.

 

 

The Impact of Customer Segmentation on Rewards

So what does this customer segmentation mean for rewards programs?  As mentioned earlier, successful programs depend on providing rewards that customers actually want.  This means brands need to consider how to design and offer rewards that resonate with each of the five distinct segments in order to make their program attractive.  

customer segmentation pragmatics resonate

With five distinct groups to look at, there’s a lot of ground to cover.  Since this would be quite a bit to bite off at once, we’re going to take the opportunity to look at each of these segments individually in a five week series.  In each of these posts, we’ll take a closer look at how to define one of the five customer segmentation categories and how to tailor a rewards program to fit each group’s unique needs.  By the end of the series, you’ll have the tools you need to understand how each of these unique customer groups think:  

customer segmentation pragmatics definitions

With this knowledge, you’ll be better equipped to build a strong program that provides value to every type of customer, boosting your retention strategy and setting you up for success.

Without further ado, let’s dive into what it means to design rewards programs for pragmatics.

 

 

Defining Pragmatics

Starting this exploratory series with pragmatics is like choosing to hear the bad news before the good. Sometimes it’s just nice to get the heavy lifting out of the way early.  The term “pragmatic” is defined as an individual who is not motivated to stay on top of evolving markets, brands, and trends.  Another way to describe them would be indifferent, as they tend to not view specific brands as necessities.

customer segmentation pragmatics definition

This mindset makes them skeptical of the differences between brands, and prompts them to make their buying decisions based on a combination of shortcuts like habit, routine, price, and convenience.  These motivations are what keep many pragmatics from shopping online.  Like the typical offline shopper pragmatics desire immediacy which, when you consider delivery turnaround times, make online shopping a tough sell.  The fact that online shopping is a learned habit also plays a part.  Pragmatics aren’t prone to trying new things, and since no one starts with an online shopping habit the chances of them exploring this territory are relatively slim.    

 

 

Designing Rewards for Pragmatics

While it might be a tough sell, getting pragmatic shoppers to commit to your brand online isn’t impossible.  One of the reasons ecommerce has been so successful is that consumers’ lives are getting increasingly busy.  Between work, family, and other commitments, people are looking for quick and easy solutions that get them what they need quickly and at a fair price.  With so much information available at their fingertips and increasingly fast delivery times, more than 42% of all American consumers are choosing to do their shopping online from the comfort of their own home.

customer segmentation pragmatics transform

These practical considerations have a huge influence on pragmatics whose shopping shortcuts often leave them looking for a quick win..  So, it stands to reason that if  you’re building a rewards program for pragmatics, it should be as focused on practicality as they are.  Between providing additional value, building relationships, and delivering a great customer experience, a rewards program can help transform your brand from a commodity to a necessity.

 

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Above all, pragmatics are creatures of habit.  They desire routines and consistency, and make most of their purchase decisions based on these principles which is actually why men are often broad-brushed as pragmatics.  With a mission-oriented approach to shopping, they don’t want to be overwhelmed by decisions and will often shop with brands that are tried, true, and comfortable.  

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In addition, pragmatics want to find a brand and stick to it. They’re not looking to change where they shop every week, so if you promise them long term value (points and rewards) for their exact preferred behaviour (habitual purchases) they’ll be thrilled. (Or at least as thrilled as pragmatics can get!)

This makes points-based rewards programs the perfect way to appeal to pragmatics.  While rewards programs now have the potential to operate with any number of complex rules and stipulations, sometimes it’s better to go back to basics.  When it comes to rewards, it’s been proven that complexity often breeds confusion, which makes it very important to establish a clear correlation between earning and spending rewards when appealing to customers of any group. (This goes double for targeting pragmatics!)

customer segmentation pragmatics public desire earn

The importance of simplicity is especially true when it comes to your pragmatic customers.  Well-known loyalty program structures like  a “spend X dollars to receive Y points” model will immediately resonate with these customers who are primarily driven by habit and practicality.  They will quickly understand how it works and why they should engage, eliminating the need to spend additional time learning every in and out of the program.  All of these factors work together to ensure that a pragmatic customer will easily understand the value of joining this type of program when it’s put in front of them.

customer segmentation pragmatics increase engagement

When your brand offers this kind of straightforward value, it increases its appeal while simultaneously promoting engagement as a benefit.  This begins to separate your brand from a long line of seemingly similar competitors.  Through this change in mindset, pragmatics will begin to consider your brand an acceptable change in routine, increasing not only your number of customers but levels of engagement as well.

