Loyalty Management: Keys to success for loyalty programs

Craig Underwood is president of Loyalty Management Group, the company that manages the Air Miles Reward Program in Canada.This monthly column explores issues and provides practical information on obtaining the maximum benefit from customer loyalty programs and database marketing.The following is...

Craig Underwood is president of Loyalty Management Group, the company that manages the Air Miles Reward Program in Canada.

This monthly column explores issues and provides practical information on obtaining the maximum benefit from customer loyalty programs and database marketing.

The following is the second part in a two-part series on 10 keys to success for profitable customer loyalty.

Although customer loyalty is in vogue today, many loyalty programs have come and gone around the world over the past decade.

Some have gone under because their owners were unable to acquire the necessary financing to sustain the expensive start-up phase; most were doomed to failure because they contained inherent strategic flaws in their design.

My last article described the first five of my ’10 keys to success’ for a profitable loyalty program.

Here are the final five.

6. Make it easy

Theory meets the real world at the point of consumer contact.

A loyalty program must be easy for consumers to collect, track and redeem their points, dollars or miles. It must also be easy and flexible for retail staff to implement.

The most successful loyalty programs feature a ‘one -card’ system. Consumers are issued a card with their collector number embossed, encoded in a two-track mag stripe and imprinted with a upc code.

This design provides the retailer with multiple options for recording the collector’s transactions at the point-of-sale.

Consumers should also have multiple options for tracking progress towards earning their award.

Periodic summaries, an online, toll-free customer service centre, and a user-friendly interactive voice response option will enable collectors to keep track of their progress and stimulate activity.

7. Measurable results

Your company will invest significant time, money and other valuable resources to develop and implement a customer loyalty program.

Take Steven Covey’s advice and ‘begin with the end in mind.’

Identify the key behavioral changes your program is designed to create, and make sure you build quantifiable measurement tools into your system.

Management should expect a significant return on their investment in customer loyalty and you must be able to prove your program is profitably changing customer behavior.

If you have a database-driven program, carefully build in the capability to perform ‘pre- and post-’ offer analysis into your design.

Alternatively, consumer research tracking studies can provide the data necessary to quantify the profitability of your program.

You will only be able to continue to invest in loyalty if you create results case studies that unquestionably prove its economic success year after year.

8. New customer acquisition

The primary role of a loyalty program is to increase a company’s base of loyal customers.

This is accomplished by three means: increasing the retention of current customers, upgrading occasional shoppers to loyal customers, and attracting new customers into your business and converting them into primary shoppers.

Although we believe most companies should increase the proportion of their marketing dollars they spend on existing customers, we also believe it is critical to constantly bring new customers into the mix.

This is one of the primary benefits of a multi-company loyalty program, or what we call Coalition Database Marketing.

By enrolling collectors at several companies, the member base will have a healthy number of non-shoppers for each participant.

Companies with standalone programs should always make the consumer benefits of their loyalty program a primary part of their advertising message.

9. Sustainable competitive

advantage

A loyalty program should be a powerful weapon within your marketing arsenal, but its potency will be significantly diminished if it can be easily copied by your competitors.

Make sure you build unique benefits into your plan. Don’t create another ‘me too’ program in which consumers collect points redeemable for everyday merchandise from a catalogue.

Every successful company has unique assets it can turn into aspirational awards.

Challenge yourself, your marketing team and your agencies to create a personalized reward structure that will give you a sustainable advantage over your competitors.

10. Experienced dedicated team

Managing and continuously enhancing a loyalty program is a challenging and demanding assignment.

To be successful and yield the maximum benefits to your company, it must be run by an experienced, dedicated team. This cannot be an individual or a team’s extracurricular assignment.

Staff your team with individuals who are experienced in direct marketing, customer service, and database operations, and who passionately believe the goal of marketing is to profitably change consumer behavior and that loyal customers are significantly more profitable than occasional shoppers.

Give them the internal and external resources to do their job, and hold them accountable for delivering a return on your investment.

This completes the model for designing a customer loyalty program that will maximize the return on your investment, the level of enthusiasm your customers have for the program, and the level of senior management commitment you receive.

Next month, we’ll test the model by examining some customer loyalty programs that did not succeed.