We could talk all day about the benefits a loyalty program can bring to your small business. If you’ve missed it, read our recent article on the benefits of a loyalty program for small business.
In this follow-up article, Stacey Lyons, Loyalty Director of Loyalty & Reward Co, gets specific about what loyalty means to your business and how you can go about creating a loyalty program.
How should I approach designing a loyalty program?
Firstly, you need to answer some important questions from a business perspective:
- Are you clear on what loyalty means to your business? Is it transactional, emotional or a combination?
- Which loyal behaviours are you trying to influence? i.e visits, spend, longevity, commitment, advocacy or other?
- What rewards can you access? i.e. are there cost effective rewards which can be accessed from within the business or will you need to rely on third-party rewards?
Secondly (and most importantly) you need to answer these same set of questions from your customers’ perspective:
- What does loyalty mean to your customers?
- Which behaviours would customers expect to be rewarded for?
- What rewards would be the most desirable to customers?
Reaching alignment between these perspectives will help put you on your pathway towards designing the right program which rewards the right behaviours with the right rewards.
What do I need to look for to ensure my loyalty program benefits both my business and the customer?
Value!!!! It’s value that trumps everything when it comes to loyalty program design and the best way to deliver value to both the business and the customer is through efficient rewards.
Efficient rewards vs inefficient rewards
Efficient rewards are inexpensive for the company to supply compared to the perceived value of the reward by the member. An example would be hotels who can offer an unbooked room as a reward to members basically for the cost of the cleaning fee, but members place a much higher value on the room than that.
Inefficient rewards cost the company the same amount as the perceived value by the member – examples might include third part gift cards, free delivery or cashback which usually costs the business the same amount as the customer sees it.
Efficient rewards are clearly the best option, so have a think about all the efficient rewards you might be able to access within your business to deliver the most value to customers at the lowest cost. The best place to start is products with the highest margin or value-add services you can provide.
How can I implement a simple loyalty program?
Here are five straightforward steps to follow when considering implementing a loyalty program:
Decide on the overall design elements. .e determine how the customer joins, earns and redeems.
Investigate existing loyalty solutions which can deliver to this design. i.e Shopify, WooCommerce and other platforms often offer loyalty plug-ins which are very cost effective.
3. Cost modelling
Do some commercial modelling around the program costs (i.e. rewards, technology and resourcing) vs the expected return (i.e. 5% uplift on transactions and 5% uplift on spend)
4. Member lifecycle
Create a basic member lifecycle communications approach across:
- Join – stimulate customers with incentives to register for a membership
- Onboarding – educate new members about program benefits and encourage them to engage early and often
- Growth – utilise tools and tactics to grow share of wallet
- Advocacy – reward members for referring new members
- Retention – identify members who are showing signs of disengagement and target them with tactical re-engagement campaigns
- Winback – stimulate lapsed members to re-engage
Create an implementation and program launch marketing strategy.
What outcomes should I be looking for?
The main objective is for a loyalty program to deliver a positive ROI (Return On Investment).
Therefore, it’s important to operate with true clarity around overall costs and gains of the program.
Member data must be captured and structured properly so you can easily see how many new members have joined, their transaction behaviour, their engagement with the business and the rewards they’ve accessed. You should be looking for positive results in these areas.
Reporting should be able to be easily accessed by the relevant people within the business (i.e. finance, marketing, customer service etc) to determine the effectiveness of the program at any one time.
Then, you can dial up what’s working and dial down what’s not to optimise the program budget over time with maximum return.
How can I ensure my loyalty program stays valid and keeps customers happy long term?
A loyalty program must continually develop.
A ‘do it once do it well’ or ‘set and forget’ type approach is not the way to generate long term loyalty with a loyalty program.
There should be a roadmap for the continued evolution of the program which is continually optimised based on learning from members derived from customer data insights.
If you need help with the design, technology or communications approach, we recommend reading the book Loyalty Programs: The Complete Guide as a next step. This is the most comprehensive book on loyalty available and uses real-world case studies from loyalty programs operating around the world to help explain the concepts detailed throughout.
Next up: Check out our case study on how Uber implemented a successful loyalty program.
Stacey is an expert loyalty consultant with experience in loyalty, digital marketing, eCommerce, social media and customer service.
Her role as the Loyalty Director of Loyalty & Reward Co involves designing, implementing and operating best-practice loyalty programs for clients. This includes exploring loyalty frameworks, applying loyalty psychology, developing and optimising member lifecycle communications approaches and sourcing the right platform vendors to suit each client’s needs.
Stacey co-created the book Loyalty Programs: The Complete Guide, the most comprehensive book on loyalty program theory and practice available.
Currently, her personal favourite loyalty program is Mecca Beauty Loop.
Connect with Stacey via LinkedIn.