Any company can implement a customer loyalty program, but the real challenge is managing it. This is because loyalty programs are often multithreaded and made up of multiple levels, which can make supervision tricky. So, the best loyalty programs are the ones who can skillfully oversee campaigns in the short and long term. They also take into account the dynamically changing market and constantly evolving shopping behavior.
Since the key to success is persistence and continuous optimization, I've created a list of eight proven loyalty program management practices. These will help loyalty managers plan campaigns in order to achieve exceptional results.
What is loyalty program management?
I've been in the loyalty program industry for 20 years, so I've experienced many definitions and approaches within loyalty program management. Before we get to the practical part, I want to make sure we're on the same page by walking you through the definitions of a loyalty program and loyalty program management.
A loyalty program is a series of activities designed to attract, understand, retain, and engage customers. You can create one to serve your customers better and ultimately build long-term relationships between customers and your brand that drives profits. On the other hand, loyalty program management is also a series of activities that help you structure, manage, and analyze loyalty programs dedicated to your customer base.
Loyalty program management centers on improving customer retention and controlling certain aspects, like buying behavior, communication channels, online and offline touchpoints, and frequency of interactions. All in all, the main focus of loyalty program management is to make loyalty programs more effective in identifying loyal, and potentially loyal, customers, and then attracting them with coveted and eye-catching rewards.
Many companies make excellent use of loyalty programs. You need to start with a solid and skilled team if you want to be successful, too.
Experts are needed to create a customer loyalty program
Suppose you're lucky enough to be part of a mature and focused business. In that case, you can create a dedicated team engaged in the effective use of data collected in loyalty management and customer relationship management (CRM) systems. With this type of multidisciplinary team led by an experienced loyalty marketing manager, you can meet specialists from areas such as strategy, marketing, sales, and big data. These specialists will jointly work out concepts for loyalty schemes.
The perfect loyalty program management team for a mid-sized company or large enterprise consists of:
- Loyalty managers. They're responsible for creating the vision and business model and then the overall execution of the loyalty management strategy. Their job is to bring together various professionals to make the program effective and impactful. They're also in charge of talking to partners and creating co-promotional deals.
- Loyalty system specialists. They're responsible for running loyalty campaigns and configuring loyalty program software or other loyalty management solutions. They can also deal with administrative matters, payments, data security, and data governance.
- Data analysts. They're responsible for analyzing shopping patterns, loyalty program trends, developing customer segments, and preparing in-depth reports.
- Other specialists focused on the operational work. Depending on your company's requirements, you'll need specific specialists. Examples of these include a logistics specialist for in-kind rewards, a customer relationship manager, a communications and marketing specialist for automated marketing, email marketing, or direct marketing.
As you can see, there are many jobs to be done, and it's easy for things to get chaotic. That's why you especially need that one experienced person to direct the entire operation, or in other words, a program loyalty manager. Let's define the key responsibilities of a loyalty manager to ensure that your process of creating a loyalty program goes flawlessly.
What does a program loyalty manager do?
Generally speaking, a loyalty manager, sometimes called the "Head of Loyalty" or "CRM manager," is responsible for implementing and coordinating the loyalty programs in the company. They're also in charge of choosing marketing tools and tactics for how the company acquires, engages, and retains customers.
The role of the loyalty manager is strategic to the organization. They often work directly with management or C-level representatives and have full or shared ownership of the revenue generated in the company.
So that you know, the list of responsibilities should be tailored to the loyalty manager's experience and career preferences. I think the most important tasks are:
- Building strategy and vision for loyalty programs that match company goals.
- Aligning the technology with the organization's business needs to ensure that both work seamlessly.
- Focusing on loyalty program management and leading new and existing loyalty campaigns.
- Strengthening brand visibility among the right target audience.
- Providing rewards and making sure they align with customer expectations and values.
- Driving long-term customer engagement through gratifying experiences.
- Managing customer service activities related to the loyalty scheme and the shopping experience.
- Manage communication and marketing strategy in line with budgets and forecasts.
- Coordinate cross-industry activities related to the loyalty program, including sourcing and managing external partners.
- Creating member acquisition strategies in collaboration with the IT and technology departments.
- Preparing financial forecasts for loyalty program liabilities.
- Coordinating the loyalty development team and running employee training.
