Loyalty Program Design

Prologue

Designing a loyalty program used to be much easier than it is today – quite simply because there weren’t that many out there.  Now, there’s an abundance of “loyalty” programs cluttering up the marketplace and misshaping consumer perceptions and expectations.   To make matters worse, many of these so called loyalty programs aren’t true loyalty programs at all.  They are just rewards programs operating under a loyalty moniker.  Remove the reward; lose the customer.  That’s not loyalty, that’s bribery.  For better or worse, they’re out there though, and they make differentiation a bit more challenging. 

In this blog, we focus on how to use a structured loyalty program as a vehicle for building true customer loyalty. To best do this, we’re going to employ a slightly different approach to blogging.  Okay, a very different approach.  This blog is a life-based fictional story.  A compilation of various loyalty marketing experiences over the past 20 years comprise its content and none of it was derived from a single event. 

The goal is to vicariously experience and learn from the highs, the lows, the frustrations, and irritations of developing a true customer loyalty program – not a rewards program – but an authentic loyalty-building program.

And so without further adieu, our story begins . . .

Chapter 1:  The Quest:  We Need Knowledge

Chris stepped out of the CEO’s office.  The edict was quite clear – he wanted a loyalty program in place in time for the next back-to-school season which was approximately 10 months away.  Initially it sounded like a lot of time – particularly since this year’s back-to-school season had just ended but once she started mapping out the plan in her head, panic started to creep in.  There was so much to do and so little time to do it.  Heck, Macy’s takes at least a year to plan a 3-hour Thanksgiving Day parade.  But she only had 10 months to plan and execute a major corporate initiative – an initiative that would be in place for years to come.   A daunting task indeed, but an easily achievable task provided she had the right plan and resources.  Okay, maybe “easily” is an overstatement, but it was definitely do-able. The CEO promised budget and resource availability to make it happen.  That was a great start.  Now the ball was squarely in her court.

“First things first”, she thought as she made her way back to her office.  “We need a team – a cross-functional team to help make this happen”.   She perused the company directory and started highlighting names from I.T., Finance, Research, Operations, and of course, Marketing for recruitment to the Loyalty Task Force.  Just like in 4^th grade gym class, she picked her friends first.  Back then, the boy team captains picked the kids who could help them win.  The girls were a completely different story – for the most part anyway.   She remembered the excitement when she was finally designated a team captain.  Her first pick was her best friend, Renee Penkala.  Never mind that Renee couldn’t run or catch a ball if her life depended on it, Chris wanted her on her team.  Lucky for Chris, all her friends at work were actually quite good.  “No one running slow or dropping the ball in this group”, she thought.  It was a kick-ass team that was going to make it all happen – and in time for BTS.

The newly formed Task Force filed into the conference room early the next morning to begin the charge of laying-out their plan.  Chris started the ball rolling: “We need knowledge, guys.  We just don’t know what we don’t know.  So we need to gather as much intelligence as we can.”  She drew two columns on the white board.  The first column was labeled Information needed.   Under it, she wrote:  

1.  Our Customers – what do they look like?  Who are our good ones and who are our bad ones?  What’s their shopping behavior like today and where do we need it to be?  How do they feel about us? 

2.  Our Business – what do we actually want and need to happen?  What are today’s goals and objectives? What are our growth plans?  Any areas of particular emphasis over the next five years?  

3.  Our Competition – what are our competitors doing?  Do they have apparent programs or initiatives in place that could impact the success of our program?

4.  Our Resources – what are our POS capabilities?  What are our limitations?  What can and cannot be reasonably executed in-store? 

5.  Our Vendors – are there any vendors with whom we have a particularly strong relationship?  Might there be a way to include any of them in the program to add value and help shoulder the cost?

The second column was labeled Information sources.  The group chimed in with suggestions:

1.  Private label credit card customer and transaction data

2.  Online purchase information

3.  Last year’s focus groups

4.  Stakeholders

5.  Field staff

After a couple of hours, the knowledge-gathering step had been completely mapped out and assigned to various team members.  Chris took on the Customer category herself and began developing her list of reports that would answer all the customer related questions that were swirling around in her head.

The list began to get rather long and Chris was concerned that she would get a little push-back from I.T.  Someone from I.T. was on the Task Force, and that might help, but the issue wouldn’t necessarily be a lack of desire to deliver the reports, the issue would be one of time.  Thankfully the CEO committed that he’d make sure the Loyalty project was the top priority for all groups involved.   That was an important step – without it, the process would be stalled while she waited for data from people who were shuffling multiple priorities.  Oh well, she wouldn’t have to waste too much time worrying about it.  Her meeting with the CIO to review the list was scheduled for first thing the next morning.

Note to Readers:  Before moving on to Chapter 2, we want to pause to reflect upon the keys that have been revealed in our story thus far. 

Summary:  Key Components 

Executive level involvement:  Absolutely essential to the success of any loyalty program.  Executive management can intervene to rattle cages, shift priorities, and get buy-in across the enterprise.  You’ll need that intervention from time to time throughout the design process.

Cross-functional team:  As you design your program, you’ll have significant interactions with various groups within the company.  Task force representation will not only make these interactions easier, it enables each of the areas to assume some ownership of the initiative.

Identification of needs and data sources:  Knowledge is essential – it is the foundation upon which your program will be built. Don’t skimp in this area.  If there are gaps in your knowledge, there’ll be cracks in your foundation.

Our next post:  Chapter 2:  “Diving In”