Definitive guide to loyalty programmes

Curious about loyalty programmes and what it takes to create one for your business? Azpiral’s definitive guide to loyalty programmes answers the most common questions for businesses starting their loyalty journey.  It’s quick and easy!

Ebook download Case Studies

Introduction

What is a Loyalty Programme?

Loyalty programmes are structured marketing tools used to encourage engagement between businesses and their customers to aid brand awareness, customer retention and build customer loyalty.  (Azpiral, 2020)

 

Who are loyalty programmes suitable for?

Loyalty programmes work for both B2C and B2B companies with the goal of understanding, engaging and rewarding their customers to increase customer loyalty and grow their business.

 

How do loyalty programmes work?

Loyalty programmes are built using strategy and loyalty software. A businesses loyalty programme should be created based on a good understanding of the following; businesses objectives, goals and their target audiences.

Different loyalty programmes are suitable for particular types of businesses and target audiences, for example, point-based loyalty programmes work best for older people while non-monetary loyalty programmes are favoured by the millennial generation.

Conducting market research about your business and target audience before you create your loyalty strategy and choose a loyalty software partner to deliver your desired loyalty programme, is very important.

 

Where to start with loyalty programmes?

Market research is critical to understand your customers, their preferences and needs and how best to engage with them. It’s also key to understanding your competitor’s loyalty programmes and identifying what works for them and in turn how you can differentiate yourself and gain a competitive advantage.

The next step is creating a loyalty strategy. A loyalty strategy doesn’t have to be created from scratch. However, it must be suitable for your business goals, customers and brand. Businesses can base their loyalty strategy on another business’s loyalty programme, or work with a loyalty consultant to develop a customised loyalty strategy.

When you have fleshed out your loyalty strategy, you then must choose a loyalty software provider to deliver your initial loyalty strategy but one that can also grow with you and your business. Ensure that the loyalty software is fully integrated and your loyalty software provider has a dedicated team to continually develop their software.

How to create a loyalty programme strategy?

This is something most clients looking to start with loyalty forget about. A loyalty strategy is like a marketing strategy but just loyalty programme-specific. A Loyalty strategy or plan is crucial to the success and longevity of a loyalty program. Having a loyalty strategy is a guide for your Loyalty programme it makes a clear plan for your loyalty programme and helps you measure the return on your loyalty programme investment.

 

6 steps to create a loyalty strategy;

 

  1. Set goals and objectives

Before you create a loyalty strategy, you must have a purpose for it. This purpose is based on a business’s long-term goals. Loyalty programme is established to retain customers and to penetrate a strong brand presence.

 

  1. Situational analysis

Accessing a business’s current situation is critical to understanding what type of loyalty programme and strategy would align with your business goals, excel your business growth and ensure your meeting your customer’s needs. Your analysis should include a SWOT analysis on your business to understand how to position your business, a competitor analysis and customer behaviour analysis. From here, create your customer personas and identify what loyalty programme features can truly engage your customers. This analysis builds the foundation for your loyalty strategy and guides and benefits your decisions around your loyalty strategy.

 

  1. Outline your budget

Often companies are on their loyalty journey and they forget that this is an investment that requires various. Assigning a budget is very important as it can dictate the scale of your loyalty program, your offerings, rewards, competitions and the loyalty software functionality available within your budget. Fully integrated loyalty platforms allow businesses to pick and choose their loyalty functionality to suit their loyalty strategy. It’s a good idea to discuss the loyalty functionality available based on your budget with your loyalty software provider.

 

  1. Outline your tactics

Combine your research, your budget and your loyalty software requirements to develop a loyalty program strategy that suits your business goals and your customers. Outline the structure of your loyalty programme, how it works on a day to day basis for the businesses and outline the customer journey. From here, discuss with your loyalty software provider what loyalty features can deliver the process. Break out your steps in the customer journey and identify what loyalty features can meet your customer’s needs.

Loyalty features include; CRM, Rewards engine, Promotions engine, Communications (email, SMS messaging, in-app messaging) loyalty App, Website, Gift Card, Business analytics…

Internal processes should be considered at this point.

