First Steps in Building a Loyalty Program
How To Build a Loyalty Program?
In this article we will cover the guiding principles for Building a Loyalty Program and if companies should invest in developing one or not!
let’s start by mentioning that in the US alone consumers have more than ONE billion rewards memberships…Imagine how many companies were able to take the steps needed in building a Loyalty Program!
That’s on average 4 memberships per member for consumers above the age of 18. According to several consumer reports and studies, more than 60% of the well-established brands have a loyalty program. Loyalty is a key component in the economics of every business and one of the strategic success factors.
Should you Launch a Loyalty Program or Not?
We talked in previous articles about launching a loyalty program and trying to understand if you should go invest the time & money in
launching a loyalty program or not?
When thinking about a loyalty program there are two aspects really that you need to assess properly in order to decide if the company is in a good position to launch a loyalty program or not:
1- The first one is internally related
2- The second one is externally related
I am going to break these two more into details so you can know the elements of each one.
Whenever you think about a Loyalty Program it is essential to look at the business maturity and what I mean by business maturity is that you need to understand what stage your business is at?
A. Are you still in a good acquisition mode?
Or the business has matured enough over the years that the Acquisition is not really the main focus. I am more concerned with the net additions that the business is adding on a monthly basis if your business isn’t growing year-over-year, which means the market has saturated from all competitors.
The task of finding new customers is not as easy as it was, every company is fighting over the same base of customers that are in the market and every company is trying to acquire from the other company.
We live in the world of scarcity where efficiency matters, so you’re not adding from new customers but trying to retain yours and at the same time acquire from your competitors.
So if you are one of these companies or a company that is going through this stage in a saturated market then you can checkmark that element as one of the reasons why you should have a loyalty program.
A Loyalty program can help you retain your customers increase their engagement and accordingly decrease your churn turn rates. We’re talking here about basics but a lot of these basics are disregarded or ignored.
B.Company 5 Year Plan: Another element that you need to assess before looking into a loyalty program investment is the business plan for the company for the next five years.
Companies that try to launch a loyalty program they tend to have a business plan that has clear objectives and goals over 5 years. The business plan and objectives focus on growth either through acquiring new customers, retaining existing customers, or even through acquiring other companies.
As a key player in the organization, you have to understand from the leadership the business plan for the company over the next 3 to 5 years in order to build your case for developing a loyalty program.
Once you have a full understanding of the business plan, you can start building the story that aligns with that business plan and this would make your business case a lot easier to sell if you are speaking the same language that leadership speaks and wants to hear.
Now it’s time to talk about the second half of the factors that you need to consider which are:
2-The external factors:
a. The first element of these factors is the competitive landscape, whenever you’re thinking about a loyalty program you MUST do a proper assessment of all the competitors that are in the market.
The assessment should cover a wide range of the main competitors, this will help you understand the reasons for churn within your organization whether it is due to better customer service or lower pricing or better marketing or due to a better product.
Understanding these reasons will help you build a stronger case for developing a loyalty program that can retain your customers and engage them with your product vs. competition.
Take a look at the Retailer space or Aviation space, for example, almost every big retailer or every big aviation company has its own loyalty program. Why do competitors have a loyalty program, because they don’t want to give an edge to their competing companies by letting them reward customers while they are not doing that?
Your competitors can make your story a lot easier to sell to the leadership.