The Easy Way to Use Your Smartwatch for Loyalty Program Management

Loyalty Program Management: 5 Proven Ways to Manage Your Loyalty Program

Would you be surprised to know that poor management is one of the major reasons for loyalty programs failure? You shouldnt. If you take a look at some of the successful loyalty programs that didnt do well as expected, you will find that poor management is among the biggest causes behind the dismal performance.

What is Loyalty Program Management?

Loyalty management is all about the use of strategy, tools, and tactics that a company uses to acquire, engage, and keep hold of loyal customers.

It helps in targeting the right audiences and offering them the best possible experiences, benefits, and rewards with the intent to drive long-term engagement.

Apart from a loyalty program, an all-inclusive loyalty management platform includes an array of elements such as:

• Loyalty program construct
• Loyalty program optimization
• Technology enhancements
• Rewards and benefits
• Creative services
• Member acquisition strategy
• Member communication and marketing
• Branded customer service
• Billing engine
• Client services, etc.

All the above-mentioned elements require working together for a successful loyalty program. However, managing all these elements may take up a lot of time, resources, technology, and expertise. Due to this reason, a large number of retailers prefer outsourcing some of these elements to some experienced and professional loyalty management program.

Creating a loyalty program may be easy but managing it is very difficult. The multiple levels and multi-process nature of loyalty programs make management difficult. It takes considerable effort, resources, and commitment to analyze, structure, and manage loyalty programs.

5 Proven Ways for Loyalty Program Management

Here are five proven ways for effective loyalty program management:

1. Define your goals
2. Understand your customers
3. Keep your loyalty programs simple and user-friendly
4. Focus on regular communication and engagement with members
5. Focus on regular evaluation and improvement

However, with proper planning, strategies, and partnership with the right loyalty partner, managing loyalty programs is easy. This blog post describes five proven practices to manage loyalty programs.

1. Define your goals

Defining goals is the first step thatll help you turn your wants and desires into reality. Whether acquiring new customers, retaining them for a long time, raking in more sales, and registering more revenue, achieving all these will be easy when you set well-defined goals for your loyalty programs. While setting concrete goals for your loyalty programs, keep these in mind:

• Have a long-term and short-term marketing strategy in place:

When creating strategies for a loyalty program, focus on long-term endeavors for three to five years. Also, have a one-year marketing strategy for your short-term goals.

• Define your Key Performance Indicators (KPIs):

To define KPIs for your loyalty program, you should identify specific metrics aligned with team member objectives. The KPIs could include new customer acquisition rate, customer retention rate, sales revenue, customer satisfaction score, and average transaction value. Make sure the KPIs are relevant, measurable, and achievable.

• Assign operational activities:

After defining KPIs, its time to assign operational tasks for the loyalty program team. While doing that, be fair and identify the unique talents of each team member. Assign tasks based on team members expertise and strengths. Encourage open communication and collaboration among team members so that they can uninhibitedly contribute their ideas and insights.

• Determine the frequency and form of KPI reporting:

The last but most important point in the goal-setting stage is to determine the frequency and form of reporting progress on the KPIs. How often are you going to report the progress? Monthly or quarterly? Apart from that, allocate time to reflect and evaluate the results as well as identify areas for improvement.

2. Understand your customers

After defining goals, the next step is to understand your customers so that you can what they like and dislike as well as whatre their preferences and motivations. The best way to understand your customers is to conduct:

• Market research
• Surveys
• Interviews
• Social media analysis
• Purchase history
• Direct feedback

Now the question comes Would customers readily give their data to businesses for better loyalty programs? The answer is a resounding yes. As per a new Accenture study, eight out of every ten respondents are ready to share their data with brands if they get personalized experiences.

Even though these methods of collecting data will need you to invest some of your time, resources, and energy, they will provide considerable benefits in the long run. After you get the data, use it to tailor your loyalty programs, rewards, and experiences to cater to your customers needs and preferences. Collect regular customer feedback to make data-driven decisions and make continuous improvements to the program.

3. Keep your loyalty programs simple and user-friendly

There is great power in simplicity. To achieve the ultimate sophistication in your loyalty programs, keep things simple, realistic, and user-friendly. The advent of modern technology has made digital loyalty programs far simpler and easier compared to traditional loyalty programs.

A simple and well-designed loyalty program can mean all the difference between success and failure. While designing a loyalty program, make it easy for customers to enrol, earn rewards, and redeem them.

To ensure a smooth and intuitive user experience, streamline the programs features and functionalities. By keeping things simple and user-friendly, you enhance customer satisfaction and increase their engagement with the loyalty program.

When it comes to rewards, keep them simple and transparent. Provide relevant and appealing rewards to your customers and avoid excessive restrictions or complicated mechanisms. Also, enable customers to view available rewards and monitor their progress.

4. Focus on regular communication and engagement with members

Effective communication is the ticket to success. When it comes to ensuring the success of loyalty programs, nothing can beat the power of regular communication and engagement with loyalty program members through various channels.

Engage with them through personalized messages, social media, or loyalty program apps to maintain their interest and participation. Keep them informed about new program updates, exciting new rewards, and exclusive offers. Also, engage with them on a more personal level by sending personalized messages that resonate with their preferences and needs.

Leverage your loyalty program app and social media platforms to connect with loyalty program members. By doing that, you can elicit positive responses and active participation from the members and it will boost their loyalty.

