Key Considerations Before Executing a Pilot Loyalty Program

When a brand considers piloting a loyalty program, there are various aspects to consider.

Loyalty360 hosted a webinar on Tuesday titled, “To Pilot or Not to Pilot? That Is the Question,” which was presented by Bond Brand Loyalty.

Richard Schenker, senior loyalty consulting director, Bond Brand Loyalty; and Maria Pallante, vice president, Loyalty Solutions, Bond Brand Loyalty, examined the numerous aspects that a company should consider before embarking on a pilot loyalty program.

Increasing investments in loyalty packs a strong punch, Pallante noted, referencing the following research from Bond Brand Loyalty’s 2017 Loyalty Report:

81 percent say that loyalty programs make them more likely to continue doing business with brands
66 percent modify spend to maximize loyalty benefits
73 percent are more likely to recommend brands with good loyalty programs

A poll question during the webinar revealed that 76 percent of attendees are either about to begin a pilot loyalty program or investigating a new program or updating a current one.

Schenker said that Bond Brand Loyalty advocates piloting loyalty programs for the following reasons:

Validate financial assumptions

Mitigate potential brand exposure

Optimize investment and ROI

Affirm customer appeal and behavior change

Fine-tune operational delivery

Stress test and solidify technology efficacy

Establish a post rollout living laboratory for innovation.

By piloting a program prior to a rollout, brands can gauge success and address communications, operational, technological, and financial challenges to get it right for rollout without widely compromising their brand with customers. As such, acquiring greater certainty of the strategic and financial success in a pilot is a sound business practice.

Why do some brands roll out without executing a pilot program?

Lack of patience, time to market

Disruption to the business

Prepared to take on risk

Willing to course correct along the way

Here are some key considerations:
Stores and competition:

  • Representative store formats
  • Store sample sizes
  • Store count changes
  • Physical barriers
  • Competitive representation
  • Competitive changes along the way
  • Regional market factors
Merchandising & Operations
  • Merchandising changes
  • Operational commitment
  • Operational tracking
  • Employee composition
Customers & Members considerations:
  • Customer representation
  • Member proportionality
Financial considerations:
  • Store performance
  • Trends (want to make sure
  • Measurability (ensure no obstacles to measuring)
Control Market:
  • Stores
  • Customers
  • Competition
  • Merchandising & operations
  • Financials
Pilot Duration:
  • Ramp up
  • Frequency
  • Seasonality 
Pallante said it’s difficult to say how long the pilot duration should be because every company is different, but she added that major organizations across various industries typically take 10-24 months to pilot loyalty programs before moving from pilot to BOC.

Factors that typically extend pilot phases include large company size (>$3B), low average purchase frequencies, and presence of value proposition ambiguity.

Pallante noted some keys for pilot readiness:

Program Blueprint:
  • Vision for your program
  • What you will do ‘now’, ‘next’, and 'later'
  • Informs 'MVP' minimal viable product
Planning, development and implementation of the proper organizational structure required to support the loyalty initiative beyond the marketing department
  • Integration with existing protocols and a commitment by all functional leaders to ensure that loyalty does not become a side show over time
Program Design: Structure, Mechanics, Financials
Member Experience
Pilot, Launch + Creative Execution
Frontline readiness/ Change Management
Measurement Strategy

Organizational Readiness:
  • Planning, development and implementation of the proper organizational structure
  • Commitment from across the organization
Pilot Readiness Technology:
  • User stories need to drive requirements 
  • Scalable technical solutions 
  • Security and fraud controls & management
  • Commitment to being agile (“The whole point of a pilot is learning,” Pallante said. “The intent is to look at things that might need adjustment and where the variability might be.”
  • Don’t make the pilot run out before making changes – deal with as many as you need to
  • Plan for the things you’re going to watch for – KPI – we go in 90% confidence, but there is always the variability we need to allow for
  • User stories / epics to ensure your focused on the experience you want to deliver and your focus on tech requirements
  • Scalable - Technology solution needs to easily scale and handle increases in Member volume, sudden bursts in activity and the flexibility to add new features and functions.
  • Security and Fraud Controls & Alerts
  • Commit to iteration
Pallante and Schenker noted that high frequency brands (food/gas) can afford less time in a pilot because they’re engaging customers on a more frequent basis, cycling through the earn and burn mechanics.
Less frequency (i.e. furniture) brands may spend more time in the pilot program phase.

In another poll question, organizational impatience to get to full rollout was a key barrier to piloting a loyalty program.

Pallante said that a brand’s employees are a critical component of customer experience delivery.
“This is absolutely essential when launching or introducing changes whether they will be perceived as positive or negative,” she said. 

Galvanizing staff to support a new program or new changes is critical and involves developing an overarching Strategy & Change Management Plan that considers three things:

How your employees will become Ambassadors for the Change

How they’ll be enabled to support the change through training and tools and

How they will continue to be engaged over the long-term.  Consider how employees are incented and how the right behaviors will be recognized.

A top-down commitment from the CEO to store associates is vital to the success of a pilot loyalty program.

Initial KPIs
  • Overall enrollment + growth
  • Communications opt-in
  • Operational integrity
  • Member feedback
  • Associate feedback
  • Press and social listening posts
  • Loyalty ID penetration rates
Interim KPIs
  • Email engagement rate
  • Initial benefit usage rates
  • Initial behaviors changes
  • Competitive program response
Longer-term KPIs
  • Sustained member activity rate
  • Increases in member transactions and basket size
  • Sales lift
  • Earn and redemption behaviors
  • Member retention lift
  • Member emotional connection (e.g. NPS)
Schenker and Pallante offered five key takeaways:
  1. Seek enterprise-wide commitment and participation in the design and implementation
  2. Select your pilot and control markets wisely
  3. Ensure that you have a solid measurement plan
  4. Be nimble and agile to make changes in pilot expeditiously
  5. Afford sufficient time to acquire defendable program impact results

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