Who’s going to manage your loyalty programme?

If there are multiple companies or retail units who will they be managed.

Communication processes, creating, editing, approving and scheduling communications.

Sourcing reward partners, rewards, competition prizes if these are part of your loyalty programme strategy.

Contact centre and customer query management outsource or manage internally.

 

  1. Make a timeline

Time is the most underestimated resource in any project. Having a realistic timeline to launch your loyalty programme is important. Your timeline can be impacted by many different aspects that you might not have considered. For example, if you decide to have branded loyalty cards as part of your loyalty programme you will need to allow lead time for design, edits, approval and ordering. In the same way, if you are adding a loyalty app your loyalty programme you should factor in design and development time into your loyalty programme timeline. Set a realistic timeframe for your loyalty programme launch and allow yourself time to prepare for an impactful launch to ensure your business gets maximum coverage for their launch. Companies that do this right have a huge uptake in registrations in the first few weeks.

 

  1. Measurements

The great advantage of loyalty programme powered by loyalty software is the ability to report, analyse and measure your loyalty programme campaign efforts and continue to learn what your customers genuinely want. With this knowledge, you can continue to tweak and personalise your loyalty programme strategy to enhance your engagement with your customers. Using Loyalty KPI’s that align with your business loyalty objectives and goals make it easy for you to measure ROI and show the impacts of your loyalty programme investment.

Types of loyalty programme strategies?

Tier loyalty programme

The tier system encourages repeat purchases and higher value purchases in order to avail of more valuable rewards and benefits with a brand. Basic participation entitles the customer to a basic reward. Customers must increase spend and shop frequently to move up the loyalty tiers to avail of the different benefits or rewards. Generally, the more a customer spends and actively engages the more exclusive the rewards and benefits become. Giving businesses a clear view of their most loyal customer segment.

 

Points programme

The most traditional type loyalty programme. This type of program has recently been revived due to digital technologies and is optimised by major brands across the globe.  Points systems encourage frequent spend by offering customers the ability to earn points relative to their transaction spend. Digital technology now enables brands to assign points for all types of customer engagement, for instance, online shopping, customer reviews or survey participation. Points can be stored and redeemed against rewards, discounts, gifts and customer purchases.

 

Non-Monetary programme

This type of programme allows brands to connect with their audience in a different way and can leave a profound effect on the customer. Depending on your brand and your target audience values you may offer a non-monetary reward as a result of your customer purchase. This type of strategy is popular for certain target audiences. However, Brands must have a good understanding of their customers in order to appeal to their values and lifestyle. Best suited? Businesses with frequent shoppers or with utilitarian shoppers or a largely millennial audience are best suited to this type of loyalty strategy. Example: Toms, the footwear brand, donate a pair of shoes to an underprivileged child in South America as a result of a customer’s footwear purchase.

 

Reward partnerships

This type of program sees a brand partner with other brands to offer their customers discounts with the associated brands. This provides customers with benefits beyond what the brand can offer. Example:  Kepak Food Alliance and Dulux Trade Points

 

Gamification

A new phenomenon. Adding a game to your loyalty program can be a compelling tool for customer engagement. In order to run a successful loyalty game, the prizes need to align with your target audiences wants and desires and the odds should be no lower than 25%. To ensure maximum engagement with the customer make sure the game is simple and easy to interact with.

 

Loyalty card programme

Loyalty card programme is an incentive plan that allows businesses (often in retail) to gather important information about its customers such as, demographic and transactional information. Customers are offered product discounts, coupons, points toward products and other rewards in exchange for actively using their card in-store. The loyalty card programme creates repeat business by offering participating customers something that is not available to non-participating customers.

How to choose a loyalty programme software provider?

Each company varies in its approach when it comes to selecting a software partner. Here are some pointers to ask about when you are researching potential loyalty, software partners.

Integration – (Most important) Having a marketing or loyalty platform that integrates with an ePOS, website or app ensures brands can deliver an Omni-channel experience for customers. It also facilitates data capture across various touchpoints giving brands a holistic view of their customer behaviours across different channels.

