How to Design a Successful Loyalty Program

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Six Critical Factors in Designing a Successful Loyalty Program

Most of us agree that loyalty marketing pays off, but it's the how that trips up most companies. Our experience shows that there are ten critical success factors to cultivating profitable customer relationships.

Who is Customer Insight Group, Inc.?

Customer Insight Group is a leader in building brand loyalty for the world’s most influential and valuable brands. We help companies engage, keep and grow more profitable customer relationships. We leverage customer insight to deliver the right message to the right customer via the right channel at the right time. The bottom line is we focus your marketing dollars to get the biggest bang for your buck. The result? Long-term customer relationships and maximized margins.

More CRM and Loyalty Marketing Resources:

Loyalty Blog: http://www.customerinsightgroup.com/loyaltyblog/

eBooks: http://www.customerinsightgroup.com/white-papers

Loyalty Workshops: http://www.customerinsightgroup.com/custom-loyalty-workshops

Systematic New Loyalty Program Development: http://www.customerinsightgroup.com/systematic-new-loyalty-program

Pinterest: http://pinterest.com/engagekeepgrow/


Who is Customer Insight Group?

Customer Insight Group, Inc. leads the way in the evolution of how companies engage their customers, positively motivate them and earn their long-term loyalty. Our extensive client work is testimony to our depth of knowledge and ability to apply strategic insight and solutions to a wide variety of business objectives. Our team’s client experience includes: NHFA, Thomasville Furniture, The Maxim Group Carpet Franchise, Ashro, A&P, The Bon Ton, Crate & Barrel, Dick’s Sporting Goods, Edwin Watts Golf, GE Consumer Finance, Monroe and Main, Swiss Colony, Midnight Velvet, MySwingle.com, The Great Indoors, G.H. Bass, Golf Galaxy, Helzberg Diamonds, HSBC, Kohl’s, La-z-boy Furniture Franchise, MCI, Payless ShoeSource, Pier 1 Imports, Petco, Proflowers.com, Regis University, Ruby Tuesday, S&K Menswear, Sierra Trading Post, Stein Mart, Tommy Hilfiger, Ulta, as well as various other leading companies.