5. Focus on regular evaluation and improvement

After completing all the above steps, identify areas of improvement and make the required adjustments to boost your loyalty programs user-friendliness and simplicity. If continuous improvement is your game plan, then nothing can stop your loyalty programs from being successful.

Continuously evaluate customer feedback and program performance. While analyzing data, look for new patterns. By doing that, it would be easy for you to pivot your loyalty program to changing customer preferences or trends.

Suggested Read: Effective Ways to Create Value from Loyalty Programs

All in all,

The difference between successful loyalty programs and unsuccessful ones is the way theyre managed. When businesses manage their B2B and B2C loyalty programs in the best possible manner, then nothing can stop them from retaining their existing customers and attracting new ones.

At LoyaltyXpert, we have not only designed and created effective digital loyalty programs for a wide range of businesses but weve also helped them manage and run their loyalty programs effectively and efficiently. If you are looking for a reputable and trustworthy loyalty partner not just to develop high-quality loyalty programs but manage them as efficiently as possible, then contact our team for a free demo

Loyalty program implementation: a step-by-step guide

A recent survey by Yotpo found that nearly 68% of respondents would join a loyalty program of a brand that has impressed them with its customer experience. Moreover, 56% of respondents are willing to spend more on a brand they're loyal to, even if there are less expensive options available elsewhere. If you think your existing customers won't like your loyalty program or find it pointless, well, you may be wrong because they'll go the extra mile for appealing prizes and savings.

Each generation buys things online or offline and uses customer loyalty programs when available. Data shows that 71% of Gen X, 70% of Millennials, 63% of Baby Boomers, and 62% of Gen Z responded that they could choose a brand with a loyalty system over one without it.

We bet that some of your customers are from one of the aforementioned generations and expect the best shopping experience you can make that happen with a personalized loyalty scheme.

A customer loyalty program will be able to push your business to another level if you're confident that your product is competitive and wildly popular with customers, and you have no significant quality, design, distribution, or price issues. After all, the purpose of a loyalty scheme is to support a product line worth investing in, or even an entire company, to gain a competitive edge.

Read this guide to discover that implementing a customer loyalty program can be a breeze when it's a well-thought-out process. We'll show you how to create a scheme with attractive offers, easy-to-earn rewards, and simple-to-understand loyalty rules. Stick to the 10 steps outlined in this loyalty program guide, and you'll end up with a high-performing and successful loyalty program.

Key takeaways

• Make sure your loyalty program stands out and brings real value to your customers to encourage them to join in.
• Set clear, achievable goals for your program to steer it towards success.
• Plan your expenses and revenue carefully to keep your program going strong and making profits.
• Get input from experts in different fields to make your program the best it can be.
• Study your audience and current loyal customers closely to tailor your program to fit their needs perfectly.
• Design your program with rewards and perks that match what your audience loves.
• Create a step-by-step plan with a timeline to roll out your loyalty program smoothly.
• Keep an eye on key metrics to see how well your program is doing and how engaged your customers are.
• Launch your program with a bang to get everyone excited and involved right from the start.
• Keep tweaking and improving your loyalty program as you go along to make sure it's always working its best for you and your customers.

1. Identify a unique value proposition

Since you're reading this guide, you probably know the benefits of a loyalty program in the B2B or/and B2C sector, and you're set on creating one. Good for you! First, lay down the loyalty program foundations and its overall concept. This step is strongly connected to setting a loyalty program business definition and value proposition.

The customer loyalty program concept must be consistent with your company's value proposition it should offer the same unique qualities as your business. But what about the mechanics and logic of a loyalty program? Can it also remain unique when there are many imitators around? Not really. That's why you need to consider which way you want to go:

"Follower" way

Since it is relatively easy to research a competitor's offerings and test their program, this approach is to create an identical loyalty scheme that another player in the market has. If you present the program as a copy of something already existing in the industry, chances are it'll be equally successful.

"Something old, something new" way

This approach combines a proven solution (a copy of a competitor's program) with unique elements created just for your business it's mainly about upgrading an existing and working system. Very often, a whiff of innovation in an industry is beneficial!

"Prime mover" way

This approach involves creating a fully personalized loyalty program from scratch. This can be a breakthrough in your industry, and you can become a trendsetter with your shiny new scheme.

Mirroring existing programs is straightforward if you have access to specialists who will efficiently analyze and inspect the inner workings of the designated loyalty scheme. In the following guide, you'll learn more about the options for creating a program according to your vision.

The loyalty program location

Next, focus on the geographic areas for your customer loyalty program and define a list of countries where it'll be launched first. You can always add more regions once your loyalty program grows in popularity. Also, consider languages, as one country may have multiple official languages. Lastly, decide what currencies your program will support because this will affect things like point value, multi-currencies, and currency conversion.

The loyalty program basic structure

Work with your team to develop an overview of the main theme of the program and its look and feel. Find an eye-catching and marketable name and logo for the system and all its elements, such as levels/tiers, loyalty points, member naming, and currency.

As you build the basic structure, think about two fundamental user journeys: The enrollment and opt-out processes. The enrollment process is related to encouraging customers to join the program and ensuring that the sign-up experience is smooth and risk-free.

On the other hand, the opt-out process involves describing the necessary steps a loyalty program member must take to leave the system. Letting customers go is the last thing you want, but you still need to treat the opt-out process equally. Also, you can use the opt-out inquiry to gather feedback on why the member wants to leave you and draw conclusions.

