Saving loyalty programs from extinction

“The future happens very slowly, then all at once”

Kevin Kelly – founding executive editor of Wired Magazine

The world we live in now moves at such a pace that change from niche to mass seems to hit without notice, changing the status quo of many entrenched ways of living our lives.

An area that is ripe and ready for change to its sea of sameness and one that I am continuously curious about and totally immersed in are loyalty programs.

Saving loyalty programs from extinction

I am not going to justify their existence, go into their history, quantify their size or pervasiveness in commerce and consumer society or their value as an asset to a business.

Instead, I am going to focus on five forces to save programs from extinction that are within the control of managers who run programs.

Program currency replaced by crypto coins.
The impact on loyalty programs, specifically those with points as the earn/redeem currency, by crypto coins (see article) is still in an innovation/early adopter phase and should not be ignored.

It’s still early days and the cryptocurrency market is volatile, although I am weary of the quote above - “The future happens very slowly, then all at once”.

It therefore deserves it’s own dissection and discussion and I will at this stage keep it out of the five forces.

Leadership belief and commitment.

Before I dive into the five forces, here is the critical issue and undisputable fact to ensure programs live as a viable asset to a business:

The leadership team of the brand or business who have a program MUST believe and be committed to the power and potential of a program.

A program will not last any distance without the executive and then team commitment. Our latest research ‘for love or money 2017 – the marketers’ view proves that both are ranked in the top 5 of an organization being a leader in loyalty.

The five forces that will save loyalty programs from extinction.

Given there is belief and commitment, here are the five forces that will save loyalty programs from extinction:

1. Do justice to the data value exchange:

At the epicentre of any loyalty program is the data that is collected on the members’ purchase behaviour (FRAT=Frequency of purchase, Recency of purchase, Amount spent, Type of product/service purchased), insights that are inferred, profiles that are built and advocacy (nps) that is captured.

They give their data in exchange for the promise and value of a program’s benefits and rewards.

To collect their data and not use it in a meaningful way (benefit the life of the member) and a measureable way (benefit the business) is a let-down to that value exchange. This will lead to a program’s demise as no mutual benefit will be delivered.

2. Refresh the program’s SPV factors:

Every program structure should have a regular refresh of the SPV factors to ensure the vitality and energy of the program is enhanced.

  • S = Simple. Review all parts of the program structure and experience to drive simplicity – starting with simple to understand and continuing on with simple to earn, redeem and interact.
  • P = Personal. Recognise the member through what you know about them and what they care about (See point 1. above)
  • V = Valuable. Is the reward worth the effort? Move from financial to non- financial rewards.

There are 24 ingredients behind the SPV factors which we continuously track in our ‘for love or money loyalty research.

 3. Identify and nurture the loyalty champions in your team:

Appoint loyalty champions.

The power of loyalty champions to leverage and revitalise a program and save it from extinction is massive. They are the members of your team who believe in the value of a program as an asset to the business and the benefit it provides to members.

Revisit the 3xE’s of team commitment with your loyalty champions:

E1 = Explain: Ensure they understand every aspect of the program (including why it benefits the business and the members)

E2 = Expect: Set KPIs and measures of success to aim for and provide feedback

E3 = Excite: Provide incentives and motivation to keep them enthusiastic and motivated

4. Measure and report results with rigour and regularity:

Identify the loyalty metrics that matter. Those that can make meaningful impact on all aspects of the business.

Some (not all) of the important loyalty program metrics are:

  • Net membership growth – the net increase after unsubscribes
  • Value of lost members – attribute a dollar amount for all members lost
  • Contactability – measure how many members you can contact by channel (email & mobile)
  • Retention based on activity – a volume of members is great, a retained active membership is better (define what ‘active’ is)
  • Value and frequency combined – profile members based on spend bands combined with frequency of visit
  • Value of a member vs non member (mandatory metric to validate the value of the program)
  • Return on loyalty investment – net impact of the value loyalty members bring to the business

Report results regularly to relevant leaders and team members showing movement and the actions to improve so that the whole business knows what’s working and what’s not and what action you are taking to improve.

5. Enhance E-loyalty - emotional interaction must be greater than transactional rewards.

The fifth and final force to save loyalty programs from extinction is to focus more on building emotional loyalty rather than transactional loyalty.

Whilst financial rewards are the flour and eggs of a loyalty cake, the icing and candles are where the pure delight and emotional connection must be enhanced.

There are many methods to building a more emotional connection and the one that still delivers an extra heart-beat is a simple surprise and delight.

Reward with experiences to create memories rather than rewards that are financial and forgotten.

 The Big Giraffe in the loyalty program room.

The elephant is big but does not have a neck like the giraffe and so based on that analogy, I believe the big giraffe in the room is the technology that enables the five forces.

So easy to say and often difficult to do, however without the right technology to glue all the five forces together a program will become a dodo.

In summary, the five forces including executive commitment and the ‘Big Giraffe’, to save loyalty programs from extinction are:

  1. Do justice to the data value exchange
  2. Refresh the program’s SPV factors
  3. Identify and nurture loyalty champions
  4. Measure loyalty success metrics, report regularly and take action to improve
  5. Enhance E-Loyalty (more memories, less money)

For those loyalty program believers and those that have lost a little faith, please review the five forces and join in to save loyalty programs from extinction.

Have a happy loyalty day!