1 Introduction
A good loyalty model has three separate yet interlinked processes to it. The robustness of these processes dictates the DNA of a loyalty program and its ability to elicit the responses to the stimuli that it offers to the member. These processes are:
* Business processes: The processes involved such as fulfillment, accrual, redemptions etc.
* Technology processes: Involves the business process enablement through technology. The choice of available technology and how it can translate the business processes and actual enablement of on-ground transactions.
* Human processes: Include understanding the cultural psyche of the addressed segments, their response-stimulus system, how the actual transactions at touch points are managed etc.
The fundamental objective in generic terms is to retain the existing customer. It has been well established and become a cliché that retaining an existing customer is cheaper than acquiring a new one translating into better ROI on the expenses incurred to manage a loyalty program. Though the underpinnings of any loyalty program are the same, it may be presented in different formats.
Loyalty programs may be broadly divided into five types:
* Appreciation Program: Rewarding ones own customers with additional value like better service or additional value on purchases. Typically a closed loop program that aims to give a little more to its existing customers for custom at existing levels. The marketing budget is relatively low with loyalty activities being relatively less complex and highly focused. The cost of the program is entirely borne by the sponsoring organization and the benefits directly plowed back to it. Selectively focused on a few and primary objective is to maintain the business levels from individual customers.
* Partnership/Collation program: When an organization associates with non-competing partners to offer a large & varied rewards pool thereby widening the appeal for the customers and increasing their propensity to purchase more from the sponsoring entities. The overall direct expenses are relatively low as this design is about collective participation. The cost of communications, rewards etc may be subsidized by various partners within the loyalty loop depending on direct benefits accruing to them. The collective database may or may not be shared among all its members depending on its basic framework.
* Rebate Program: Simple and more tactical in nature, this type of a loyalty program focuses on discount offered to a customer proportionate to his custom. The program doesn’t necessarily focus on accruals as the customer perception is fuelled directly by the amount saved on each purchase. A database may be collected, loyalty token issued & customer transactions tracked and analyzed, this program is differentiated by the singular lack of an accrual character.
* Affinity program: Building a lifetime value relationship with a customer based on various factors. The most important being aggregation of people from closely similar backgrounds like doctors, architects or those who want to give points earned to charity.
* Coalition Program: A coalition attempts to bring in many partners working towards a common goal. Compared to a collation program, there is more involvement between the partners. The points can be earned across the participants and goes into a common kitty from where they can be redeemed across the partners. A coalition program widens the possibilities for its cardholders and is generally managed/administered by a third party operator.
2 Components of a Loyalty Program
The four main components of a loyalty strategy may be summarized as:
* Marketing strategy:
Understanding the existing business
Ascertaining its needs & requirements as far as loyalty is concerned
How a loyalty program fits-in
Program model & design
Identifying the right technology
Functional framework
ATL marketing strategy
* Execution strategy:
Implementing & enabling technology (software & hardware)
Technology Testing
Staff training (product & systems knowledge and concept handling)
Collateral display
Fulfillment
* Customer contact strategy:
Setting up a physical centre as the fulcrum of all communications except ATL
Receiving/answering customer queries
Feedback collation and escalation
Procuring tactical offers from participating merchants
Procuring advertisements from participating merchants
Communicating offers to members using phone, SMS, Email, post etc.
Collateral/POP design
* Analytics strategy:
Customer Analytics
Profiling and Segmentation over multiple parameters
Product Popularity: Customer Profile Metrics
Campaign: Target Customer Profile Fit
Program Analytics
Loyalty Index
Activity: Member base ratio
Program ROI
Campaign Analytics
2.1 Brief: Marketing strategy
There is an appropriate image-fit that every loyalty program should address. Loyalty programs have an independent life of their own and thus their positioning has the power to affect the associated brands. The reward mechanism needs to take into consideration the existing positioning of participating entities as well.
The design of the program should be based on the overall corporate strategy. It could be based on instant gratification, delayed gratification, rewards, recognition, benefits like hard benefits, soft benefits etc. It could be administered offline, online or with an effective mix of both.
