A loyalty program is no longer just nice to have, but a must have— even 75% of consumers say they would change to a company with a better loyalty program.
Some entrepreneurs interpret the loyalty program as a customer base to which they send occasional discounts and information about promotional offers. As a result, there are many loyalty programs in the market that, in reality, are just discount programs. As the popularity of the project increases, the cost of promotion and direct communication can grow faster than the ROI, so practicing this approach, translates into unfavorable financial results for the company. What should you pay your attention to in order to make a loyalty program successful, attractive to customers and financially profitable?
Lack Of Preparation Is Also Preparation, But For Failure
The effectiveness of a loyalty program depends on several key factors. Before launching a loyalty program in the market, it is important to ask yourself to whom it will be dedicated and to plan the strategy accordingly, in terms of the activities, attracting program participants, and rewarding them. You should also develop a method of reporting on key aspects of the program already at this stage.
When preparing a program, you should not rely only on your intuition or general trends. Each decision should be well thought out and supported by prior analysis, as there is no one-size-fits-all loyalty program.
Show Us Your Data And We Will Tell You Who Your Customers Are
To create an effective strategy for a loyalty program, you need an in-depth analysis of the available data. You should focus on transaction data, data related to communication interactions, data from the Central Statistical Office, information on the company’s media and advertising spending, as well as competitors and a range of other information from the market environment. It is also important to know your past marketing activities. Analyzing their effects and benchmarking them to market best practices in each category will provide insight into the strengths and weaknesses of the company’s performance in the analyzed area.
Since the loyalty program is made up of customers, describing their characteristics and segments will identify the growth levers needed to effectively manage the loyalty program. Depending on the brand and industry, you could focus on:
- increasing the frequency of purchases,
- motivating to increase the value of the shopping cart,
- access to limited offerings,
- recommending to friends,
- better customer retentions.
The segmentation allows you to determine which customers to target with your loyalty program. It is important to identify customer groups that have potential, and then plan to engage them in a loyalty program.
(Un)intuitive Choice Of Mechanics
The mechanics on which the loyalty program will be based is a key element of the strategy. It is designed to positively influence customer behavior and encourage them to identify themselves. The selection of the optimal solution should be based on an analysis of the company’s characteristics, customer profiles and the constraints it faces.
At the end of last year, the Lagardère Travel Retail group launched a multi-brand loyalty program called Kameleon (in English Chameleon), which included brands such as: Inmedio, Relay, 1Minute, Hubiz, the So!Coffee coffeehouse chain or the airport’s Aelia Duty Free stores. The Kameleon program can be found at train stations, in office buildings, hospitals, shopping malls, the Warsaw underground or Polish airports.
“From the beginning of our work on the program strategy, together with our partner, Loyalty Point, we have been looking for such solutions and mechanisms that would address our biggest challenge, i.e. the diversity and multiplicity of formats, product ranges as well as the expectations and needs of different target groups” noted Magdalena Charczuk, Marketing Director at Lagardère Travel Retail. As a result, we have offered program participants a simple but attractive mechanism in which they receive money back in the form of vouchers to use for future purchases. The vouchers, can be used at any of the points covered by the program, which provides great freedom in using the program. The cashback, which allows instant refund while still at the store, will make joining the Kameleon program truly profitable for participants. “For the stores at the airport, it’s a gamechanger, and for the stores in the city, a chance to build loyalty and attract customers” emphasizes Magdalena Charczuk.
A program based on the right mechanics will be an investment in customer value over time. Knowing the rules and privileges, a program participant will surely first check out the offerings of the company running the program before going to the competition.
Selection of Rewards
When creating a loyalty program, don’t forget about rewards, an important motivator for using the program’s offerings. The issue, however, is not as trivial as it might seem. On the one hand, the problem lies in an inappropriate selection of rewards to meet the needs and expectations of the program’s target group, and on the other hand, in an unfavorable conversion rate. This means that the value is high in relation to the time spent and expenses incurred by an average customer to obtain the reward. Offering a specific benefit value is the foundation of an effective user reward system.
Increasingly, there is a shift away from in-kind rewards to a benefit in the form of an exclusive privilege, thereby improving the overall customer experience. The program participant deserves an extended return time or a lifetime warranty. These types of activities make customers want to be identified and they are willing to take advantage of offers under the loyalty program.
Schedule Reporting Over Time
The loyalty program should be looked at from a long term point of view. Over time, as the program grows and the number of participants increases, the expenses associated with operating the program also increase, so an unquestionable method for reporting the effects of the loyalty program should be established from the very beginning. Sometimes the program’s effectiveness is either miscalculated or the results are over-interpreted. Therefore, even before starting a project, it is important to determine how you intend to measure its results.
The marketers should be able to prove at any time that the program is earning money and is profitable, and how is the balance of costs incurred against what was earned. This way, you will actually begin to see the costs incurred as an investment. A good method of evaluating the effects of the program is to determine and compare the results of the control group to a typical program participant.
Loyalty Point — Cooperation Methodology
Our 20 years of experience in the industry have allowed us to develop an implementation methodology that, on the one hand, makes it possible to get to know the contractor’s business in depth, and on the other hand, enables the client to implement a tailor-made loyalty program matching their business and consumer needs. Our “Raport Otwarcia” allows you to avoid basic mistakes made in intuitive program planning. The process is very methodical and, in addition to analyzing the data available in the organization, it also involves reviewing available IT tools, team structures and processes.
At Loyalty Point, we always take into account the characteristics of the company, the limitations it has, and its customer profile, and we recommend the optimal solution based on in-depth analysis of these factors. Recognizing prospects and identifying barriers is the first step to building a thoughtful loyalty program strategy. One of our effective implementations based on the Opening Report is the Vision Care program of the Vision Express brand.
The loyalty program implementation is a major undertaking requiring a number of strategic decisions, a lot of analysis and the involvement of representatives from several departments. It’s a complex project, so it’s critical to have the support of an experienced partner when implementing it. “Vision Care is a comprehensive eye care program and it reflects Vision Express’s strategy of taking care of Poles’ eyesight. Its success to date makes us plan to build the future of CRM and Customer Experience activities on it” comments Aneta Pruk, CRM and Loyalty Program Manager.
We have used the Opening Report dozens of times and it has proven effective in many industries: from NGOs through multinational corporations to local businesses operating only in the Polish market.
The Future Of Loyalty Programs
The loyalty program market is evolving and customer needs are changing. That is why the companies should have access to a modern IT platform or CRM system that will enable them to manage the program rules in real time.
In an effort to provide our customers with the latest technological solutions, we have implemented the Loyalty Drive Enterprise (LDE) tool. The company’s proprietary CRM system is a software driven by data and artificial intelligence to build long-term relationships with the consumers. It enables efficient implementation and flexible operation of the loyalty program in a highly automated manner. This solution ensures that a personalized and customized customer service model is created. The system contains all the necessary modules, addressing all the processes within the program.
When deciding to implement a loyalty program, consider working with a specialized agency. This will greatly reduce the risk of making any of the mistakes. When choosing an agency, you should look at the projects it has completed to date as they say the most about its effectiveness.