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Build a Loyalty Program That Keeps Customers Coming Back

The benefits of loyalty programs are clear, but it needs to be said that consumers that take part in loyalty programs are only active in around half of the ones they’ve joined. The question is: how can you create a loyalty program that engages your customers and keeps them coming back? Here are 5 steps for designing and implementing a successful loyalty program.

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Build a Loyalty Program That Keeps Customers Coming Back

  1. 1. Build a Loyalty Program That Keeps Customers Coming Back © 2016 Customer Insight Group, Inc.www.customerinsightgroup.com 1
  2. 2. What we’ll cover today… 1. Defining Loyalty 2. 5 Facts About Loyalty Programs 3. Steps to Follow to Designing & Implementing Your Loyalty Program 4. Do’s and Don’t For a Best-in-Class Loyalty Program © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 2
  3. 3. Defining Loyalty Loyalty: Loyalty Marketing: Customer’s faithfulness; advocacy, devotion; purchase constancy Discipline of identifying and nurturing the yield of best customers through a long-term, reciprocity, value-added relationship. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 3
  4. 4. 5 Facts About Loyalty Programs 1. Consumers belong to an average of 13.4 loyalty programs, but are active in only 6.7 programs.[1] 2. 75% of consumers say loyalty programs are part of their relationship with brands. [1] 3. 73% of loyalty programs members are more likely to recommend brands with good loyalty programs, which equates to a boost in member acquisition and reduced marketing spend. [1] 4. The top two reasons why consumers continue to participate in a loyalty program are: that it’s easy to understand (81%) and the rewards and offers are relevant (75%). [2] 5. The return on loyalty program investment is higher than ever. Engaged consumers buy 90% more frequently, spend 60% more per transaction and are five times more likely to indicate it is the only brand they would purchase in the future. All of these factors lead to engaged customers delivering three times the value to the brand over the course of a year. [3] © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 4 1. Bond, 2016 2. Colloquy, 2015 3. Rosetta, 2014
  5. 5. Steps to Follow to Designing & Implementing Your Loyalty Program • Step 1: Be Crystal Clear About Objectives • Step 2: Build a Program Around the Customers that Create Value • Step 3: Determine Best Value Proposition and Program Structure • Step 4: Create Compelling and Meaningful Communications • Step 5: Identify Metrics to Evaluate and Measure Loyalty Program Success © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 5
  6. 6. Step 1: Be Crystal Clear About Objectives Retain Customers Target Marketing Increase Spend & Frequency Build Brand Loyalty Build Customer Relationship Differentiate vs. Competition Acquire New Customers Gain Customer Insight Increased Revenue © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 6
  7. 7. Step 2: Build a Program Around the Customers that Create Value Advertising & Marketing Efforts Most Growable Customers Low Value Customers Most Valuable Customers © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 7
  8. 8. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 8 Which Customers are Targeted How and When Customers Are Enrolled Qualification & Requalification Criteria Value Proposition and Program Structure 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 Program Elements Design Trade-offs Step 3: Determine Best Value Proposition and Program Structure
  9. 9. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 9 Cash Back/Rebate
  10. 10. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 10 Points for both transactions & engagement. Points Program
  11. 11. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 11 Discount Program
  12. 12. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 12 Fee Based Loyalty Program
  13. 13. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 13 Tiered Program
  14. 14. Step 4: Create Compelling and Meaningful Communications © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 14 Understand Customers Align Marketing Investment Deliver Relevant Messages Customer Statistics Average Annual Spend Average Annual Transactions Average Transaction Amount Average Margin Percent Demographics Financial Statistics Sales Contribution Margin Contribution Right Offer Complimentary Product Buy One Get One Free Product Replenishment Right Time Replenishment Geolocation Offers Right Product Stila Clinique Givenchy Bumble and Bumble
  15. 15. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 15 Sephora creates personalized product recommendations for Beauty Insider members.
  16. 16. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 16
  17. 17. Step 5: Identify Metrics to Evaluate and Measure Loyalty Program Success © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 17 Purchase Frequency Average Purchase Amount Customer Retention Annual Revenue Per Customer # Members % All Sales as Member Sales # of Member Transactions % of All Transactions by Members Average # of Items Per Transaction Gross Margin # Rewards Earned # Rewards Redeemed Negative Churn # Referrals # Social Shares Net Promoter Scores
  18. 18. For a Best-in-Class Loyalty Program • Do differentiate members by value. All customers are not created equal. Focus your resources on your most profitable and developing your growth segments. • Don’t ignore employee training and education. Training updates ensure that employees remain motivated and excited about the loyalty program over the long term (not just at the launch). • Do get personal. Incorporate personalization into program messages, discounts and offers. Customers' overall satisfaction with loyalty programs is 4.6-fold higher when they receive very relevant communications.[1] © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 18 1. Bond, 2014
  19. 19. For a Best-in-Class Loyalty Program • Do mobilize. Use mobile apps, mobile messaging and a mobile responsive website so members can connect, interact and engage anywhere, anytime. • Don’t make it confusing. Make it easy to understand why enroll, how to earn and redeem rewards. • Do act on what we’ve learned. Use the knowledge about customers to tailor product offerings, promotions and target customer segments. • Don’t view loyalty as just transactional. Use your loyalty program to identify and track customers, reward behavior, and drive deeper engagement and relationships. © 2016 Customer Insight Group, Inc. www.customerinsightgroup.com 19
  20. 20. RESOURCES Loyalty Blog http://www.customerinsightgroup.com/loyaltyblog Infographics http://www.customerinsightgroup.com/infographs SallieBurnett on Twitter http://twitter.com/sallieburnett LinkedIn Group http://linkd.in/LinkedInDiscussion
  21. 21. Thank You! Sallie Burnett sallie@customerinsightgroup.com Twitter.com/sallieburnett LinkedIn.com/in/sallieburnett

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