A soft economy can make even the strongest of loyalty programs sluggish and stagnant. As fiscal challenges continue and consumer spending remains tentative, loyalty programs need to work harder than ever.
Focusing on loyalty—and the people with which your business already has relationships—is a good way to influence sales in a short period of time while building long-term customer equity. Evaluate your loyalty program to ensure it performs at peak efficiency and generates maximum return on investment.
When evaluating your loyalty program's performance, ask yourself:
· Does your existing program design meet today's business needs?
· Is your program driving the customer behavior you need to sustain and grow your business?
· Are you attracting new members with high growth potential?
· What areas of the program are in need of improvement?
· How appealing is your program to your target customers?
· Are you motivating incremental customer behavior or rewarding existing customer behavior?
Ideally, a loyalty program assessment should be conducted by a third party that can provide an objective analysis of the program's performance, and highlight best practices from different companies and industries. Here are five-steps to ensure your loyalty program drives customer activity that sustains and grows long-term business.
1. Discovery
Loyalty programs can easily become outdated and lose their impact over time. It's expensive to continue to pour budget dollars into something that may not generate the returns needed to grow your business. Loyalty programs created long ago may need an adjustment to meet the changes in business needs and economic factors. An update is the time to gain better insight into your target customer segments, and their behavioral, attitudinal and messaging preferences factors.
2. Review Existing Program and Metrics
Delve into the ins and outs of your program, including the objectives, design of program and communication with customers.
Retailers spend a tremendous amount of money beefing up their reward programs as a response to consumer apprehension to spending. Sweetening the pot isn't necessarily attracting the right customers and it may reduce profit margins. Instead, retailers should look at what really drives behavior and design the program to have the greatest impact.
3. Evaluate Performance
Review the metrics you use to assess performance. Analyze key performance indicators and look at members and non-members. While this is an arduous task, it's the only way to accurately assess how the program measures up to program and business objectives.
4. Identify Key Opportunities
Determine gaps between needs and performance, as well as vulnerabilities. You may find that your loyalty program attracts a membership base that has limited spending potential while not reaching one with greater spending power.
5. Develop Recommendations
Give your program a facelift by recalibrating the underperforming areas. Whether it's targeting new customers, focusing on a certain behavior or implementing a new tactic, you'll know that your revitalized program ties back to business objectives and will help grow the right customer relationships.
After testing and rolling out changes to the program continue to measure performance of your program against business objectives, changes in the marketplace, and consumer behavior. Loyalty programs are ultimately about valuing customers for their interactions with your company and creating a relationship that makes them feel special while having a positive impact on your bottom line.
Kamal Tahir is the director of services and propositions management for Experian Marketing Services.
