Imagine for a moment, if you will, that you are engaged in a discussion with an industry colleague ... a marketing leader of your acquaintance from another brand. The topic of discussion is the loyalty program recently launched by your colleague.
What would your response be if, in answer to your question concerning the level of planning that went into getting ready to launch the initiative, the executive with whom you were speaking replied, "Well, we felt as though we should have some kind of program since a number of our competitors have them. We don't have ‘in house' expertise in ‘loyalty' ... so we looked at what was out there, took what we liked from this one, got some ideas from that one, found a low cost provider of loyalty cards, were careful not to decide on what kind of program rewards we should offer, printed up enrollment forms ... and off we went."
Presumably, you'd feel that what you had just heard was a recipe for failure on all possible fronts ... ranging from the absence of much of anything to create customer interest right on through the inability to perform useful measurement of results. And yet, while this kind of approach to launching a new loyalty program is unquestionably a bad idea, it's not, in varying degrees, particularly uncommon.
So here's a suggestion: If you are exploring the viability of launching a loyalty program -- whether it is your intention to work with a resource partner or manage the program internally -- you will be well served to carefully consider the types of questions posed in the balance of this article.
1. Is a formal, card-based loyalty program what you really need? Assuming your POS system has the basic capability of linking a customer identity number (e-mail address or even phone number) to a specific transaction, you are in a position to begin the process of gaining insight into all the important aspects of your customer's purchasing behavior ... shopping frequency, locations visited, departments shopped, what items are purchased, transaction value, etc.
Being able to collect this type of data, the question becomes ... do you have internal resources to optimize its usefulness? Do you have experts on staff to create behavior based segmentation models and to perform the intense analysis that will enable you not only to develop ROI producing customer contact strategies, but also to make profit enhancing decisions relating to in-store product placement and/or special offer product combinations?
If not -- and most retailers don't -- find an expert partner. Allow that partner to help you learn about your customer base. Engage in insight-driven data base marketing and in the process you will (in all likelihood) also reduce your direct marketing expense. And, incidentally, while allowing yourself time to contemplate whether or not you really do need to offer a formal card based loyalty program, you will avoid various significant costs associated with creation and distribution of program materials, maintaining a program website, providing program related customer service and, of course, issuing hard dollar rewards.
2. What are the primary objectives associated with offering a loyalty program? Let's say you have determined that you want to offer a formal customer membership rewards program. Thoughtful determination of specific, clearly identified program objectives will result in a more meaningful planning process: what, for instance, designed into the program will most effectively encourage customer retention, bring about overall increases in shopping visit frequency and improve average transaction value? How will the program be used as a tool to aid new customer acquisition? What will constitute overall success ... and what measurements must be in place from day one?