Insights That Might Baffle the Savviest Loyalty Program Managers

Even the savviest loyalty program managers can be baffled, right?

Loyalty360 will host a webinar on Tuesday, Nov. 14, 2017, at 1 p.m. EST titled, “The Loyalty IQ Challenge: Five Lessons for Loyalty Pros,” which will be presented by Paytronix.

This intriguing webinar will help attendees discover five insights that have surprised even the savviest loyalty program managers, what customers your loyalty program should be built around, how often you should engage your loyalty members each month, and how many visits it takes to earn customer loyalty.

Kimberly Otocki, Content Marketing Specialist, Paytronix; and Stephen Stone, Content Marketing Specialist, Paytronix, will be the featured webinar speakers.

Loyalty360 caught up with Stone to find out more about this compelling topic for loyalty marketers.

Can you talk about a couple of the insights that might baffle even the savviest loyalty program managers? 
Stone: One thing that surprises a lot of loyalty program managers is that their best customers do not make or break their program. One might inherently think that a loyalty program should be built for the brand’s most loyal customers, but that’s not the case. Instead, the program should be targeted at less frequent customers who might like that brand but are not necessarily loyal.

This is because the best and most loyal customers are already loyal to the brand and do not need any extra incentives to participate in its loyalty program. There is not a lot of room to generate extra visits and revenue from a brand’s best customers since they are already at or close to their spending potential. The real money-makers for loyalty programs are customers who show equal loyalty to several different brands within the same competitive space. These are the customers who have the potential to become more loyal, which, in turn, helps brands win visits from their competitors.

What are loyalty program managers doing well now and where do the challenges lie? 
Stone: Core program value is a key element of any loyalty program and many brands manage this aspect particularly well. This represents the monetary value of what the customer gets back in a reward versus what they spent to earn that reward. The core program value should hover around the 4 to 8 percent range (spend $100, earn a reward worth between $4 and $8.) Last year, Starbucks famously changed its loyalty program and under the new structure, it delivers a core program value between 4 and 8 percent.

Having said that, some ROI challenges persist. Batch and blast promotions are still out there, where brands send the same promotion and message to all loyalty program members. This can hurt promotion ROI. Sending an offer to everyone likely means that customers who were going to come in any way get cannibalized. Sending an offer of $10 off a $50 purchase will increase revenue from customers who weren’t planning on coming in during the promotional period, but those who had already planned on spending $50 are now getting a free $10 with no incentive to go above and beyond their normal spending behavior. This is why segmentation and targeted offers are the best way to maximize the value of a loyalty program and associated promotional campaigns.

What is the most overlooked ingredient in a successful loyalty program? 
Stone: We hear from brands all the time that want to digitize their loyalty programs. In many cases, they want to eliminate any means of program participation that they might deem antiquated. This is the wrong way to go about this.

While we encourage the use of innovative technologies in any brand’s loyalty ecosystem, one newer method should never replace an older one, but rather expand the customer’s options set. So, if you ran an exclusively card-based program and wanted to introduce a mobile app that carries the same functionality as the card, that’s great! But eliminating cards from your program will only alienate customers who are happy with their cards. The key is to lower the barrier for entry. The more ways the customer can join and participate in a program, the better.

Does a loyalty program today have to be technology-laden to prosper? 
Stone: Absolutely. Although more traditional program participation methods like plastic cards will always have a role in any modern loyalty program, an increased reliance on digital customer-facing tools is inevitable. Brands should strive to be on the front lines of innovation. Many successful brands in the retail and restaurant spaces could make the argument that they’re really technology companies. Domino’s Pizza takes pride in this claim.

It’s important to note, however, that technology’s role extends beyond customer-facing tools. The infrastructure to capture customer data and make swift marketing decisions based on that data is the lifeblood of a successful loyalty program. This is technology’s most significant contribution to any loyalty program.

What do you see in the future related to loyalty programs and how often brands should engage with their customers? 
Stone: Many industries are in the midst of a consumer convenience shift, where brands offer new channels for customer engagement. This is particularly true in the restaurant space, where traditional sit-down restaurants are now offering takeout, and more fast-casual concepts are experimenting with delivery and online ordering. And as brands expand their channels to enhance customer convenience, it’s important that they’re equipped with the ability to capture and leverage data at any touch point.
Engagement frequency isn’t as important as engagement relevancy. The ability to collect and use data–regardless of how the customer interacts with the brand–will only increase the relevancy of all customer engagement efforts, which enhances the customer experience and strengthens loyalty. 

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