 

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People always like to say that “less is more”.  But when it comes to choices on a menu or the number of scoops of ice cream on a cone, we often find ourselves wanting more. So which is right?  Studies have actually shown that being given more choices is actually not always a positive thing, and can lead to customers being unmotivated to engage with brands.

customer segmentation pragmatics choice engagement

The theory was proven in a study conducted by the Harvard Business Review.  In the experiment, customers were offered a discount coupon after being shown a large display of 24 varieties of jam and a smaller display of only 6 jams.  After seeing both displays, customers proved to be only 1/10th as likely to buy based on their exposure to the wider variety.  This poor conversion rate is due to what has been defined as “choice paralysis”, where excessive choice can lead customers to experience anxiety, regret, and high expectations based on the number of options they’re given.

customer segmentation pragmatics excessive choice HBR quote

When it comes to rewards programs, brands are beginning to experiment with new and exciting ways to reward their customers.  Diversification has been a hot topic for some time now, and there are undisputable benefits to offering your customers a wide range of relevant, brand-specific rewards.  

However, while it can be extremely beneficial for specific customer groups this broader range of choices can also be detrimental for others, including pragmatics.  The more convoluted a rewards menu becomes, the harder it is to understand, which will lead pragmatics to dismiss your store in favour of another clearer option.

customer segmentation pragmatics baublebar

So how do you get around it?  The answer once again lies in simplicity.  Just as points-based loyalty programs are easy to understand and engage with, so are dollars off and free shipping rewards.  These types of transactional benefits ultimately help customers get what they’re looking for – a lower price for high quality items.  The utilitarian nature of these rewards is also reassuring to pragmatics, who simply want rewards that “work”.  In this case, working means appealing to the price motivator, giving you the opportunity to leverage your program’s value as evidence of what sets your brand apart.

 

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As mission-oriented shoppers, convenience and efficiency play a large part in where pragmatics choose to shop.  How well a brand meets these needs is a huge factor in how likely pragmatic shoppers are to include them in their routines.  The moral of the story is that brands with higher visibility stand a greater chance of securing a pragmatic’s business.

customer segmentation pragmatics higher visibility

This same principle applies to the likelihood of a pragmatic joining a brand’s rewards program.  As pragmatics continue to explore the world of ecommerce, they’re bound to stumble upon a number of different stores that sell similar products and run similar rewards programs.  Getting their attention, then, should be of utmost importance when designing your program.

customer segmentation pragmatics ivory ella visibility

Eye-catching promotion is in your best interest no matter what type of customer you’re hoping to attract with a rewards program, but can have an especially big impact on pragmatic customers.  Effective promotion is the first step to engagement, and can be done in a number of ways that are sure to make an impact on anyone who comes across your webstore.  Using a rewards tab, designing a beautiful explainer page, and linking to rewards information in your store’s navigation bar are all highly great ways to keep your program close-at-hand and inspiring urgency in even the most indifferent customers.  

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These methods are especially effective when combined with email marketing and other on-site calls-to-action.  When something’s directly in front of you, it’s hard to resist investigating, and this curiosity is what will help push your pragmatic customers into a lasting relationship with your program and brand.  This type of promotion also doesn’t require your customers to do any work to stay informed of what your brand has to offer them.  Essentially, your brand becomes the convenient solution that delivers long-term value without requiring mission-driven pragmatics to do any work.

 

 

Focus On the Practical

Above all, pragmatics are practical.  Unless a brand or product feels necessary, they’re unlikely to engage with it for any length of time.  This makes simplicity the best strategy!  Programs that stay away from flashy, excessive rewards by focusing on the value and benefits of being a member make a more positive impact, eliminating the risk of choice paralysis and creating a customer experience that truly feels rewarding.

customer segmentation pragmatics takeaway

This, combined with effective marketing that makes your program easy to find and even easier to join will make their job as a customer even easier, making your brand a necessary addition to their online shopping experience.

 

Want to learn more about customer segmentation?

Click on any of the links below to learn more about that customer group.

customer segmentation series link connoisseurscustomer segmentation series link connoisseurs

customer segmentation series links savvy opportunistscustomer segmentation series link brand loyalists

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