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Choosing the Right Billing Model for Your Rewards Program

Choosing the Right Billing Model for your Rewards Program blog

When designing a winning program structure to fit precise molds, there are lots of variables to consider, like your reward billing model. Reward program types, audiences, permissions, branding, data integrations, tiers… the list goes on. One variable that is often overlooked during solution design, but remains a significant component of an efficient rewards program is how to structure a reward billing model that works best for you- and your participants. This means that it provides them with the best experience possible, while keeping your reward program spending within budget. The exact choice is dependent based on program specific KPIs and your own goals, and various combinations are recipes for success, evident in other WorkStride programs. The choice could make the difference between a good and a great program, and with the help of our Engagement Managers and Professional Services team, success is always within reach.

Reward billing models describe the specific blend of program currency type (dollars/points), transaction billing type (Bill on Issuance or Redemption), and reward mix (Gift Cards, Payments, Merchandise) that a reward solution provides – the sum of which make up the overall model for reward billing. A successful program will find a harmonious balance between the three components, providing a great reward experience at a controlled cost. Below, we breakdown a series of three key steps worth discussing with your reward program provider to determine the billing structure that’s best for you. (We even included a handy infographic to encapsulate reward billing).

Step 1: Determine Currency Type

Currency type may seem to only refer to country-specific currencies like the Euro or the Dirham, as its used in global rewards programs. Before even considering country-specific currency considerations, you must determine if the program will even use fiat like the dollar, rupee, euro, etc. as tender at all. Multiple other options like points, tokens, or organization-specific currency exist, and can also serve a strategic function within your program. In US based programs, since the US dollar is the assumed currency type, the choice is a little easier, yet just as strategically important.

Dollars – Using dollar-based tender in your program enables users to earn a true monetary value, like $250 for a milestone that can then be redeemed for a $250 gift. The benefit of this model is transparency. By showing the participant exactly what they earned in a format that aligns to everyday true currency, they can immediately conceptualize the value of what they earned. Dollar formatting make the most sense for programs that look to provide the benefit of true value to users, with reward cost weighted more on the company than user.

Points – Points or similar non-dollar formats replace earned program value in a dedicated program currency (perhaps a more appealing form of “Schrute Bucks”). These program points translate to dollars based upon whatever exchange rate that the program stakeholders determine makes the most sense for the audience. Points often create a game-like experience that engages and encourages audience participation. Points formats often make the most sense for companies that seek to share some reward cost with the user.

Step 2: Determine Billing Model

After choosing the desired currency format, you must now determine how you as a company desire to be billed for variable reward transactions. Two available options across all programs are – Bill on Issuance (BOI) and Bill on Redemption (BOR). The main difference lies at what point of the reward experience does the transaction fee billing activate- when the reward is issued to recipients or when rewards are redeemed by them.

Bill on Issuance – BOI is a structure where sending a reward is billed at the point of the send, or upfront. In this model, the reward recipient can redeem for any available redemption options with no additional costs. Whether you’ve choosing to issue Points or Dollars in your Step 1 decision, the transaction fee would be billed at the point of initial issuance. Typically, BOI carries a lower percentage fee, billed across all program dollars issued.

Bill on Redemption – BOR is a model where sending a reward is not billed until the point of redemption by the recipient for their reward. This model can involve a higher fee percentage per transaction but only across the redeemed value at the time of redemption. With this option, only rewards that are redeemed are billed and paid for.

Step 3: Determine Reward Mix

Finally, one of the last important steps is to determine what types of rewards you’d like to offer within the program. Whether your audiences or participants are more driven by direct cash, or if they’re partial to the tangibility of merchandise, or the flexibility of gift cards, theres an engaging mix to choose.  Whatever the specific assortment may be, you should have the ability and flexibility to include any combination of three main buckets of rewards – Gift Cards, Payments, Merchandise.

Reward mix in your reward billing model

Gift Cards – Gift cards are single-load retail gift cards in either physical or digital format, able to be used at retailers in person or online. WorkStride offers more than 150+ gift cards –from options as general as Amazon or as specific as Paint Nite. Gift cards are great to ensure the earner is using their rewards on something memorable that they’ll enjoy.

Payments – Payments are cash-like options that can be included in the program redemption mix. At WorkStride, we empower program administrators to choose to include Payments in the form of Visa prepaid cards, Visa reloadable cards, ACH/Direct Deposit, or even physical checks. While adding an element of Payments creates valuable freedom for the participant, they might lack the personalized reward experience that other options may provide.

Merchandise – General merchandise and logo’d items add a shopping-like experience in the program. Rather than the more indirect nature of Gift Cards or Payments, the user might find a physical item to claim directly. While physical merchandise items limit the scope of what program value can be used for, it carries the value of a memorable reward experience that can serve the user a strong reminder of the program each time they use that particular item.

There is no absolute in terms of which combination makes up the winning reward billing model for every program. Like most aspects of reward program design, purposeful thought and strategic logic must go into what will be best suited for both the audience and your organization. In this case, important variables to consider are who the audience is, and what valuable to them. You must also consider how the organization expects to best fund the value of the program in order to keep engagement high.

While a Points program that is Bill on Redemption for exclusively Merchandise might make a splash for one company and their program, it might lack appeal for another. A Dollar program that is Bill on Issuance for Merchandise, Gift Cards, and Payments might move the needle for a different company, but it might be more costly than the value is worth for another. Familiarizing yourself and scoping your prospective program’s audiences, goals, and other strategic logic is an important step to figuring out how to maximize your reward billing model, and doing so at an efficient cost.

Through all this, you’re not alone, as WorkStride is always here to help — not just in program execution, but supporting all of the strategic design elements of a program that is right for both you and your participants. Contact us today!

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