Obviously, you'll have to craft many more user journeys, such as gamified profiling, friend invitations, in-store user identification, or combining showrooming with a mobile loyalty app. But you'll get there when your loyalty program is well-rounded.

The loyalty program type

Deciding on the nature of a customer loyalty program will affect its logic and features. See a brief breakdown of the most common types of customer loyalty programs and determine which one suits your needs. Remember that each type brings different benefits but also technical limitations.

1. Point loyalty programs

This program offers members points based on how much money they spend or what actions they take, such as leaving a review, rating a product, or signing up for an update newsletter. Loyal customers can then redeem their points for rewards from the rewards catalog or on other simple rules.

2. Spend-based loyalty programs

The program rewards customers who spend more money with targeted incentives designed to encourage repeat visits and even more spending. So, loyal customers feel that their behavior is reasonable, as they gain new exclusive benefits with repeat purchases.

3. Tiered loyalty programs

Tiered loyalty programs provide a structured pathway for customers to unlock enhanced benefits and rewards as they progress through various membership levels. This progression-based system encourages deeper engagement and loyalty by offering exclusive perks and privileges at each tier. By adapting to different levels of commitment, these tiered loyalty programs foster a sense of achievement and recognition among members, ultimately strengthening brand loyalty.

4. Paid/VIP loyalty programs

In the paid loyalty program, members pay a recurring and upfront fee to stay in the system and receive generous benefits or offers they can enjoy immediately. This loyalty program is chosen to establish an even stronger relationship with existing customers and recognize them apart from others.

5. Value-based loyalty programs

This program grants benefits and rewards to all members of the system unconditionally it doesn't matter how much money they spend whatsoever. Such a program is designed to create an emotional bond with the brand so that customers spend more money and visit more often.

6. Referral loyalty programs

In this program, existing members invite their like-minded friends to join the scheme and are rewarded for doing so. New members become familiar with your offerings, and if they like them, they can generate buzz around your company and one day become loyal customers.

7. Multipartner loyalty programs

This program brings companies together to provide end-users with a one-stop shopping experience, for example, through discounts on tiles and tile adhesives or lamps and light bulbs. Your and your partner's offerings complement each other, and your loyal customers can find everything they need on the spot.

8. Coalition loyalty programs

It's a program based on combining two or more independent and non-competitive companies into partnerships to increase their influence in the market, for example, by offering product bundles of chips and sodas or milk and cereal. Depending on the requirements, companies can share a customer base, points collected by members, or all the logistics of a loyalty program.

9. Game-based loyalty programs

This program is based on a game engine and uses challenges, mini-games, or badge collection to engage customers. Members must regularly interact with the brand's touchpoints and repeat certain activities to keep their perks.

10. Hybrid loyalty programs

The hybrid loyalty program mixes several loyalty structures, such as points and tiers. It combines two or more program types to better tailor the loyalty experience and align the program with the business.

The loyalty program rewards

You should decide on a loyalty benefit offer depending on your business's industry and the level of customer involvement in your product (high or low).

Ruby Camara of Sixth Continent commented to Referral Rock that if you encourage customers to earn credits, "you create a continuous buying circle" and "as a result, people keep coming back." This is because "consumers feel rewarded every time they make a new purchase, and companies grow their base of loyal, repeat customers."

Loyalty benefit offerings can be divided into two categories: Soft/hard loyalty rewards and instant/delayed rewards.

Soft and hard loyalty rewards

Soft rewards include various non-financial rewards and privileges that indicate a member's status. They refer to VIP treatment that long-term customers can enjoy, for example:

• Birthday gifts
• Instant prize drawings
• Commission-free upgrades
• Premium add-ons
• Early access to pre-sales
• Personal support agent
• Exclusive access to product launches
• Meet-and-greet events
• And so on

In contrast, hard rewards refer to clear-cut incentives, including points, discounts, rebates, freebies, and other items that boost engagement and encourage customers to make repeat purchases.

Instant or delayed rewards

Instant or delayed rewards have their basis in a psychological phenomenon associated with gratification. This category of rewards is closely related to issuance and scheduling.

Instant rewards are given shortly after the main product purchase to build a sense of belonging in the customer. The instant reward can be a discount, a price reduction at checkout, or a scratch card with a mystery prize. So, for example, you can give a 50% discount on coffee when a customer buys a $5 cookie.

On the other hand, delayed rewards, or so-called accumulation rewards, refer to rewards delivered after cumulative purchasing times (not during the transaction). For example, you can offer a customer a free haircut after every 5th visit to your salon.

You can also play around with limiting rewards to create higher demand and push customers further. So, you can try:

1. No limitation. There's no specific limit on rewards, which most often take the form of a coupon, discount, or voucher with a fixed value. Treating members equally is the easiest way to build customer loyalty.
2. Quantity limitation. The number of rewards is limited. This increases the value of the prizes, and people start competing to get them.
3. Time limitation. Buyers must redeem their reward within a certain period. Otherwise, they simply lose their chance. Time limits motivate customers to earn points quicker.
4. Seasonal limitation. Shoppers gain access to special rewards during holidays such as Christmas, Valentine's Day, Independence Day, or Halloween. Tapping into the festive mood is the best way to increase customer engagement.
5. Status limitation. Rewards are issued according to the program member's status created through segmentation and member activity in the program.
6. Money cant buy. These types of rewards are unique and limited. Usually for the best segments or premium customers.

