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Strategies for 3 Stages of the Customer Loyalty Program Lifecycle

Maintain customer engagement — and profits — whether you have a start-up, established or mature loyalty program.

3 Stages of Customer Loyalty

Article Highlights

  • Loyalty program performance and participation naturally rise and fall over time.
  • New loyalty programs should focus on generating awareness and enrollment with a simple, engaging value proposition.
  • Established loyalty programs may see metrics drop as customers become desensitized to the perks; this is the time for an audit and refresh.
  • Successful, mature loyalty programs can still find room for improvement — for instance, improving member insight with better data flow or enhancing benefits based on customer research.
  • Regular check-ins with the C-suite are critical to maintain support and ensure everyone agrees on the key metrics to track at every stage.

You probably know all about the customer lifecycle. But many retailers don’t realize there is a loyalty program lifecycle, too. But it’s real. Programs move from start-up to established to mature. Along the way, customer interest can shift from excitement to engagement to boredom — and program performance can rise and fall through the stages. Understanding how to manage each stage can help you maximize the program’s long-term success — and make good on the promise of stronger, more profitable customer relationships.

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Loyalty Program Lifecycle Stage 1: Start-Up

At this point, you’ve done all the appropriate planning to develop a new customer loyalty program. You’ve won buy-in from the C-suite, and you’ve designed a basic value proposition that fits your brand and your customer base. You feel ready to take the next steps to roll out your program.

Start-Up Loyalty Program Objectives

During this stage of the loyalty program lifecycle — which we typically consider the first year after roll-out — your primary goals will be threefold:

  1. Generate awareness of the program, as well as customer interest and excitement
  2. Grow customer enrollment and active participation to drive shopping frequency and spend
  3. Gather foundational customer data, typically transaction-based, such as what, when and how members are purchasing, and how much they’re spending with you

Start-Up Loyalty Program Challenges and Solutions

During the first 12 months of rolling out your loyalty program, you may find that enrollment and participation aren’t what you hoped. Causes for lackluster performance include internal disconnects, customer confusion and technology issues. These tactics will help you overcome each obstacle.

Disconnects. “If you didn’t engage internal stakeholders from all departments when planning your loyalty program, you need to bring them on-board ASAP,” says Dave Sims, a retail loyalty expert with extensive experience working with such brands as DSW, Toys R Us, Nordstrom and Proactiv.

Make sure that stakeholders understand the program objectives, each department’s critical role, and how the program will benefit both the company and your customers. Also make sure everyone agrees on the metrics you want to track. At this stage, says Sims, enrollment figures are a top priority. And, as the program gains steam, he notes it’s important to stay connected and maintain support by sharing results.

Complexity. Overly complicated programs or value propositions lead to customer confusion over how to join, how to earn and how to use rewards. That reduces enrollment and participation. Make sure the enrollment process is simple, fast and available via multiple channels, such as in-person with an associate, online and through your mobile app.

Make sure your benefits are optimized for your customer base so that members want to earn them and will change their shopping behavior to do it.

Generate awareness and enrollment with a well-planned marketing and communications campaign that clearly convey your program’s value proposition. Emphasize what’s in it for members and provide a clear explanation of how to participate. Continue engagement by communicating regularly with new members, such as with status updates, exclusive offers and members-only content delivered via email, SMS and a program microsite.

Make sure you also train associates on how to introduce and promote the program, as well as how to interact with enrolled members. Offering incentives and allowing program participation can help turn associates into program ambassadors.

Technology issues. Legacy systems often present problems, such as functionality roadblocks. They may also create data siloes, preventing you from combining and analyzing data from different areas, or preventing personalization. The best defense is a good offense: Involve your IT team early and often as you plan and implement your loyalty program. Work with them to develop and test use cases, and to help you understand what existing tech is capable of — and what it can’t do. Otherwise, you can end up promising things that IT can’t deliver — and end up with disgruntled members.

Loyalty Program Lifecycle Stage 2: Established

After a few years, you’ve hopefully had success meeting your loyalty program objectives. Customers have been joining, members have been actively participating and you’re beginning to see signs of brand affinity building because of the program. But don’t be surprised (or alarmed) if you see performance start to taper off.

Established Loyalty Program Objectives

If you begin to see enrollment and participation drop, your primary goals will be to revitalize your loyalty program, reignite customer interest and rebuild member engagement.

Established Loyalty Program Challenges and Solutions

It’s common at this stage of the loyalty program lifecycle for customers to lose that initial flush of excitement about the program and rewards. Customer interest flattens, members are less driven to earn rewards, and the program, benefits or value proposition may begin to feel stale. In short, what once worked isn’t working now — but these tactics can help bring back that loving feeling (and refuel performance).

The value proposition is limiting. Many loyalty program lifecycles start by offering points or rewards based only on transactions — spend $X and get Y. You can spark more participation by rewarding non-transaction behaviors, such as posting a review to your website, interacting with your social media or downloading an asset (like a fashion look book).