A loyalty manager has to be knowledgeable in marketing, business, and modern technology. Having these skills allow them to have a holistic view of customer loyalty management.
Eight proven practices for successful loyalty program management
Eight proven practices for successful loyalty program management
- Clearly define your goals.
- Understand your customers.
- Start small, and build up as you go.
- Make it simple and realistic.
- Constantly work on the value proposition, benefits, and rewards.
- Build partnerships to refine incentives.
- Craft a bold marketing strategy.
- Monitor, analyze, and adjust.
Increasing the number of loyal customers who complete more high-value transactions is critical for companies worldwide. Steady growth ensures that they can maintain resources and plan for the long run.
Let's face it, if you achieve your goals, your company is more likely to stay in business. So, when a loyalty manager takes on the new challenge of creating or managing a loyalty program, they need to tie their plan to the company's objectives.
If you're going to use a loyalty program to meet your company's goals, you first need to plan the actions properly. Then, you need to map all identified activities into clear and measurable campaign goals. After that, all that's left to do is roll up your sleeves and start working on your loyalty scheme.
"Easier said than done," you might think, but no worries. I won't leave you empty-handed. Let me guide you through eight practices that will make your loyalty program data-driven and deserve a place in your company's strategy.
1. Clearly define your goals
For your loyalty program to be successful, you need to design it with specific business objectives in mind. Think about customer retention, new customer acquisition, sales, or other high-touch areas that you consider critical. When setting goals for your loyalty scheme, focus on:
- Having a well-thought-out strategy first. Business owners expect a loyalty program to drive sales and meet margin goals. Think about long-term efforts, looking several years ahead, as well as a short-term marketing strategy focused on one year.
- Defining motivating and achievable KPIs. Cascade your goals and translate the company's strategic objectives into individual team member goals.
- Assigning operational tasks for yourself and your team. Be fair and respect the talents of each person.
- Determining the form and frequency of reporting progress on KPIs. Report monthly or quarterly on your performance to someone at the operational level. Include time for reflection and a possible improvement plan.
A well-defined strategy, vision, and annual plan based on metrics are everything. My advice: Never leave a team meeting without confirming your upcoming moves. Ensure you understand the goals of the loyalty program and that the other stakeholders agree on them.
2. Understand your customers
The success or failure of any loyalty program depends on collecting and analyzing customer data, including preferences, trends, demographics, and motivational factors. Before starting any new loyalty campaign, do market research first to understand your customers.
Researching and acquiring information about customer behavior and preferences is a multi-layered process. Try to collect as much qualitative and quantitative customer data as possible. This will help you create better customer profiles and learn about their practical and emotional needs. Both of these factors are critical in shaping your loyalty program campaign.
You can collect information about your customers from various data sources, such as surveys, interviews, social media analysis, purchase history analysis, or direct surveys. I can't deny that these types of operations can cost you some time and effort, but they have a big impact.
Once you've done collecting data, you can use these insights to prepare suitable activities that are focused on customers. Just imagine how this data will help you design discounts, contests, sweepstakes, or product combos. There's no better proof that you know your customers than a well-timed loyalty strategy.
It's time to make collecting customer feedback on your loyalty program a habit. Go ahead and use sales and behavioral data from segmentation analysis and other zero-party data shared by members to turn them into profitable actions.
3. Start small, and build up as you go
A loyalty scheme is an element of marketing that can become an integral part of your brand. If you suddenly withdraw your loyalty program, I can guarantee that your customers will take it very poorly.
Successful loyalty strategy creators start small after thinking big. For this reason, don't push yourself to "go big." Break your loyalty program idea into bite-sized pieces. Definitely focus on testing, iterating, and gradually evolving your loyalty campaign while considering customer preferences and business requirements.
Start the implementation of your loyalty scheme with a pilot on a closed group of customers. If you can’t put together a closed group of customers, you can also try it with employees or their friends and family. The pilot will allow you to refine your loyalty campaign and the value proposition offered to your end customers. Then, use the pilot data to refine the business case for the loyalty program so that it's more likely to meet cost and revenue assumptions.
The principle of starting small and growing over time also applies to running a marketing campaign after launching your loyalty program. By testing multiple concepts for campaigns with different customer segment settings, you can refine the premise of the marketing campaign and "go big" in the next step.
