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Making Changes to Loyalty Programs the Most Effective Way

When a brand makes changes to its loyalty program, sometimes those changes are received well by customers, but other times (i.e. Starbucks) not so much.

Loyalty360 caught up with Christopher Barnard, President at Points, to learn more about the most effective ways brands can modify loyalty programs.

In light of recent loyalty program shakeups at big brands like Starbucks, Chipotle, and American Airlines, how do you think loyalty marketers should change their loyalty programs in the most effective way?

Barnard: Many loyalty programs today, much like American Airlines and Starbucks, are shifting toward a revenue-based model. Under this model, loyalty programs are able to balance their focus on the bottom line while rewarding their most profitable customers.

At the end of the day, loyalty marketers are out to drive business performance - be that repeat business, encouraging a broader range of activities, deepening engagement. Ultimately, it all leads to one thing: Profit. We’re seeing that the most successful programs are those that don’t just reward frequency - there’s so much more that a loyalty program can help drive -  but reward valuable customers that spend more with the brand.

What is the biggest challenge that your clients face today in creating measurable experiences to drive customer loyalty? How do you recommend they measure efficacy?

Barnard: Loyalty has traditionally been difficult to measure because it deals with some concrete, and some
not-so-concrete measures. It’s about the relationship a brand builds with its most valuable customers. But measuring loyalty goes beyond measuring the strength of the brand-to-consumer relationship. It’s about driving engagement, which ultimately drives profit. That’s the ultimate measure.

To measure efficacy, tie your loyalty program objectives to measurable goals. Look at your program engagement and define what engagement means–is it the number of times a customer interacts with your brand? Then measure social engagement. Are you looking for consumers to spend more? Then measure the average basket or transaction size.  Are you looking to influence behavior? Then measure the breadth of interactions or the number of products your consumers are interacting with. Are you looking to get most consumers? Then measure that. Ultimately, a valuable loyalty program should be tied to driving revenue and achieving corporate profitability targets.

What are the biggest opportunities / challenges for brands and marketers today? If you could recommend one thing to a client (or prospective client), what would it be?

Barnard: One of the biggest challenges we’re seeing in the loyalty industry is keeping members both engaged and active. According to the 2015 COLLOQUY Loyalty Census, the average American household participates in 29 different loyalty programs, but is only active in 12. A lot of programs boast impressive amounts of users, but only a fraction of those are active members and that’s a huge problem. It’s not altogether surprising because we have more options than ever before. For the loyalty programs that we work with, we’re seeing that engagement, and continued engagement, is the key to success.

To overcome this challenge, loyalty programs should first consider whether or not their loyalty currency is strong enough to influence and change consumer behavior. If it is, then it’s about making the currency more ubiquitous. One of the greatest opportunities we’re seeing is with mobile wallets, which are now incorporating loyalty capabilities. Many programs are looking to technology companies, like ours, to make it easier for their members to use their rewards on a regular basis, as part of their daily routines. For example, imagine it’s around lunchtime and your phone, specifically your mobile wallet, offers you a deal - get 1,000 reward miles when you purchase a sandwich from the shop down the street. In this scenario, everyone wins. Merchants are able to drive business, loyalty programs drive engagement and gain exposure, and consumers are delivered timely and relevant offers.

On the other hand, if a loyalty program has a less established currency and is not influencing behavior, consider offering currencies that consumers already know and love to incent desired behaviors. Or, consider creating or joining a coalition program, like Plenti. Launched by American Express, Plenti includes brands like Macy’s, Rite Aid, Hulu, and Exxon and allows members to shop and earn points with one brand, then redeem their rewards with another participating brand. Coalition programs benefit all involved: loyalty programs get greater exposure for their currencies, merchants use loyalty to drive sales, and consumers are able to reach their redemption goals faster.

The overarching theme here, and our biggest recommendation to any loyalty program, is that the more ways you can enable members to earn and burn your rewards, the more valuable your program becomes and the more engaged your members will be.

How sophisticated are the customer experience and customer loyalty initiatives of most brands today? From the very nascent stages of considering a program to the ability to assess and integrate an array of complex new technologies that create consistent and seamlessly connected programs, where do brands exist along this spectrum?

Barnard: As with anything, of course, the customer experience and loyalty initiatives of today’s brands vary across the spectrum. You still have the rudimentary, very one-dimensional programs that reward members based on frequency or repetitive behaviors (buy nine sandwiches, get the 10th free). But on the flipside, loyalty programs are getting even more sophisticated. They’re realizing that one size does not fit all and we’re seeing the rise of things like data-driven efforts and personalization that are making these programs better for customers and a little more complicated for the program. But I’d argue that there’s ROI on those efforts.

One thing working in the favor of those more sophisticated programs is that there are more tools than ever before that allow loyalty programs to expand their offerings and drive incremental revenue without a whole lot of extra effort and upkeep on their end. For example, our Points Travel product enables loyalty programs to allow their members to use or earn loyalty points on hotel bookings. This not only drives their incremental revenue, but requires little to no dev efforts for implementation and for upkeep.

We continue to hear about brands that are looking to create alignment between their customer loyalty efforts and the brand promise. Should all brands try to become the next “Apple” or “Amazon?” Or is it more realistic and/or beneficial for brands to understand their own unique brand identity, and then define objectives, process and programs that align with that unique identity?

Barnard: Loyalty is not one size fits all. Of course, brands should pursue the goal of creating intensely loyal fans and brand advocates like the followers of Apple and Amazon have, but the route to doing so isn’t identical. The needs and desires of consumers vary based on a number of factors such as industry, product, and levels of engagement. And brands should consider each before building a loyalty program. Take stock from other successful programs, but avoid duplication. Build programs that appeal to your target audience and avoid offering the same loyalty incentives and mechanisms for earning across the board. 

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