Note that your benefits and reward offer must be of high value and meet not only pragmatic but also emotional, so-called "perceived values" to be compelling.

Verify that the benefit proposition is genuinely enticing to your membership base and that you aren't basing it solely on your beliefs. Also, read how Adam Posner, Customer loyalty and Program Specialist, commented on a compilation of six currencies loyalty program members care about. It's such an eye-opener that, ultimately, customers want more than just rewards.

Summing up, the conceptual and ideation phase is the most important. Be aware that there's always a risk of staying in your mental bubble while working on the system idea. Seek the support of an external specialist and consult on the program concept. Use casual advice to be directed to the latest industry trends.

2. Set clear and smart goals

Your program is just a tool in your hands and must have the same goals as your business. So, once you know the value proposition for your customer loyalty program and have its initial concept, it's time to define the objectives you'd like to achieve.

Define your goals very specifically we mean it! This will incredibly increase the effectiveness of your program development. You can divide the objectives of your loyalty system into three types: Core, primary, and secondary. Be aware that this is just an example of goal differentiation. In fact, how you name and break them down is your choice.

Core loyalty program goals

Danny Meyer from Shake Shark brought up the amazing formula that successfully bringing a customer back depends on "finding the perfect mix of what you get at home" (comfort, recognition, knowledge of your preferences) and "what you cant get at home" (excitement, an out-of-the-ordinary experience, a chance to share with new people).

So it'll come as no surprise that the main reason for implementing most customer loyalty programs is to boost customer retention, build trust, make a profit, increase revenue, expand market share, and foster brand recognition. In your case, it should be no different. After all, you're investing time, money, and effort to grow as a company, and a loyalty scheme is a means to that end.

Primary loyalty program goals

Your loyalty program's primary goals should be building customer relationships and converting them into long-term loyal members. For this reason, your primary goals (or tactical goals) could be:

• Acquiring new customers (customer acquisition as a goal often applies to multipartner and referral programs, in which the buyer base is exchanged between partners)
• Increasing customer loyalty and customer retention
• Retaining customers and preventing outflow (customer churn)
• Increasing frequency of online/offline point-of-sale visits
• Building a robust loyal customer base
• Supporting the operations of other company departments
• Creating new external partnerships
• Developing new communication opportunities and building touchpoints with the brand

Secondary loyalty program goals

The secondary goals for your scheme are a byproduct of the ongoing work on the core and primary objectives. However, they're also important because they improve your company's workflow, strengthen communication, enhance product/service quality, and so on. The secondary goals (or operational goals) could be:

• Increasing the frequency of visits to online/offline points of sale
• Increasing the number of orders placed
• Boosting the purchase value
• Driving up the share of purchases of high-margin goods
• Reducing abandoned shopping baskets, returns, and drop-offs on delivery
• Increasing mobile loyalty app usage
• Developing documentation of solutions to customer issues
• Supporting public relations actions
• Improving the company's innovation
• Expanding company product/service categories
• Adding new customer feedback channels
• Improving product or service
• Building better marketing strategies or branding campaigns

The goals will follow closely from the first point in this guide, which is the value proposition and the type of program you choose. Additionally, for some companies, secondary objectives may be primary and vice versa.

The customer loyalty program is a long-term investment. It can bring you profits by using loyalty points as a currency, changing buyers' behavior, and providing more data about your target audience. All in all, your success depends on customer habituation to the loyalty program.

Customers enrolled in the loyalty system won't always immediately start doing what you expect them to do. You have to work hard to earn the customer's trust. This means that you can only achieve your goals if you educate, adopt, and befriend customers with the program. Then, you'll quickly reach your core, primary, or secondary objectives.

3. Plan your expenses and revenue

The next step is to build your business case, a financial model of expenses and revenues for the entire loyalty program release project. First, you need to consider the program's sources of funding. This must be a new, independent budget because the system requires a significant financial contribution, and you must have control over it. Consider whether you plan to fund the customer loyalty system from the marketing budget or a stand-alone budget that incremental revenue streams will cover.

Above all, the board must align the loyalty system with the company's strategy. If this is accomplished, the next step is to prepare the appropriate budget cases, which are divided into: implementing the loyalty program and running the loyalty program.

Costs of implementing a loyalty program

Creating a customer loyalty program remains a serious investment. Most companies are unwilling to share financial information about their customer loyalty programs. Still, on average, the cost per member per year can be estimated at $20-60 for B2C loyalty programs and $100-300 for B2B loyalty programs.

Having a well-planned budget before launching the program increases the chance of a return on investment. Let's look at management, technology, and marketing/promotion costs when implementing a customer loyalty program.

Management costs

Start by hiring people with loyalty-building skills to operate the program. Then, conduct in-depth crew training to ensure they know the system inside out. Create the necessary regulations and terms of participation in the program with the legal team. Dont forget to prepare training materials and provide proper training for your staff.

Take care of the information flow within the company and document the steps you take. This will be the perfect basis for analysis and corrections after the program's launch. A key part of the management costs includes selecting, ordering, and storing in the case of physical rewards, or signing appropriate agreements with digital reward providers.

Technology costs

The main technology cost is choosing the suitable implementation method and back office for the customer loyalty program. Decide whether you'll acquire bespoke technology, buy a license and pay a fixed or scalable recurring fee, or subscribe to a loyalty platform to run your system.

