Should marketers launch a loyalty program right away or take the pilot approach?

 

Loyalty360 will host a webinar titled, “To Pilot or Not to Pilot? That Is the Question,” on Tuesday, Oct. 31, 2017, at 1 p.m. EDT. The webinar will be presented by Bond Brand Loyalty.

Richard Schenker, senior loyalty consulting director, Bond Brand Loyalty, will be one of the featured speakers during the webinar. Loyalty360 talked to Schenker to get a sneak preview.

Should every brand necessarily have a loyalty program?
 
Schenker: Yes. It is a major organizational commitment, which, if designed correctly and executed with excellence, can help foster strong business results for brands.
 
We advocate that all brands embody some level of formal or informal loyalty program mechanics to engender transactional and emotional loyalty to their brands. Formal loyalty programs are more challenging to effectively deliver with brands that have a very low natural frequency of engagement. We tend to see this in brands where there is a “one-and-done” transactional relationship such as the moving industry, residential real estate sector, and one-time insurance products such as life insurance. In such circumstances, one-time incentives and value-added service levels can influence purchase choice and build the brands reputation beyond the work that a formal loyalty program might achieve, where repeat engagement is very low to non-existent.
 
If a brand wishes to launch a loyalty program, what key considerations should be accounted for?
 
Schenker: It all starts with program design. Brands need to ensure that they have senior organizational alignment on the key imperatives that a loyalty program is expected to support. It’s also critical to secure enterprise-wide congruence on key success metrics, the commitment of resources, and stakeholder involvement from across the business.
 
When designing a program, brands should be seeking ways to differentiate the program’s customer experience from their competitors and infuse the essence of the brand into the program design. It’s also vital to determine which customer segments the program must appeal to, and include deliberate mechanics that will drive the intended behavior change for each customer segment.
 
Moreover, the program design should not be overly reliant on discounts, which are easily replicated and lead to margin erosion. The design should include features, attributes, and benefits that are unique and coveted by the brand’s customers. The solution should strive to not only fuel transactional loyalty but also emotional loyalty to the brand. Last, but not least, the program must be simple to understand and to participate in, and easy for employees to engage customers with excitement.
 
How does a brand know when it is ready to launch a new loyalty program?
 
Schenker: A brand is ready to launch a loyalty program when the foundation of that brand is relatively stable. The best well-thought-out loyalty program will not fix key foundational issues with a brand. A loyalty program requires C-suite support, passion, and commitment. It cannot be only a bottom-up initiative; it must also be a top-down priority. When these conditions are in place, an organization can begin to embark on the pursuit of a loyalty program.

What does it mean to gain greater certainty of success?

Schenker: We advocate piloting loyalty programs for many of the following reasons: (i) validate financial assumptions, (ii) mitigate potential brand exposure, (iii) optimize investment and rate of return, (iv) fine-tune the marketing communications strategy and operational delivery, (v) solidify technology delivery, (vi) harness organizational momentum, and (vii) utilize the pilot in rollout as a “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. As such, acquiring greater certainty of the strategic and financial success in a pilot is a sound business practice.

What are brands doing well with loyalty programs and where do the challenges lie?

Schenker: Brands that look beyond transactional loyalty and focus on fostering emotional loyalty are making it psychologically difficult for members to even consider their competitors. There’s sufficient evidence in the marketplace showing that brands have used their respective loyalty programs to build a love for the brand.

Infusing personalization, unique experiences, mobile technology, social mechanics, and leveraging the strategic loyalty assets unique to their brand’s ecosystem have led to greater emotional connections to brands. Brands that are overly reliant on discounting and old mechanics as part of their loyalty programs are not differentiating and are merely acting to keep members loyal to the discount, and not the brand. Customers are promiscuous in their shopping behaviors, and a brand must find the right emotional levers to drive engagement and build long-term brand loyalty.
 

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