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Nine ways to drive ROI through a loyalty programme

Is your loyalty programme creating value for your business, as well as your customers?

Jacqueline Munguía, Unsplash

Implementing a loyalty programme can create massive value for your business. However, designing an innovative and engaging scheme isn’t always straightforward. As every business is different, there is no such thing as a generic loyalty programme you can take ‘off the shelf’.

Remarkable as it may sound, some companies consider a loyalty scheme simply because their competitors have one, or simply because they fear competition from companies in their marketplace. In some businesses, this has been enough to gain support for the endeavour, in others, those proposing the programme encountered resistance, calling out a need for clear ROI projections.

"So how can you foster positive return for your loyalty programme? We’ve identified nine key moves, for designing and implementing an effective loyalty programme that delivers the results that matter most."

1. Define your business goal and expected benefits and work towards them

A good loyalty programme isn’t just about making customers happier. It can be used as an efficient engine to drive profit, create revenue, or promote key behaviours that will benefit your overall operating model, such as self-serve or category sales of high margin services. It can become a key competitive advantage against your competitors.

Understanding what you seek to achieve with your loyalty programme is the first key strategic step towards delivering a strong return on investment.

Clarifying what you are trying to achieve with stakeholders and sponsors will not only help you to unlock a budget that matches your business ambitions, it will also help you set the objectives and the strategy to get you there.

2. Remember to consider the intangible benefits

The five direct benefits from a loyalty programme are customer loyalty, customer satisfaction, customer retention, sales and brand awareness. But there are also some intangible benefits that should be considered. When planning (and calculating) your return on investment, and more specifically if your organisation is data-led, you may want to consider the value of the data generated by your programme.

Well-defined digital rewards programme offers a wealth of data points that provide businesses with insights on customers habits, their spending, their product interests – all of which can be exploited to improve sales operations.

3. Identify the levers that drive positive return

To fully assess the value of your loyalty programme, it is also very important to explore and map all the levers that will help you achieve your goals.

If your goal is to drive more revenue from your existing products, what could incentivise your customers to spend more than they usually do? What could incentivise them to buy products that they do not usually purchase?

If your objective is to decrease churn, what are the problems that your customers currently face and drive them to your competitors? For instance, if the key problem is price related, what incentives could help them to perceive your business as offering better value thanks to your loyalty scheme?

These are just a few examples of the key questions to consider. The levers are specific to your business and your target audiences, so it is important to use what you know about your customers when defining them.

4. Strategically choose your rewards

Effective rewards do not necessarily need to be big or costly. It is all about identifying the rewards that create positive psychological attachment to your brand. A regular cup of coffee from their favourite coffee shop may drive more regular purchases than a one-off 50% discount that they may not deem useful.

As loyalty rewards represent a key cost in your loyalty programme, you may also think about strategic loyalty partnerships. In fact, partnering with organisations who will offer loss-leaders to promote their services or products will reduce your loyalty program’s overheads. In addition, they can increase your customers’ satisfaction by providing rewards that surprise and delight, but that work as part of the overall experience of buying from your brand.

5. Consider the needs for each of your customer segments

Not all of your customer segments will react to your loyalty programme in the same way. Just as you would optimise your customer journey for each of your target audience, it will stand you in good stead to carefully consider the drivers for each of your segments.

Moreover, although the objectives of a loyalty programme in the B2B and B2C worlds are similar, B2B loyalty programmes have different considerations that you need to address.

If you are building a loyalty programme for businesses, your small business customers’ needs and expectations may in fact be totally different from those of your large business customers. The cost and proposition of an effective reward may be totally different for each, including how often you need to reward them.

You’ll also need to consider who exactly in the business you want to reward — the individuals processing the orders on your platform, the lead buyers, or maybe the firm as a whole.

6. Integrate off-the-shelf technologies that foster engagement

For some businesses, a loyalty programme which uses the familiar principles of ‘games’, such as setting challenges and issuing points scored, can help engage customers in an interactive and innovative way. Indeed, loyalty schemes of-the-age do not solely focus on rewarding customers based on their purchases, with benefits going beyond a simple purchase. In fact, customer engagements alone can contribute to overall return on investment. For instance, encouraging community engagement may be highly beneficial for your business as they increase your brand awareness and attract new users. You could incentivise your customers for their interactions on your social platform and reward them with a point-based system using a gamification engine.

While the cost of building a complex and bespoke engine ‘from scratch’ can be prohibitive, selecting an off-the-shelf gamification engine that meets your needs, and integrating it into your platform, is a good route to a cost effective solution.

7. Estimate the running cost of your loyalty platform

To drive positive return, the value your loyalty platform generates needs to outweigh your overall platform costs. But how are those costs categorised? There are two key types of costs: implementation costs for getting your platform up and running, and operating costs for efficiently running it to drive your key results. A good way to estimate these costs is by defining your loyalty programme operating model, with a deep dive into the costs, including individual rewards and specific marketing costs.

8. Plan how you are going to measure success

How you measure the ROI of your loyalty programme will largely depend on the goals you set out to achieve.

For example, if your customer acquisition costs are unacceptably high and need to be reduced, it would be logical to track this acquisition cost as a key performance indicator. In another case, if you struggle to sell some products (overall or during specific periods of the year), you may want to track sales driven by your loyalty programme, comparing your revenue before and after the implementation of your loyalty programme.

There are many ways to calculate the return on investment, but what is key is to define the most appropriate estimate of the gain and costs specific to your organisation.

9. Build an agile and trackable platform

A good strategy is key to a successful loyalty programme. How your customers react to it is never 100% predictable, and your initial loyalty scheme offer may need to be tweaked as you test, measure and learn. Positive returns rarely happen overnight. However, they can be realised through careful monitoring and incremental adjustments. To give yourself the best chance of success, make sure you build your loyalty programme incrementally, and give yourself the time and tools to measure your ROI after each incremental change.

For almost every organisation, loyalty platforms can become a strategic tool in driving customer purchase behaviours, retention and satisfaction. There is a cost to Implementing and running such a platform, so, as with any investment, it is essential to map a strategy that drives a positive return.

Whilst there is no silver bullet that can guarantee direct and immediate returns, a clear strategic plan considering ‘what would good look like’ for your business and your customers, and identifying the key levers and tools that can get you there, will significantly de-risk your loyalty programme implementation and optimise your return on investment.

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