In addition, consider the cost of integration, consulting, front-end/back-end development, and employee training. Before launching the system, you should also figure out how users will access the program and whether you'll need a plastic card, a digital wallet, or a dedicated mobile loyalty app.

Marketing and promotion costs

The most critical aspect of marketing costs is to put together adequate advertising campaigns and online/offline promotional materials. Make an effort to let people know about your new investment. Before implementing your loyalty system, think about preparation:

• Pre-launch social media campaign
• Pre-launch teaser email
• Pre-launch SMS campaign
• Public relations and media notes
• Information to communities
• Email announcing a brand-new loyalty scheme
• Welcome email
• Email with referral information
• Email with redemption information
• Email notifying the next level/tier
• Teaser page and on-site pop-up
• All other BTL or even ATL campaigns, depending on the scale of both the business and loyalty program.

These marketing materials must be catchy enough and engage the customer to stay in the program. Get creative and be bold!

Costs of running a loyalty program

When the hardest part with the implementation pricing is done, the next part is the costs over the lifetime of the loyalty program. Here again, you need to be very strategic and consider three types of budgets: Management, technology, and marketing/promotion.

Management costs

Your program is a "living" solution and needs people to maintain, run, and analyze new customer loyalty campaigns. Expenses for logistics, warehousing, partnerships, and cooperation with third-party organizations also fall into this cost category.

You can also contact members to ask them how they feel about the program, inform them of upcoming sales, offer them deals, remind them of reward opportunities, or invite them to revisit your store.

Technology costs

Ongoing technology expenses include the cost of maintaining the program if you've opted for a subscription model, as well as the cost of additional system integrations and program service centers. Nonetheless, your biggest expense is already in the past, unless you're planning further major iterations or patches.

Marketing and promotion costs

Once you've grabbed attention and the first customers start to become members of your loyalty program, you can't rest on your laurels spare no expense to promote the system in every communication channel. Constantly work on engaging marketing and promo materials and prepare:

• Teasers and countdown on the website
• Videos and captivating infographics
• Engaging social media campaigns and contests
• On-page banners linking to a rewards page
• Seasonal campaigns related to Christmas, Valentine's Day, Halloween, etc.
• Emails, SMS/MMS, and social media campaigns with updates and discounts

Less predictable reward costs

Let's zoom in for more information on the cost of rewards, which can vary and be somewhat unpredictable. Typically, rewards as expense items are set by the company's board, and it's usually a percentage of the program's revenue. The loyalty program manager then ensures that the fixed rewards cost is within the budget scope.

Suppose that one point in your customer loyalty program is worth $0.5. Loyalty members can redeem points for a reward that costs you a total of $100. Now, take the price of the reward and divide it by the fixed exchange rate of loyalty points. As you can see, in this case, the price for the reward should be about 200 points so that you don't incur a loss.

Remember to monitor the point issuance on the market and set up a financial reserve for these points. Another thing is the point-price value. This is the number of points and their equivalent in real money that are required to get a certain reward. If the price is too high, customers will move away from your program quickly. Conversely, your margins will take a hit if the price is too low.

Lastly, orchestrate your loyalty point services around management, logistics, express shipping, extended warranty, multipartner rewards agreements, events in all shapes and sizes, and promotional activities (such as members-only content, videos with tips and tricks, or giveaways). Realize that rewards in your program may be fully or partially funded at the expense of your providers or partners.

After all that information about expenses, you're probably wondering what revenue will flow from the program. Data shows that a 7% increase in loyalty can raise lifetime customer profits by up to 85%. Additionally, Rob Markey, a partner and director at Bain & Company and founder of the firm's Global Customer Strategy and Marketing practice, said that those companies that offer meaningful customer loyalty programs increased their revenues about 2.5 times faster than others in their industry.

It's time for a moment of truth: With a new program, proving who's a new customer and who has been using your services for a long time is quite a challenge. This is because both existing customers and newcomers can join the system. Most of those who participate at the beginning are your regular customers from the pre-program days.

Unless you have an eCommerce store (which has an extensive analytics section), you certainly don't know how customers behaved before the customer loyalty system. Now, though, the situation is about to change! After a year of owning the program, you'll be able to easily find out how your shoppers act, how often they interact with your brand, what the quality of visits is, and consequently, how much profit you make.

The build-or-buy dilemma

Many businesses have the same knotty question and wonder whether they need to build or buy a solution to implement a loyalty program. Well, there are three ways you can create your system. Cezary Olejarczyk, CEO/CTO at Open Loyalty, commented on LinkedIn that it's better to buy a good loyalty engine and focus on customer loyalty and engagement than to be stuck at the software development stage of yet another tiering or reward mechanism. Still, it's preferable to be aware of the options available, so let's move on.

In-house development

Developing a loyalty scheme using your own resources from the ground up is expensive. All the work involved in conceptualization, customer journeys, loyalty program trends, customer behavior, UX trends, wireframes, final design, development, rollout, and promotion of your solution is on your side.

That's why if you want to do it right, you need to involve a lot of experts, starting from the user experience designer, UI designer, frontend and backend developer, integration specialist, analyst, and ending with loyalty manager and marketers. Naturally, when a loyalty program is developed in-house, you have full control over the entire process. On the other hand, it takes a lot of time (it can take months or even years), resources, and personnel.