Published in: Marketing

How to Design a Successful Loyalty Program

  1. 1. Six Critical Factors in Designing a Successful Loyalty Program
  2. 2. Many Loyalty Programs Fail to Deliver Positive ROI − Fail to develop loyalty opportunity. − Quality of data is not properly addressed. − Lack clearly defined and measurable objectives. − Little or no attention is paid to employee skill sets and abilities; not ongoing training about the program and the benefits to the organization. − Customers don’t understand how to earn rewards. − Data is not leveraged to communicate to customers. − Program was launched and went into “auto” drive. − Change behavior rather than just reinforce it. − Each year program results are analyzed to optimize customer enrollment, retention, redemption and ROI. − Build in time for testing and learning. − Over-invest in coordination with users and across functions. − Link technology implementation priorities to business objectives. − Advocacy by senior management. − Segment and tailor the program and offers. − Demonstrate innovation and regular re-invention. − Develop robust multi-channel communications to engage, keep and grow profitable customer relationships. − Understand customers and how segments differ from one another. What do the winners do right?Where do they go wrong? © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  3. 3. Six Critical Factors in Designing a Successful Loyalty Program Successful loyalty programs are strategic Trade-offs are required to realize financial goals Objectives must drive program strategy Leverage best practices of industry leaders Identity how program design delivers value 1 2 3 4 5 6 Align Loyalty Program with CRM © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  4. 4. What is the primary business objective goal for customer impact? Frequency Average sale Lime time value Are potential benefits compelling enough to achieve required customer impact? Do customers know what it takes to earn rewards? Benefit mix (combination of hard and soft benefits). Strategies to move customers up in tiers/spend? Is the value message simple to understand? How can you deliver and reinforce engagement over time? POS technology Frontline training Social media, Fulfillment Marketing support What distinctive assets can be leveraged? Assortment Receipts Community Affinity programs How will these assets reshape economics and expected returns? Successful Loyalty Programs are Strategic SET REALISTIC AND TARGETED PROGRAM OBJECTIVES MAKE RIGOROUS DESIGN TRADE- OFFS TO ACHIEVE OBJECTIVES LEVERAGE DISTINCTIVE ASSETS EXECUTE SKILLFULLY AND PERSISTENTLY TO SUSTAIN IMPACT Successful Loyalty Program © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  5. 5. Six Critical Factors in Designing a Successful Loyalty Program Successful loyalty programs are strategic Trade-offs are required to realize financial goals Objectives must drive program strategy Leverage best practices of industry leaders Identity how program design delivers value 1 2 3 4 5 6 Align Loyalty Program with CRM © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  6. 6. Which Customers are Targeted How and When Customers Are Enrolled Qualification & Re-qualification Criteria Value and Structure of Rewards How Program is Communicated •Breadth of appeal and participation •Level of participation over time •Types of customers participating •Degree of offer-tailoring •Types and degrees of impact •Depth and consistency of data capture •Level of frontline involvement •Culture to drive sales or margin •System capabilities •Cost of program •Long- and short-term measurement •Exit flexibility/cost Six Critical Factors in Designing a Successful Loyalty Program Program Elements Design Trade-offs © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  7. 7. Six Critical Factors in Designing a Successful Loyalty Program Successful loyalty programs are strategic Trade-offs are required to realize financial goals Objectives must drive program strategy Leverage best practices of industry leaders Identity how program design delivers value 1 2 3 4 5 6 Align Loyalty Program with CRM © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  8. 8. © 2010 Customer Insight Group, Inc. All rights reserved. Objectives Must Drive Program Strategy Expand marketing channel with direct capabilities  Provide direct, targeted messages and offers across customer base  Target all segments, with limited ability to target and tailor between segments Collect data to be us used as a core business asset  Collect customer data to make better decisions across the business  Target all segments, significant ability to target & tailor between and within segments No explicit strategy Build strong relationships with growth segments  Develop strong relationships with most valuable segment(s)  Target growth segments only, significant ability to target and tailor between and within segments  Continue to pursue defined initiatives Depth of Customer InformationLow High BreadthofCustomerInformationLowHigh Business Objectives © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  9. 9. Six Critical Factors in Designing a Successful Loyalty Program Successful loyalty program are strategic Trade-offs are required to realize financial goals Objectives must drive program strategy Leverage best practices of industry leaders Identity how program design delivers value 1 2 3 4 5 6 Align Loyalty Program with CRM © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  10. 10. Expand marketing channel with direct capabilities KEY AREAS OF BENEFIT CUSTOMER SEGMENTS FUNCTIONS Growth segments Maintain segments Marketing Only • Improved efficiency of markdown spend through direct targeting and understanding of promo response “BROAD AND SHALLOW” • Limited customer insights to drive core function business decisions. • Increased customer loyalty. • Enhanced customer perceptions. • Targeted levers (e.g., conversion, frequency, UPT, and markdown) “NARROW AND DEEP” • Robust customer insights drive business decisions • Strategic decision support. • Strategic choice evaluation (e.g., impact of merch. changes on core customer segments behavior) • Increased customer loyalty • Targeted levers “BROAD AND DEEP” Growth segments Maintain segments Growth segments Maintain segments Marketing Distrib. Merch. Planning Buying Store Ops. Marketing Distrib. Buying Store Ops. Limited data for all customers Robust data for all customers Deeper data for select segments Identify How Program Design Delivers Value Collect data to use as core business asset Build strong relationships with growth segments Merch. Planning POTENTIAL IMPACT © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  11. 11. Six Critical Factors in Designing a Successful Loyalty Program Successful loyalty program are strategic Trade-offs are required to realize financial goals Objectives must drive program strategy Leverage best practices of industry leaders Identity how program design delivers value 1 2 3 4 5 6 Align Loyalty Program with CRM © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  12. 12. Leverage Best Practices of Industry Leaders Industry Leaders Strategy Hallmarks © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  13. 13. Leverage Best Practices of Industry Leaders Deliver Superior Experience Multiple touch points, channels Build Platform for Relationship Extension Customer embedded in business decision-making Mass market acceptance/confidence as a “gateway” to broader array of relevant products & services Able to identify high value/high priority individuals and deliver superior experience across touch points Engage Mass Market Provide every day extra value Strong core brand alignment Build ongoing connection point to encourage purchases, differentiate offers Target Priority Segments Several important segments with differentiated needs Tailored value proposition (e.g., pricing, service levels) based on behavioral insights to better meet needs Embrace Top Spenders Small dominant spending group Exclusive aspirational offers Examples HallmarksStrategies © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  14. 14. Six Critical Factors in Designing a Successful Loyalty Program Successful loyalty program are strategic Trade-offs are required to realize financial goals Objectives must drive program strategy Leverage best practices of industry leaders Identity how program design delivers value Align Loyalty Program with CRM 1 2 3 4 5 6 © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  15. 15. Align Loyalty Program with CRM Program Type Execution Elements Economic Considerations © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  16. 16. Six Critical Factors in Designing a Successful Loyalty Program Successful loyalty program are strategic Trade-offs are required to realize financial goals Objectives must drive program strategy Leverage best practices of industry leaders Identity how program design delivers value Align Loyalty Program with CRM 1 2 3 4 5 6 © Customer Insight Group, Inc. All rights reserved. • www.customerinsightgroup.com • +1 303.422.9758
  17. 17. Customer Relationships – Engage. Keep. Grow. Customer Insight Group is a leader in building brand loyalty for the world’s most influential and valuable brands. We help companies engage, keep and grow more profitable customer relationships. We leverage customer insight to deliver the right message to the right customer via the right channel at the right time. The bottom line is we focus your marketing dollars to get the biggest bang for your buck. The result? Long-term customer relationships and maximized margins. Sallie Burnett, President Customer Insight Group, Inc. Email: sallie@customerinsightgroup.com Phone: 303.422.9758

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