4. Make it simple and realistic
It's always best to keep things simple and realistic in terms of results for you and your program members. A well-rounded loyalty scheme creates happy program members that truly enjoy their accomplishments. Don't offer overly complicated programs that require too much time to earn rewards. This is a sure way to turn customers off.
Keep the rules for your loyalty campaign understandable enough to cut out the guesswork. If you want to make your loyalty program simple and realistic:
- Set campaign objectives related to its duration, assumed sales, assumed margin, and promotional budget.
- Outline non-financial goals, like customer trust and brand recognition.
- Define customer segments you want to target to create consistent online and offline communication.
- Establish a reward policy, such as "when you purchase Coca-Cola, you'll receive a coupon for 10% off your next purchase, valid for 14 days from the date of purchase."
- Specify threshold conditions that will be included in the program's terms and conditions but not necessarily clearly stated in marketing materials. An example of this is "coupons will be valid until December 31, 2022" or "$10 off applies to purchases of $100 or more."
- Define the rules for calculating the benefits of a special offer to your business along with its impact on further sales once the promotional season is over. Take into account changes in the behavior of new and existing customers.
You can also use frequent, easy to earn, small rewards in tandem with other programs that offer ongoing and long-lasting customer satisfaction. Believe me, it's a trusted and powerful combination.
5. Constantly work on the value proposition, benefits, and rewards
Make sure that your loyalty program is always appealing to its members. For your customer, this usually means a steady dose of new deals and other benefits available through your loyalty scheme. For your business, on the other hand, an attractive rewards program translates into increased trust, greater loyalty, and enhanced brand exposure.
Depending on the type of loyalty program you plan to create, you should consider these elements when working on your value proposition:
- Shopping cart discounts.
- Intuitive reward catalogs.
- Defined rules for calculating points.
- Fixed benefits, like free shipping, extended returns, or an extended warranty.
- Limited access to special offers, like pre-sales and early adopter events.
- Rewards for providing feedback or completing surveys.
- Better options for customers in high-value segments. An example is double points for purchases.
- Rewards for long-standing membership, birthdays, etc.
An effective loyalty program is one that customers willingly and actively use over time. Regularly monitor the satisfaction with the program by conducting surveys and tracking activity-related metrics, such as the reward redemption rate. This will give you an overall idea of whether you're heading in the right direction with your campaign or need to tweak it.
6. Build partnerships to refine incentives
Loyalty rewards alone can't always keep customers interested. On top of that, insignificant rewards can make customers quickly give up on them. What you need are high-value rewards that will keep customers circling back to you. If meeting these expectations is a bit of a challenge for you, you can always team up with a loyalty program partner.
There's a lot of buzz about service discounts or special events you can arrange with partner companies. Well-thought-out partnerships can bring your customers great incentives and help diversify the rewards in your loyalty scheme. With the right set of terms and conditions for your loyalty program, partner rewards can make your campaign more profitable and enticing.
Building partnerships with other businesses can provide beneficial exposure for both parties, especially if your partner is in a completely different industry and can route their customers to you. For example, transportation or fuel retail companies often have excellent partnerships with food service companies.
If you want to attract qualified partners to your loyalty programs, start by planning affiliate campaigns. Below, you'll find an eight-step action plan to help you start building an affiliate plan for your campaign:
- Create a list of potential partners whose products or services are a perfect complement to your offerings.
- Establish the terms of the partnership and the benefits you want to gain from the partnership, such as data sharing, customer acquisition, joint promotion, advertising, etc.
- Schedule a meeting to pitch your partnership offer.
- Set a time frame for the partnership.
- Set the KPIs you want to achieve together.
- Agree on the budget necessary to run the customer loyalty program.
- Test your product combo on a limited group of people.
- Check out the test results and make necessary adjustments to ensure your partnership is buttoned up.
The last step at this initial stage of cooperation is, of course, signing the contract. Once you've done that, it's time to get down to business and complete the first items on your to-do list.
7. Craft a bold marketing strategy
A loyalty campaign can't thrive if no one knows it exists. Make sure your customers are aware of the various loyalty programs you offer, and most importantly, that they're aware of all the benefits they can get. Relevant advertising through well-chosen media can optimize the effectiveness of your loyalty scheme and bring in even more new members.