Product development – Partner with a loyalty software company that continues to develop its product to deliver the latest technology in digital loyalty software trends. This prevents Loyalty programmes from becoming stale, so brands continue to increase engagement with customers. Ensure the Loyalty Software Company has the resources to aid bespoke software development. This isn’t necessary but it’s good to have the option to customise the loyalty software to grow with your strategy.

User-friendly software – Any software platform built as a solution for business needs must be easy to use. Employees interacting with the software should be able to use the platform with ease for the platform to be utilised throughout the company.

Customer support – Loyalty software, like any software requires a good customer support team to manage client’s queries, offer advice to clients, help set up communication campaigns, offers and promotions and liaise between the client and the software development team.

Established clients – There’s no better vote of confidence for a company when you see they work with established brands and have a wide variety of clients listed on their website.

How to launch a Loyalty programme?

You’ve created a loyalty strategy, secured a budget for the programme and sourced loyalty partners to deliver this programme. It’s time to set up and introduce your loyalty programme to your customers. Outlined below are steps you might need to consider for your timelines.

  1. The installation process with a Loyalty technology provider. *This will vary by supplier.
  2. Training

This step is crucial to any Loyalty programme. Comprehensive training about how the programme works prepare employees with the answers your customers may have regarding the Loyalty programme. Remember your employees are often the first people your customers meet if they are well- informed and enthusiastic your customers are more likely to participate.

3.Promotion material and Launch day.

Ensure content, promotion material and other resources are ready and available in advance of the launch day. PR is important around the launch of your Loyalty programme aim to get local newspapers and radio involved if possible.

Types of Loyalty cards and application forms

Card and application orders (if applicable)

Some suppliers will have in house designers to design your cards, but you might have the resources to do it yourself. Make sure you assign time to design, approve, print and deliver both card and application forms. Having plenty of time to undergo this process ensures there will be no delay to your preferred launch date.

There are various types of cards and application forms the most common types are;

Cards

Key fobs

  • 28 x 54mm (supplied 3 from an 86 x 54mm card)
  • Printed full colour both sides on 0.76mm PVC
  • Gloss laminated both sides •Drilled a hole at the top, punched and scored for breaking out
  • Barcode overprinted to back of fob
  • The label on the back to match to application
  • Boxed as suitable

Gift / Loyalty cards

  • 86 x 54mm
  • Printed full colour both sides on 0.76mm PVC
  • Gloss laminated both sides
  • Barcode overprinted to back of the card
  • Boxed as suitable

 

Combi Cards

  • 86 x 54mm card with two 28 x 54mm cards attached
  • Printed full colour both sides on 0.76mm PVC
  • Gloss laminated both sides
  • The drilled hole at top of fobs punched and scored for breaking out
  • Barcode overprinted to back card and fobs
  • Boxed as suitable

 

Application forms

2pp DL Application form

  • 210 x 99mm finished size
  • Printed full colour both sides on 300gsm Silk
  • Trimmed to size
  • Card matched and attached to form (if required)
  • Boxed as suitable

 

4pp DL Application forms

  • 210 x 99mm finished size
  • Printed full colour both sides on 140gsm Bond
  • Trimmed to size
  • Card matched and attached to form (if required) and folded to 4pp DL
  • Boxed as suitable

 

A4 application forms

  • 297 x 210mm
  • Printed full colour both sides on 140gsm Bond
  • Trimmed to size, micro perfed in two places
  • Card matched and attached to A4 form (if required), form folded to 6pp DL
  • Boxed as suitable

*These specs are based on our card suppliers and could vary between suppliers

Loyalty programmes for B2B?

Like B2C customers, B2B customers want great customer experience which in turn develops customer loyalty and retention with a brand. There are many benefits to implementing a B2B loyalty programme some include, gaining insight into your customers’ needs and expectations through data obtained from a loyalty programme.

Loyalty programmes help create brand advocates that spread your name online and through word of mouth to their partners and associates. As well as that, loyalty programmes can act as a differentiator from your closest competitors.