The loyalty operating model, choice of a loyalty token (plain vanilla card, magnetic stripe card, RFID enabled card, smart card, others), rewards & redemptions and the technology (primary and secondary) that enables it completes the loyalty program.
* Business processes:
It is important to get the processes correct at the first instance. The opportunity for major course correction might not be feasible once the program is in the public domain.
There are many processes that are involved in a robust loyalty model, some significant ones are:
Member Management
Enrolment process
Fulfillment process
Rewards accrual process
Rewards redemption process
Member activity management
Communication Management
Channel Management
Fulfillment – Cards / Statements etc.
Service Providers Management
Customer contact – Request / Grievance / feedback
Ad. Hoc Communication
Marketing Management
Marketing Planning
Promotion Planning
Campaign Planning
Response Collation
Follow-up
Reporting
Partner Management
Partner recruitment
Partner Planning
Data Exchange
Program Management
Financial Management
Rewards Management
Loyalty Program Administration
Business Development
Product Management
Category Offerings Management
Service level management
* ATL Communications strategy:
2.2 Brief: Execution/ Implementation strategy
* Training
Training materials preparation
Imparting Training
Re-training at fixed intervals
* BTL Communication
Tactical promotions development
POP development
Collaterals development
Identifying suitable channels for communication (SMS/ Email/ Direct call/ In-house magazine/ direct mailers)
* Problem solving
* On site testing of systems & recommendations
* Onsite transactions efficacy testing (human processes) & recommendations
Training
One of the most important activities that can make or break a program as the retail staff become the face of the organization for the customer. Thus training materials preparation, effective training sessions, follow-up sessions etc become a crucial link in the loyalty chain.
Problems solving:
Whenever there are problems in accruing or redeeming points, it needs to be solved based on clear processes with time lines and escalation points. An issue solved on time doesn’t remain a problem but demonstrates service capability.
Testing the systems:
Testing systems regularly is important, in order to confirm that they are working at optimum efficiency levels. The systems are able to take set amount of load and are responsive to loyalty activities.
Transactional efficiency (Human Processes)
A loyalty program’s success will in part be driven by efficient handling of transactions; from timing the transactions to optimizing transactions, handling queries on loyalty program to effectively enrolling members.
2.3 Brief: Customer contact strategy
All types of communication have an effect on brand perception & subsequently service perception. It thus becomes imperative that all communication is designed such that it is clear, time-bound and conforms to the organization’s needs.
Outbound communications: In loyalty this translates to collaterals, POP, Communications modes like SMS/ Email/ direct call/ in-house magazine etc., offers etc.
In bound communications: Whenever a customer (member/participating merchant) calls up, with questions, concerns, advise, complaint etc, it comprises of inbound communications. Arguably, more important than outbound as this is a voluntary activity. Vital information regarding the health of a loyalty program may be diagnosed from what information is coming in. It is vital to have a system that can absorb and implement valuable lessons from this mode of communication.
2.4 Brief: Analytical Strategy
The fundamental objective of a loyalty program is to collect deployable information about customers. Loyalty is also an exercise that involves considerable resources both manpower and financial. Thus optimizing every activity in order to deliver maximum impact becomes important and the one major factor that helps in this function is adequate and relevant information.
While loyalty programs automatically generate realms of data, mining them and extracting the right information becomes important. This ability to use new data and extrapolate it with previous data differentiates the capacity of an organization in creating actual loyal customers. Analytics can throw-up a variety of data and can be filtered using various parameters depending on what the organization wants to know.
While it is important to develop customer intimacy (the reason for loyalty program), it is equally important to establish and monitor success criteria for the program itself to know if the program is performing for the brand and meeting its objectives.
© Sanjai Velayudhan.
Endnote: The author would like your feedback-both bouquets & brickbats. Write to me- sanjai.velayudhan@gmail.com.
- Post Time: 01-12-16 - By: http://www.rfidang.com