Custom development by an agency

To be honest, dealing with a third-party agency is quite similar to working with your in-house team. The difference is that you outsource the work to a company with the experts on board, ready to support you. You're in good hands if you find an agency with loyalty experience. The loyalty agency staff is eager to help you conceptualize a customer loyalty program, develop it, and manage marketing communications before and after the launch.

However, agencies are reluctant to share low-level loyalty program knowledge. This is probably due to the fact that they often have contracts with loyalty platforms and outsource off-the-shelf solutions. As a result, they're unwilling to let the program out of their hands, which means you don't have complete control over it and have to negotiate every change.

Customer loyalty software implementation

If you opt for fee-based SaaS loyalty software, very little work is needed to get your system up and running. The backend of the loyalty program is already configured and waiting, and the only thing you need to consider is the customer loyalty concepts and frontend area.

In addition, the company behind the SaaS loyalty program software has the knowledge, resources, and technology to set up and launch a loyalty scheme quicker than any previous approaches. Plus, you'll be instructed on how to use the platform to get the best results.

Your program can be ready from the get-go if the SaaS company implements a MACH loyalty program based on microservices, API-first, cloud-native, and headless approaches. You'll be able to add advanced features, such as gamification, omnichannel, IoT, VR/AR, multiple tiers, and gamified surveys along the way.

4. Bring specialists together under the program

Another key element when implementing a program is to join the forces of different team members, so the system begins to run seamlessly. If you want to ensure a smooth loyalty program implementation and development, you should put together a project team made of: functional team members and management representatives.

Functional team members

Let's talk about the functional team first. You've got the loyalty program manager, whose job is to make sure everything lines up with the company's goals. Then, there are the customer loyalty systems specialists, who handle all the technical aspects to keep things running smoothly. The marketing automation manager is responsible for keeping those automated tools working seamlessly. Sales managers are here to ensure that strategies align with program objectives. IT specialists handle security and integration, while data analysts crunch the numbers for insights. Next up, there are finance specialists who manage the budget, and technical project managers to keep everything on schedule. Lastly, graphic designers add a visual touch to the program's interface and promotions.

Management representatives

Moving on to the management side, you've got the Chief Marketing Officer (CMO) providing strategic direction for marketing alignment. The head of retail ensures that the program is in sync with retail goals. The Chief Technology Officer (CTO) guides technology infrastructure and integration. The Chief Operating Officer (COO) ensures operational alignment with broader business processes. The head of content oversees messaging within the customer loyalty program. Other specialists, such as those in customer service, legal, and analytics, may also come into play based on specific needs.

See the must-have loyalty program roles you need to cover to be laser-focused when implementing the system.

Think carefully about who should be on board, as leaving out one link could lead to failure. Pawel Dziadkowiec, an expert in rewards and customer loyalty programs, zoomed in on a real-life situation where the purchasing department was skipped during the implementation of the system.

This caused considerable problems in logistics, as the warehouse and logistics department couldn't keep up with orders they weren't prepared for such a growth. The program boomed quite quickly, with a 30% increase in customer demand for specific products. This resulted in shortages in the store and implied one thing a failed start to the fiasco of the customer loyalty program. Shoppers had nothing to buy and were frustrated that they couldn't take advantage of the fancy discounts.

Pawel Dziadkowiec also places great emphasis on the top-down flow of information. Management must keep the involved employees well-informed of the plans. The bottom line is that you have to find all the relationships between the program and the departments in the company because the program may require, for example, more warehouse space, more delivery truck runs, or more sales staff, or bigger CS calls to customers. This is a well-known cause-and-effect chain that you need to be aware of.

Building the customer loyalty program requires support at all levels. Diversifying the team in this way and considering the different views of specialists ensures that there will be ultimate acceptance of your system concept company-wide.

On the other hand, by involving various levels of management, you're assured that you have the board's support, and they'll push your idea. At the same time, lower-level employees will find their footing in implementing the program and will be motivated.

5. Analyze the target audience and loyal customers of your loyalty program

Detailed customer segmentation is the heart of a successful customer loyalty program. Pawel Dziadkowiec, a loyalty expert, mentioned that major players use systems as a solution to gather information about their customers and identify them. They're aware of the profits they can make when they offer the right product to the buyer, and this is only possible if the data about the audience is refined and well-analyzed. Now is the time to dig deeper into your valuable customer data!

A database that contains detailed and correct information on your shoppers and visitors is a strategic weapon that will greatly influence your success. Use customer relationship management system data and target customers who want to build relationships with you. Your loyalty program audience can be a mix of these three groups:

1. Members of the loyalty system
2. Company employees, board members, and stakeholders.
3. External partners of the loyalty program, such as media houses, external organizations, NGOs, and so on

Prepare different means of communication for each of these three groups to send the right marketing/sales messages to encourage interaction.

Fortunately, there's a lot of customer data that you already have or will have when the system is ready, such as:

• Sales statistics and RFM, that is, recurrence of previous visit (R), frequency of visits (F), monetary value, and volume of purchases (M)
• Speed of payment
• Customer profitability
• Assortment within customer purchases, meaning product categories, product features, number of goods, and reasons for selection
• Non-transactional statistics related to activities and visits meaning hits to the website/eCommerce, goods viewed, unpurchased items added to the shopping basket, promotional or referral posts placed, and so on
• Customers data related to geography, demographic, psychographics, and behaviors
• Customer loyalty over time

If you're doing audience research on your own and find it difficult to sift through extensive data, you can always start by finding answers to these questions:

• How much does the customer buy over [period]?
• What type of products do they buy?
• How often do they make purchases?
• Can we cross-sell them other products?
• How much profit do we make on their purchases?
• How quickly do they pay after deciding on a product?
• What is their opinion of our company and are they satisfied with our work?
• How could we enhance our relationship?