While several B2B corporations dismiss client loyalty programmes as strictly a B2C idea, implementation of loyalty programmes can lead to growth within a business. According to Bain & Company, “B2B loyalty leaders tend to grow four to eight percentage points above their market’s annual growth.”

In short, although B2B purchasing decisions tend to take longer time and are a more formal process, therefore, they differ from B2C purchasing processes. They still have one thing in common they are dealing with humans. Implementing a loyalty programme can give businesses the opportunity to connect with clients and build relationships with them, gain valuable insights and retain customers.

Loyalty programme KPI’s?

Businesses based on their customers and business type have different goals and measure various KPI’s to ensure they are moving in the right direction. This is no different when you implement a loyalty programme KPI’s are very important to identify patterns and to test what is working for customers and the area’s businesses can improve in. Firstly, it’s essential that a business define what customer loyalty looks like to them or define the characteristics of the loyal customer. This will guide the reports or KPI’s a business should monitor.

From our experience the most common loyalty KPI’s are;

  • KPI’s to measure Recency, Frequency, Monetary.
  • Active customers in the last 30 days.
  • Average transaction value.
  • Average purchase frequency.
  • Spend-per visit.

Other indicators that measure engagement are;

  • Subscribers to brand communications, email, SMS, in-app messaging.
  • Actively redeems offers and promotions.
  • Writes reviews online about your store, service, product.
  • Participates in surveys.

Loyalty programmes and big data?

One of the greatest benefits for companies with a loyalty programme delivered through integrated loyalty technology is the large volume of customer data that is captured. Loyalty programmes capture valuable customer data that businesses can use to understand their customers better and in turn offer customers a personalised and superior customer experience.

This data benefits, not only the customer but multiple departments in a business. For instance, product purchasing, sales forecasting, demand forecasting and budget planning. Having a clearer insight into the everyday functioning of business allows for greater investment in the areas that need it most.

How to calculate Loyalty programme ROI?

It’s difficult to give exact figures as it varies for different businesses and sectors. We recommend looking at the average spend, visit frequency and gross margin to calculate loyalty ROI.

The key elements for a Loyalty ROI across all types of retail are:

  1. The loyalty cost per customer per year.
  2. The average spend per loyalty customer transaction.
  3. The average Gross Margin % on loyalty member purchases

 

The Model:

  1. Looks at the average spend per member and the average gross margin % and calculates the additional margin from just one extra visit per customer per year.
  2. Then it looks at the average loyalty cost per customer per year and how many times this cost is covered from the margin from just one extra customer visit.

This gives you the Loyalty ROI Ratio

Calculating Loyalty Cost per customer per year includes:

  • The once off card & application form cost divided over the three years and divided by the number of customers.  X+Y/3/no. of customers
  • The points cost per customer per year (this varies with the type of retail– see pharmacy example below).
  • The Loyalty technology cost per customer per year. This is the annual loyalty licence divided by of the number of members.
  • The communication cost (SMS & e-mail) per customer per year

 

What are the benefits of Loyalty Programmes for businesses?

Businesses implement loyalty strategies to achieve different objectives and goals. The benefits of Loyalty programmes can, therefore, vary based on your sector or business type. I’ve summarised the benefits below, but some could be specific to a certain sector.

  • Build a comprehensive database of customers
  • Understand and truly connect with customers
  • Increase customer spends on multiple aspects of the business.
  • Identify high-value customers
  • Reduce customer attrition
  • Increase purchases
  •  Encourage the purchase of new product lines.
  • Improve communication with customers and build a personal relationship.
  • Understand customers using product-level data for individual trade customers
  • Strengthen partnerships with supply chain partners to nurture shared customers.
  • Seamless Brand amalgamation
  • Aids brand consolidation
  • Understand and build relationships with customers
  • Identify high-value customers
  • Reduce Customer attrition

Keep in touch via our Newsletter

Download our Ebook

Azpiral Magazine September Issue

You have Successfully Subscribed!