Datacandy loyalty program Just like regular doctor visits or routine auto inspections, the health and well-being of a loyalty program should also receive a standard tune-up. That was the crux of Thursday’s Loyalty360 webinar titled, “5 Steps to Assess the Health & Effectiveness of Your Loyalty Program.”

Presented by Luc Garneau, the Vice President of Strategic Consulting Services at DataCandy, the webinar offered attendees strategies to measure the value of loyalty programs, how to recognize warning signs, and ways to successfully maximize ROI.

Garneau’s 5 steps offered a clear and actionable plan for loyalty program managers to follow.

Step 1: Determine your top key performance indicators (KPIs)

Garneau outlined 7 KPIs including active members, sales penetration, transaction penetration, breakage rate, participation rate, redemption rate, and customer retention. While all are important, Garneau openly cited customer retention as the most crucial because it builds lifetime value. A 7 out 10 customer retention rate is a very good indication of success.

Beyond that, brands need to understand exactly who their best customers are. This can allow for a multi-tiered loyalty program, where the most valuable members are rewarded more, and thus further increasing their customer engagement levels. Marketers are also strongly advised to concentrate on theDatacandy loyalty program number of active loyalty program members, as opposed to the total number of members.

Similarly, Garneau cautions against an over-emphasis on the number of points members earn. Instead, brands should focus more on point redemption, which is a better overall indicator of customer engagement.

Step 2: Benchmark and analyze member activity and customer engagement

An in-depth understanding of program membership activity, sales and transaction percentages, and targeted customer engagement offers is vital.

One key factor in determining the health of a loyalty program is ensuring that current members remain active, while also understanding why some members become inactive. Continued inactivity is a sign that a loyalty program is losing momentum, and simply attracting new members will not fix the underlying problems that are preventing customer engagement.

Step 3: Address any issues with best practices

Garneau offered a word of solace to those concerned with an initial decline in member activity. This is typical shortly after the launch of a loyalty program, as excitement levels will naturally taper off.

There is a problem, however, when a well-established program begins to lose members. In these cases, Garneau recommends re-energizing the program with a relevant promotional campaign that concentrates efforts toward retaining and re-engaging the best customers first.

What’s more, brands should regularly revisit the goals of their loyalty programs. A healthy loyalty program should always increase levels of customer engagement and spending through the use of targeted and relevant promotional initiatives. If it begins to stray away from this core focus, it’s time for a tune-up.

Step 4: Evaluate how the loyalty program is managed

From top to bottom, Garneau stresses the importance of maintaining a complete involvement from all parties associated with a loyalty program.

This means everyone from executive level management to the clerks on the frontlines and, of course, the marketers and managers in between. Everyone must maintain a focused understanding of the program.

“Everyone must be on board” and “own” the program, Garneau stated.

Step 5: Use effective data to understand your customers

The operative term is “effective” data and this could also be redefined as “useful” data as too much information can be overwhelming. Only data that directly provides a better understanding of the habits and wants of customers should be considered.

The ultimate challenge is not simply to provide a relevant customer experience, but to continually increase the level of relevance over and over again.

Any brand that has ever attempted to understand and effectively engage a customer realizes that humans are incredibly complicated. There is no magic formula that provides the perfect customer experience. And this is why Garneau also stresses the continual need to test, test, and retest to discover what works best.

The bottom line is that a healthy loyalty program must be constantly evolving and improving to better meet the ever changing needs, wants, and habits of its members.

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