Don't rely solely on transactional data, as the actual image of your audience will remain blurred. Instead, try mixing it with other behavioral data. Understand the benefits of qualitative or quantitative research and conduct a customer satisfaction survey to collect customer feedback. You'll easily get answers to the question "Why?" why customers choose you and why they stick with your brand. Also, you can engage customer service agents to learn how buyers behave at different points in the purchasing process.

Moaaz Nagori from Cloudlead explains for Referral Rock that the best way to gain loyal customers is through support. "Coupons and other monetary benefits are good but theyll have short-term effects and are more applicable to maintaining loyalty, not driving it."

With a loyalty program in place, you can learn about customer behavior and regulate sales, for example, by directing traffic toward a product that isn't chosen very often. In addition, if you see a product performing poorly, you can launch a loyalty action and triple award points for its purchase.

You can also use your loyalty program to adjust logistics. Knowing that customers are buying more of a particular product will give you an idea of how much of it has left your warehouse and keep your inventory under control.

In summary, use the data you collect to change customer behavior, market your loyalty program, and reach out to members with themes that pique their interest.

6. Develop a tailored loyalty program structure

Now it's time to technically conceptualize your loyalty system and develop the technological layer and mechanics of the program (rules).

Loyalty program technology layer

Integrate your customer loyalty program into your company's organizational structure link it to all the CRM tools and databases you and your team use daily. The primary system that your loyalty program's back office should be connected to is your sales system, namely, the CRM, POS, transaction software, or other cash register system that handles your sales.

The second important integration is the one with the warehouse system, in order to have information about loyalty inventory (number of rewards in stock) or product inventory (number of products in stock).

Another noteworthy integration is the one with the communications module. Connect your program to communication systems to send responsive and personalized messages through the channels of your choice, such as SMS, emails, or push notifications.

Additionally, you can consider integrations with your analytics system. And you're in luck if you choose a loyalty platform to support your program, as it guarantees access to robust reports and analytics.

The last integration is related to security and fraud control. Your loyalty system should enable the installation of filters to detect scammers, from customers to employees. This way, you can quickly detect any suspicious activity on a specific ID and account and then execute an algorithm designed for these cases, such as blocking the ID and sending an alert to the company's security team.

The number of integrations is unlimited, so customize them to suit your needs.

Loyalty program mechanics

You can step up the game using all the fancy loyalty rules or applying complex integrations of several IT systems, branched algorithms, virtual reality, or machine learning. Still, the truth is that the straightforward and clear mechanics of a loyalty system work like a charm, too!

Jeffrey Casullo, Senior Manager at Monitor Deloitte, said their upcoming annual Deloitte U.S. Consumer Loyalty Survey reveals that "simplicity and ease" are more important than "personalization" for loyalty users.

Back to the mechanics, or so-called program rules. These contain a set of conditions and rewards. The conditions correspond to the goals of the loyalty program, which you established in the first part of this guide.

Loyalty program mechanics can be divided into general, segmented, or triggered, and they're determined by why a rule applies to the customer.

General mechanics

The general mechanics are often referred to as the "basic rule" of the loyalty system because they govern how the program operates. It's usually openly published in the program's terms and conditions as the minimum reward level available to each member. An example of the general mechanics of a loyalty program might be: For completing any purchase, 5% of the cost is granted as bonus points for all loyalty accounts.

Segment rules

The segment rules are related to customer segmentation, usually by geographic, demographic, psychographic, and behavioral data. An example of segment rules for a loyalty program might be: During Children's Day, +500 points on June 1 for the customer segment: Users who buy children's clothing.

Triggered rules

The triggered rules are associated with the actions a person takes when interacting with your brand. An example of triggered rules for a customer loyalty program might be:Providing free delivery on every third purchase and a reward when the transaction reaches $200.

7. Set a roadmap for program implementation

When you have a deadline, then you're highly motivated to meet it. That's why you must create a timeline to get a complete perspective of your customer loyalty program implementation.

The first milestone is the basic tasks you need to perform in parallel. Since you're planning to launch a customer loyalty program, focus first on strategy and conceptualization. Then, prepare an annual plan for your system, during which you have to choose the system implementation method (using in-house resources, agency services, or a loyalty platform). This will also affect the functional requirements and architecture of your loyalty system.

Then, choose the mechanics and rules of the program and select integrations you can't go live without. Remember to test the system configuration and data mapping. At the same time, conduct training and instruction, select reward offer, develop documentation, and perform initial marketing and promotional activities.

The next milestone is the program rollout. This is when all the activities from the first milestone are triggered. There's no turning back now!

The third milestone is the first verification of program performance, which usually occurs after two weeks. You can validate that the scheme is playing its role and verify all KPIs, success metrics, inventory, transferred points, receipt cards, and app performance (if you have one).

The last milestone is the further development of the program and future steps. In the months after the system is released, you can think about expanding it you already know what works for your customers. By focusing on this, you can conquer the market and the hearts of your customers.

