Time to Overhaul Your Loyalty Program? 7 Steps to Long-Term Success

Is it the Right Time to Revamp Your Loyalty Program?

It might be. A loyalty program is not something that you do once, flip a switch and set it on autopilot. If you’re not regularly reviewing and refining your customer loyalty program then you may be long overdue for a loyalty program audit.

A loyalty audit is a non-biased look at your company’s loyalty program to ensure that the program is working. Saks Fifth Avenue Refreshes SaksFirst, Overstock.com, Marriott Rewards and others have updated their loyalty programs in 2013.

Here are seven factors you can evaluate to ensure that your program continues to grow and be successful over the long-term:

1. Collect Customer Data and Use it

Jack Welch, Former Chairman and CEO of General Electric, put it very succinctly,

“We have only two sources of competitive advantage:

1. The ability to learn more about our customers faster than the competition.
2. The ability to turn that insight into action faster than the competition.”

How you gather, manage and use customer insight will determine whether you win or lose. Successful loyalty programs gather customer data and use it to:

• Attract profitable customers.

• Determine allocation of resources to improve ROI.

• Evaluate customer reaction to specific promotions.

• Deflect competitive challenges.

• Identify trends and opportunities.

• Increase customer conversion rates.

2.  Create a Shared Vision

In a true customer-centric organization, the vision has to be clear and – equally important – embraced at all levels by all employees. Make sure everyone knows how the program works and why it’s good for the customer and the company. Is it time for an enrollment drive? An enrollment drive focuses on educating and building awareness of employees as well as customers.

3.  Set Realistic Goals  

Sometimes loyalty programs are developed with good intentions, but unclear objectives. If that’s the case, step back and develop program objectives based on your primary business objectives. Do you want to… expand your marketing channels? Collect data to be leveraged as a core business asset? Build strong relationships with high value and high growth customer segments? You decide – but you have to decide.

4.  Know Your Customers

All customers are not created equal. Define your best customers. Avoid rewarding “free riders” — loyalty members who join your program but give you nothing in return, and instead focus your efforts on truly profitable, loyal customers.

5.  Make Rewards Attainable and Realistic

The 2013 Loyalty Census reported that the average household is enrolled in over 21 loyalty programs, but is only active participating in 9.5 of those memberships. As a result, it is critical to design a loyalty program that will encourage customer participation as well as achieve your business objectives. By design, a loyalty program is a balancing act between low-cost, easily attainable short-term rewards that are redeemed early in the program, and more highly valued, aspirational (and more costly) rewards that can be redeemed once customers spend more. While the short-term rewards encourage enrollment and ongoing participation, the long-term rewards serve as an incentive for your customers to consolidate purchases and award you greater share of wallet.

6.  Be Relevant

Don’t bombard customers with messages. Develop a multi-channel communications plan that includes in-person, social media, website, email and direct mail. Make sure your messages are relevant to the season and customer purchase cycle and have a synergistic message across channels. For example, triggered and personalized email campaigns can ensure that the right content will be delivered to the customer at the most right time, optimized for a device that works for them (laptop, tablet, mobile etc.).

7.  Measure Success

Go back to your objectives. What do you want to achieve? Track and measure your loyalty program’s performance based on short-term campaign results and long-term overall changes in customer behavior, like spending more per transaction, shopping more frequently, spending more each year.

As you prioritize your marketing plans for 2014, take a close look at your loyalty programs performance. More than likely, the poor results of many of the tactical projects are really symptoms of larger issue in your program strategy. Hopefully, you aren’t too close to your business to see them. Whether you do it internally or externally, an audit of your current loyalty and customer relationship-marketing program is essential to understanding (and solving) the real problems affecting your bottom line.

Sallie Burnett is the president of Customer Insight Group, Inc., a strategic marketing company that helps companies improve the return on their marketing investment by developing and executing high-performing loyalty programs.

Share your insights with me at sallie@customerinsightgroup.com. You can also follow me on Twitter or read our loyalty marketing blog.