Designing a loyalty program can feel like a daunting task with endless decisions to make.,
Designing a loyalty program can feel like a daunting task with endless decisions to make. Each program will be unique to the brand, and the most successful programs are unique to each customer, using data to leverage challenges and rewards specific to an individual’s visit and purchase history.
While the choices are many, three basic concepts represent the backbone of an effective loyalty program: Enrollment, Activity, and Triggering. They are easily remembered through the acronym EAT.
Whether building a loyalty program from the ground up or revamping an existing one, following the guidelines of EAT will help ensure that the program delivers the highest possible return on investment. Executed well, this can result in an increase of 20% or more in overall customer spend.
Enrollment seems like an obvious necessity, especially for new programs, but enrolling new customers is absolutely critical throughout a program’s lifetime. Members will inevitably leave for a variety of reasons, so success relies on consistently adding more members than the program is losing. The key to a high level of enrollment is to make it as easy as possible for the customer with multiple points of entry, including mobile apps, text-to-enroll, NFC loyalty, and website enrollment in addition to the traditional method with a cashier at the register.
Executive buy-in is also critical when it comes to enrollment. The cashiers are a brand’s ambassadors, as they see and speak with customers daily. Brands whose leaders do not value the program will struggle to get their employees excited about enrolling new customers.
Activity may depend on enrollment, but program success depends on activity. The more customers use the program, the more likely they are to understand its value and to choose that brand over the competition. Plus, active customers who regularly identify themselves as loyalty members provide the brand with invaluable insights on visit cadence, average spend, and purchase history. That data, when collected on a large scale, can be used to make strategic business decisions to maximize revenue.
One way of measuring activity is through penetration rate, defined asthe percentage of checks associated with guests who identified as loyalty members. Programs should maintain a penetration rate above 15%.
Triggering is one of loyalty’s most exciting challenges. What will drive customers back for that extra visit or incentivize them to add that extra item at checkout? The extent to which a brand can trigger incremental visits and spend is directly related to the program’s impact. It’s typically measured in one of two ways: through an analysis of pre- and post-program transactional data or through target-and-control campaigns. Either way, effective triggers will be found through experimentation and data analysis.
When carefully managed, loyalty programs not only raise a brand’s top line, but also enhance its customer relationships and overall reputation.
This post is sponsored by Paytronix
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