Loyalty program implementation milestones.

8. Identify KPIs and customer loyalty success metrics

Since you know what your main (primary and secondary) goals are, based on them you can create a set of metrics and KPIs that will tell you if you're moving in the right direction.

First and foremost, when you measure your program's success, look for indicators that show a steady flow of new members. This means that your program is attractive, relevant, and meaningful to customers.

Also, ensure that program members are actively redeeming their points for rewards. If too few members do so, it could indicate a problem with the availability of rewards or their desirability. Work on your promotion and send communications reminding members to redeem their points.

Another vital metric is the average order value among members compared to non-members. If it's higher among loyal members, that's wonderful because they're your most valuable users and will generate the highest revenue for your business. The same goes for the customer lifetime value (CLTV) metric. You should see a higher CLTV value among loyal members rather than non-members.

Set of must-have loyalty metrics

Now, here's a compact set of must-have metrics that you should follow regularly:

1. Number of loyalty program members
2. Point issuance ratio
3. Redemption rate
4. Stock in-kind rewards
5. Basket value, average order value, and purchase frequency
6. Incremental margin
7. Customer retention and churn rates

We discuss them in depth in another article. Find out more about the metrics for your loyalty program.

9. Kick-start your loyalty program

Generally speaking, it'll take six to twelve months to develop a customer loyalty program from the initial idea to full implementation. So, what should you do when the long-awaited day of the program launch comes?

The day before the release, you need to arrange a meeting with people from various departments responsible for the program's individual elements. Each person must report that they're 100% ready and able to run the program on their side. All eyes are ultimately on the loyalty manager, who's in charge of the overall program. If they also give the green light, the machinery can kick off.

Organizational tasks before the launch

Let me once again remind you in this loyalty program guide of the following organizational tasks that need to be solved until the customer loyalty program is launched:

• Prove the robustness of your loyalty system concept.
• Specify the loyalty scheme's features in detail.
• Create a mission-driven team. Ensure that all employees involved in new or changed processes are self-motivated and well-trained.
• Integrate and configure the system. Formalize the necessary changes to IT, logistics, and service processes.
• Conduct user acceptance testing (UAT). Spend at least one month testing the system configuration to prevent loyal users from discovering critical errors or vulnerabilities.
• Create a workflow to eliminate technical and organizational bugs.
• Adjust logistics and reward management.
• Distribute communication materials at each point of sale.

The next day after the meeting, the loyalty program is launched at a selected time. At this point, all employees are truly energized as the system is finally about to go live.

First, there's the program activation it runs a little earlier in the test version, and then it's switched to the production version. After that, you can communicate your new loyalty system to future program participants. Do this as early as possible through various channels to build awareness.

10. Audit your loyalty scheme regularly

The final step in this guide is ensuring the longevity and ongoing success of your loyalty scheme. In most cases, companies should wait six to twelve months to see the program results. With KPIs and success metrics at your fingertips, you'll get access to reporting mechanisms, extensive documentation, and analytical dashboards that you can use to:

• Experiment with new loyalty strategies
• Perfect your loyalty system
• Evaluate program success and financial effectiveness
• Update your customer segments
• Clarify program objectives (also for customer segments and microsegments)
• Develop new reward offerings
• Evaluate the efficacy of individual incentives and promotions

Based on the experience of David Slavick, co-founder of Ascendant Loyalty, a system assessment should take about four weeks and provide a strategic roadmap with improvements ready for implementation. You should regularly perform a loyalty program audit to optimize your system, implement all necessary improvements, and reinforce member behavior.

You can reduce overhead and optimize your loyalty program & implement all necessary improvements. Eliminating all unnecessary elements and lowering costs is essential, mainly if the program absorbs a lot of resources. Optimization is also about improving program performance, especially if inaccuracies or bugs affect efficiency. You should also examine the customer pain points and target your next promotion to eliminate them. Then, start planning to relaunch the program in the latest reinforced version.

Besides, you can harness loyalty to create a genuine relationship between your customers and your brand and reinforce desired behavior. You're able to easily influence the actions of your most loyal customers and guide them in ways that lead to benefits for your business. By having the initial customer data, you're free to segment the database again for a deeper level of personalization.

Drive customer engagement by offering new, enriched incentives and promotions, and consciously reward customers for performing activities that align with your strategy. Be sure to integrate your marketing communications calendar to keep customers in the loop with updates.

Eventually, after implementing the program, you may find that you need to revise some of your business goals. Well, reality-check always happens. That's why measuring the indicators you set at earlier stages is essential to see the differences in their value.

A successful program launch? Use the loyalty program guide

Setting and fine-tuning rules, developing a loyalty system, registering new members, and collecting and analyzing data require professional effort and a considerable amount of time. Nevertheless, it's worth having this powerful marketing solution in your toolbox. A well-designed and well-funded program will later bring a significant economic return and improve the customer experience.

Once you kick off your scheme using this loyalty program guide, pay attention to non-financial indicators to avoid slowdowns and reduced effectiveness in the early stages. Focus on the number of people who have joined the program, the completion of member profiles, the ratio of points issued to redeemed ones, and other customer engagement metrics. These indicators confirm that the program has been launched successfully, is popular with loyalty members, and is growing at the desired pace.

Stay inspired and check out the Loyalty Program Trends 2024 report.