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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.
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.
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:
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.
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:
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
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.
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:
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.
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.
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.
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:
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.
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:
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.
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:
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.
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:
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.
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:
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.
Point issuance is a set of two metrics, Â 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.
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.
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.
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