Include information about your loyalty program in all of your company's marketing materials. Start with the digital assets you use to promote your eCommerce store and end with print materials in physical stores. Customers should be exposed to the program every time they interact with your brand.
A terrific example of promoting a loyalty program among non-members is ALDO Crew. Information about their newly launched program appeared in almost every online and offline location that ALDO uses.
In addition to an acquisition campaign targeting new customers, it's important to continually promote the program to existing members. Create a single, consistent, and repeatable marketing structure that constantly runs in the background and "triggers" customers. You can use such marketing activities as:
- Customized onboarding flow.
- Weekly news and updates.
- Special seasonal discounts.
- Reward catalog updates.
- Product catalog updates.
If possible, provide ongoing discounts to your retail staff. They're able to effectively increase your program's shopping basket when meeting with customers in person.
Use direct and personalized offers to registered customers. The good thing is that these are often invisible to your competition, and they give killer results.
Run campaigns with high-margin products and communicate their significant benefits. It requires you to use techniques to push along sales and a pinch of patience, but the payoff is worth the effort.
The external promotion of your loyalty program should be focused on both customer acquisition and retention.
8. Monitor, analyze, and adjust
Unmonitored campaigns are just a shot in the dark with little or no chance of success. The key to survival in the fierce arena of loyalty schemes is adaptation and constant evolution. Stay up to date and control your campaign to gain an edge.
When analyzing data, look for anything that is out of the ordinary as well as new patterns. This way, you can improve your program according to the changing trends and preferences in customer loyalty management.
First, plan your workday to include program monitoring and analysis. Loyalty program metrics must be tied to the type of the program and predetermined long-term business objectives. Let's explore five basic metrics you should be monitoring as part of your loyalty program:
1. New and existing loyalty program members
Look at the number of new members who have joined the program over time. You can see peaks and troughs in memberships, but the trend should always be upward.
When you analyze metrics, compare apples to apples. Track the number of new and existing members by comparing them in similar periods. Also, consider holidays or days that specifically attract customers, such as seasonal sales.
2. Point issuance
Point issuance is a set of two metrics, transaction and value issuance, indicating customer health scores. Transactional issuance shows how many transactions were made in a given period, while value issuance shows the value of those transactions in terms of the amount of money spent.
Assume that you're in charge of the loyalty program management for a clothing store. It's Monday, and the total value of transactions at that store on that day is $2,000. Half of that total was spent with a loyalty card, representing 50% of all transactions. What should you do next? You need to check out the quality of these transactions in terms of loyalty card usage. Simply put, see how many transactions were made with and without the loyalty card. Do this systematically on the same day, and you'll quickly notice trends.
Pay special attention to the number of people who have made transactions and belong to the loyalty program. They'll be the ones who determine the success here.
Redemption refers to the number of points "burned" from your loyalty account compared to the number of points accumulated on it during a given period. For example, your customer may want to redeem their points for a flashlight, which will cost them 100 points. At the same time, 50 other customers will shop and earn a total of 1,000 points but choose to keep the points for later. This contributes to the number of points available on the market and makes it easy to deduce the number of points removed and stored on loyalty accounts.
Points accumulated on loyalty accounts count towards your business expenses. Your customers may want to redeem these points for rewards at any time. That's why it's crucial to create a sufficient financial reserve so that you're always ready to redeem them. Be especially aware of seasonal events, such as holidays, when customers are more likely to spend points than accumulate them.
Watch the redemption metric closely. It clearly shows how attractive your program is to customers and what reward, in particular, stands out.
4. Intriguing anomalies
Review your loyalty program transactions to identify those that could result from a mistake. This type of transaction skews the results of your campaign, so you need to put on the detective's hat and dig around.
5. Stock in-kind rewards
As a loyalty manager, you must responsibly handle the program's inventory management. If in-kind rewards are part of your campaign, you need to take care of purchasing them, stocking them, and then delivering them to the customer when they redeem their points.
The eight practices I've collected here are the basics of loyalty program management. What you should do next primarily depends on the specifics of the campaign you're focusing on. Just so you know, working on a B2B program based on affiliate programs will look slightly different from working on a B2C program where cashback plays a key role. The cornerstones of a successful loyalty scheme are developing good habits and implementing thoughtful processes to stay ahead of competing campaigns.