A loyalty program is one of the most effective marketing tools for maintaining consumer interest in a brand, especially during a decline in purchasing power. RIS Group Marketing Director, Alexander Kovalkov, told e-pepper about what factors should be taken into account when implementing an effective loyalty system in 2024.
Loyalty programs have become an important tool for many companies looking to strengthen customer relationships and increase customer satisfaction. However, not all loyalty programs are equally effective, and even world-famous brands make mistakes when formulating a strategy to work on customer loyalty.
Read also: 5 questions to answer before launching a loyalty program
In this article, we will look at 7 key factors that will help you avoid such failure and make your loyalty program truly effective for your business.
What is important to pay attention to when working with loyalty?
Make sure your product is the best you can offer the customer
You can start thinking about implementing a loyalty program only when you are sure that the product fully satisfies the needs of potential customers.
Therefore, before taking the first step in this direction, make sure that you have done everything possible and impossible for your own product, and the client is 99.9% likely to receive a positive purchasing experience. Let’s remember the standard marketing mix: work with the (P) product is paramount, loyalty and (P) promotion come after. Improving the product and communicating with the audience works better and, importantly, is cheaper than trying to win back an already disappointed consumer.
Meet your target audience
If you are confident that the product has been perfected, and it’s time for the client to increase his motivation a little so that he can come back for it again and again, then it’s time to reconsider the current marketing strategy.
However, before you formulate a plan for implementing a future loyalty program, you need to understand who it will be aimed at. Today, the offer is becoming more and more personalized, and customers are becoming more and more demanding. Therefore, it is important to study the characteristics of the target audience in advance; special attention should be paid to their needs and pains.
For example, in retail loyalty programs, the consumer can be both a solvent audience represented by parents and their children. Therefore, when forming a marketing strategy, the interests of both parties must be taken into account. Thus, according to global research and local focus groups conducted by the RIS group, most parents expect to receive a children's gift that has an educational and cognitive function and remains safe. For children, the entertainment aspect and gamified approach are more important. You need to convert the information received about the audience into an effective tool that will meet the expectations of the target audience, and as a result, will help your company achieve its goals. Communicate with your customers and consumers, find out their pains and needs.
Determine how you will communicate with the client
Depending on the expectations of the target audience, you should determine in advance a unique tone of voice that will suit your clients. For example, the Burger King audience is mentally prepared for the company’s next extravagant marketing decision, which certainly cannot be said about McDonald’s visitors, who adhere to more conservative values and are more likely to react positively to the usual Monopoly game than to the game of “burger for a bald head.”
The goal of the campaign must be clear and digitized
An effective loyalty program is built on a clear understanding of the end result. This could be an increase in the average check, customer return, an increase in LTV (lifetime value of a customer), brand awareness or the number of regular customers.
Whatever the goal, you should be able to quantify the results and evaluate the effectiveness of your marketing campaign based on numbers, not ephemeral indicators. To solve this problem, it is better to adhere to a SMART planning strategy. That is, goals must be specific, measurable, achievable, relevant and time-bound.
For example, the expected result of evaluating the effectiveness of a loyalty program might be an increase in customer satisfaction (NPS) by n% per year or an increase in repeat purchase rate by n% over 6 months, customer churn rate (CR-rate) or increase in turnover.
Choose the model you will work with
When choosing a model for a future loyalty program, it is extremely important to consider the timing of its implementation. For example, if your long-term goal is to increase the frequency of customer return, then you should pay attention to the “cumulative” mechanics that airlines often use.
If you are striving to increase the average check in the short term, models with immediate “benefit” for the client are more suitable for you. Such tools are often used by retailers, offering customers rewards for purchasing a certain amount or for purchasing a certain number of goods from a particular manufacturer.
Don't complicate the client's life
DMA's research found that shoppers are often put off by the complex path to rewards. The ideal mechanics should consist of 3 steps: take, make, receive.
Many campaigns did not become successful precisely because customers did not engage in the programs due to complex mechanics or insufficient rewards and a large investment of time and effort. For example, the clothing store Dillard's launched a loyalty program only for holders of special partner credit cards. Moreover, the first rewards were available after purchases of $750 per year, and free shipping on purchases of $2,000 or more per year.
Apply for a card, download, go, fill out, click something, go again and buy – not everyone can complete this hero’s path. Therefore, before inventing a bicycle, it is necessary to carefully study and simplify the customer journey as much as possible.
Follow trends and respond to audience requests
When working with loyalty, it is important to monitor trends and be ready to respond to circumstances of any scale. Thus, during the pandemic, the needs and expectations of users changed dramatically, 99% of business communications with clients went online, and only those companies that immediately responded to the audience’s request were able to “win” from this.
For example, Yandex Shop created a unique selling proposition, which made it stand out from its competitors. The service has completely canceled paid delivery until the coronavirus situation is resolved, which attracted the attention of potential customers and strengthened the positive image of the company among current customers.
Now we see the opposite trend, the demand for creating a community is growing. Society likes that many things can be done online, but according to research, people enjoy spending time together offline.
Today, seamlessness is effective – easy switching between online and offline; there is a noticeable trend towards personalization and artificial intelligence. This is how large retailers like Sephora, H&M, LIDL create advertising based on individual preferences, search queries and frequency of online purchases. In the field of children's products, the change is happening even faster. Now it’s worth actively working with the new trend of gamification and digitalization. If the first sensational “Scrapers” and “Stuck” could be folded into a pencil case and this was enough for children, today we are talking about a seamless transition and several stages of interaction – in addition to the toy itself, the child will have a story, a collection, game mechanics and digital support. Therefore, a QR code to go to an interactive page will help prolong interaction with the brand and not only consolidate knowledge about it, but also involve the audience in your mobile application.
Everyone has a chance to minimize risks
Loyalty programs remain one of the best marketing tools, not only for strengthening relationships with existing customers, but also attracting new audiences.
However, a truly effective loyalty program can only be created on the basis of a thorough analysis of customer and market needs, a personalized approach, a constant desire for improvement and by defining a portrait of the target audience. Therefore, if you accurately define your audience, communication methods and goals of the loyalty program, build a simple and understandable reward system, and rely on trends, positive results will be, firstly, expected, and secondly, almost guaranteed.
