COVID-19 caused an unprecedented economic event. Stores were shuttered and restaurants closed. Travel and hospitality companies slowed to a crawl. While many are coming back to life, regulations and safety concerns are keeping them at less than half their capacity. So, with all the issues these companies are facing, now may be the right time to take a hard look at loyalty program performance.
Loyalty Program Owners, CMOs, CFOs, and Customer Experience owners should reflect on the following set of questions:
- When should I do the audit?
- How best to initiate an assessment of the loyalty program?
- What are the key metrics and operational considerations?
- What areas should the loyalty program audit cover?
- What does success look like after performing a loyalty program assessment?
- Based on the results and key findings, how best to prioritize the moves you make in order to get the biggest benefit and lift program performance in both near and longer-term?
To help answer these questions, we turned to our friends at Ascendant Loyalty, a global CRM/Loyalty consulting firm focused on helping customer-centric, middle-market companies efficiently and effectively improve customer retention and drive growth profitably.
In this article, David Slavick, Co-Founder and Partner at the firm, shares his expertise on this very timely topic. A big thank you to David for taking the time to do this interview. We hope you will enjoyed it.
Why is now the right time for an assessment of your loyalty program performance?
The COVID-19 crisis affected the biggest part of the economy and, in some cases, totally changed consumer shopping behaviors. Program members have had their patterns turned upside down. Change for many drives a re-evaluation of long-standing affinities. Convenience has overtaken other priorities, like the need to save on shopping trips with value accrued in the form of points, rewards, and special recognition. In many cases, program management staff have been furloughed or otherwise left the company for new challenges.
This new world order should give you a reason to pause and assess the strengths and weaknesses in your loyalty program. The slowdown and change is a great opportunity to improve your value proposition. In some cases, reshaping the loyalty program will be needed.
What should trigger concern for a loyalty program owner or senior executive that has their eye on loyalty program performance?
You should consider auditing your loyalty program when:
- There’s a significant drop in the return on investment (ROI) of the loyalty program, and it’s not easy to determine the root causes
- The positive gap between member and non-member metrics is shrinking
- Enrollments driving new member acquisition has slowed and are not hitting financial model projections
- The positive margin on member average transaction is shrinking as the program has fallen into promotion excess, giving away both discounts/deals plus points to a broad (vs. targeted) segment
- Engagement metrics are in a downtrend: Fewer social posts by members, a lower rate of response to surveys, weak referral rate, lower CSAT scores from members, lower open/click-thru rate on emails, and lower penetration of preferred forms of payment
What should you expect from the loyalty program assessment?
An assessment should enable you to come out of the crisis in a much stronger competitive position by being able to plan, execute and measure program performance. Likewise, you may find that there are opportunities to improve your expense profile, improve your enrollment rate, re-energize your store associates, shift/lift response to program offers, improve the margin on goods sold and indeed, over time, source tools, solutions, and platforms that have an even better feature/functionality for running your program than you have in place today.
The assessment should help you identify strong and weak points of your loyalty program and give you clear recommendations on what to change and fix in communications, technology, staffing alignment, store associate training, program operations, rewards, and UX/UI.
What’s important while doing an audit of the loyalty program?
For most retailers who have some form of recognition and rewards program in place, daily, weekly, and monthly reporting on program performance is enough to know whether the program is driving business metrics profitably. This assessment should be founded on the business case built to justify the program including, but not limited to, the program’s financial model.
Success is defined by pre-established measures, or KPIs (key performance indicators). A quarterly audit with your service providers is also highly recommended to assess how well the program performance is supporting objectives. It allows you to identify areas for improvement and determine what the near-term priorities should be in order to meet/exceed commitments to the enterprise in terms of delivering incremental profitable return from your valued program members.
The audit should cover areas like:
Program KPI status
- ROI, enrollment as a percent of foot traffic
- Enrollment as a percent of conversion – paid transactions
- Active members (past 3, 6, 9, and 12 months)
- Member lifetime value – increasing or decreasing
- Member value profile – deciles performance
Program management - the biggest gaps right now in your resources model and the checklist of objectives you like to get done but just can’t seem to get to
Loyalty vision - your loyalty roadmap for next month, next quarter, next year
- What is working/not working
- Testing methodologies remaining valid and reliable
- Lift from offers – meeting goals/objectives
- Review and potentially refresh
- Review or incorporate a social program as a complement to the existing design
- Member tiers and their benefit structures
- New components or features in-store or online to be considered that the program can leverage
- Level of relevance/degree of personalization and whether this is being optimized
- Vendor performance against SLAs
- Gaps in feature/functionality
- Customer segments that are actively participating (redemption, increasing spend, etc.)
- Marketing use of these insights
- Merchandising – Planning and analysis of the use of customer insights
Customer data protection
- Data hygiene issues
- Data management
- Email undeliverables
By conducting a thorough examination today, you can absolutely expect to achieve better results in the new year. In addition, you can count on fewer sleepless nights worrying about issues and planning how to solve them.
What data are required for assessing the performance of the loyalty program?
Initially, we need to align program staff that remain onboard during this pandemic period to be prepared to share:
- Program metrics
- Sales trends
- The financial model that supported the program business case
- RFM model
- Prior year promotional calendar and current year plan
- Member “voice of the customer” research
- Feedback on tools/solutions/technology supporting the program: vendor/partner performance, identification of gaps/weaknesses/areas for improvement that have limited program performance to date
- Feedback from the core program team to identify areas for improvement from store operations, finance, IT, brand marketing, e-commerce, and store experience
Knowing these data points is crucial for effective loyalty program optimization.
How long does it take to get some initial observations of value?
Based on our experience, and assuming access to team members, the whole assessment should take around 4 weeks in total to provide a strategic roadmap leading to implementation. Implementation of observations and recommendations is typically phased and prioritized based on both demand on resources and impact on business performance.
How should we execute changes in the loyalty program?
Implementation can occur the week following the conclusion of the assessment. There are always “low hanging fruit” which typically fall into the following areas that can have an immediate positive impact on business metrics:
- Target segments re-aligned to promotional offers and lift margin on goods sold
- Insight applied to support closer to member personalization, relevance
- Store associates refreshed on program value proposition to improve customer engagement, lift enrollment rate, and improve conversion rates
- Social engagement refined to improve sharing and member engagement to lift brand awareness
Longer-term, but still on an accelerated basis, the assessment can inform:
- Sourcing and selection of new/advanced analytical solutions
- Sourcing and selection of loyalty platform technology
- Sourcing and selection of member engagement tools: Surveys, gamification
- Development and testing of re-freshed program design/strategy
- Analysis and development of a new, more predictive financial model with better/improved sensitivities based on: Member behavior, liability projections, customer tiers, etc.
In most cases, the evolution of your operating model per the above is done in phases.
About David Slavick
Co-founder and Partner at Ascendant Loyalty Marketing
David is a world class expert at CRM/Loyalty business case development, program design/strategy, and global technology assessments. He has designed some of the largest, most successful loyalty programs in the retail, restaurant & hospitality, department store, and eCommerce sectors.
About Ascendant Loyalty
Ascendant Loyalty Marketing is staffed with experts that are laser-focused on helping customer-centric, middle-market companies efficiently and effectively improve customer retention and drive growth profitably.