Benefits are stale. Take time to evaluate your existing benefits and consider how you can ramp them up. This might mean adding or replacing benefits — making sure to optimize your mix of hard and soft rewards. Or it might mean adding tiers so that more valuable members earn more perks, creating aspirational momentum and spurring behavior change as members seek to gain a higher tier.

Messaging and offers are generic. Drive greater member engagement with personalized promotions and communications. To do this, you’ll ideally collect behavioral data to bolster existing transactional data. With better insight on who members are and how they engage with you, you can segment your membership and develop targeted offers and messages that resonate more strongly with individual members.

Program awareness has fallen. Refreshing your loyalty program presents a perfect opportunity to field a new loyalty program promotional campaign announcing the exciting updates. Also make it a point to update associate training on the loyalty program changes and possibly revamp incentives for getting customers to join.

Stakeholders have lost faith. Sims adds that, even though your program has been around a few years and had initial internal approval, “that doesn’t really mean everyone is a believer. You have to always be selling the program internally.” So be sure to schedule regular check-ins to let the C-suite know how the loyalty program is doing — and, since key metrics change over time, make sure everyone agrees on which metrics matter right now. For an established program, says Sims, that generally means tracking reward redemption and comparing membership sales to overall sales penetration.

Loyalty Program Lifecycle Stage 3: Mature

You’ve had a customer loyalty program now for five years or more. You’ve been through at least one program refresh. Things are good. But could they be better? Short answer, yes — there’s almost always room for improvement.

Mature Loyalty Program Objectives

At this stage of the loyalty program lifecycle, specific objectives will be different for each retailer and each loyalty program. You’ll want to evaluate your program to identify current strengths as well as weaknesses. Then build your goals around bolstering those weak points.

Mature Loyalty Program Challenges and Solutions

Your program evaluation should take the form of an audit, where you analyze key metrics to expose challenges and activate solutions.

Loyalty program key performance indicators to review include:

  • Membership penetration (number of member transactions divided by all transactions)
  • Reward redemption percentage
  • Share of wallet (compare members to non-members)
  • Active participation quotient
  • Enrollment quotient
  • Program net promoter score (tracks member satisfaction and advocacy)
  • Motivation to spend (rates ability of program to motivate member consolidation of spend)
  • Customer data view (measures degree to which your data collection is providing 360-degree view of members)

The following strategies can help boost any but the last of these KPIs:

  • Consider how to better motivate customers. Does it take too long to earn rewards? Is the program hard to understand? Are benefits still compelling? Do you allow just one tender type (such as your proprietary credit card) to participate, or do you accept multiple forms of payment?
  • Conduct customer research to get first-person insight on what is and isn’t working with your loyalty program — and what could make it better.
  • Make sure you’re proactively communicating with members through a trigger email program that provides ongoing status updates, as well as through a members-only microsite where people can review their status and benefits at any time.
  • Continue reaching out to non-members through in-store signage and integration with your website — including loyalty program banners and callouts on your ecommerce checkout page.

As for that last KPI, if you’re less than satisfied with your customer data view, take time to review internal data flow. Are there siloes or other obstructions preventing you from building a consolidated view of your loyalty program members? Do you need to explore new technology or tactics to help you collect more types of data — such as adding emotional insights to the behavioral and transactional data you should already be gathering.

Last but not least, mature loyalty programs may be challenged by stakeholders who aren’t convinced the program is delivering value, says Sims. “Success will mean different things to the COO versus CFO versus CEO and so on,” he adds. Continue to reassure these key people about program performance and make sure everyone still agrees on which metrics matter most, since they may change over time. For instance, says Sims, while start-ups worry about enrollment, mature programs often need to answer the question of whether the program is driving incremental visits.

Make sure to regularly generate and share reports that show results. Be prepared to provide recommendations for improvement when it’s warranted. And don’t be afraid to be proactive in identifying opportunities to improve efficiency or reduce costs.

The Loyalty Program Lifecycle Is Ongoing

Simply having a loyalty program puts you on the right track to building better customer relationships. But it isn’t the final destination. The reality is, you’ll need to periodically assess and recharge the program to achieve its full potential and keep ramping up success. Only then can you keep enjoying the benefits of increased customer loyalty and revenue growth year after year after year.

CCG’s mission is to build customer loyalty for our clients while building our clients’ bottom lines. Our loyalty agency has more than 40 years of experience in designing, evaluating and improving customer loyalty programs for retailers across North America. We offer a full slate of retail marketing services, from strategy to creative to technology search and support. To learn more about how we can help you build, review or revitalize your loyalty program, request a free consultation or call 303.986.3000.

Sandra Gudat

Author Sandra Gudat

Sandra Gudat is CCG’s president & CEO. Considered a pioneer in the field of customer marketing, she has a diverse background in consulting, database marketing, advertising, retail and business management. She is a frequent speaker on customer loyalty marketing and developing customer-centric policies

More posts by Sandra Gudat

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