5 Best Practices for Loyalty Programs

March 24, 2014

A recent posting on the Fast Company website was chock full of wisdom, and it deserves to be shared. If you missed it, author Don Peppers outlined five important best practices that characterize a solid loyalty program. So if you’re thinking about a loyalty program for your business, or if you’re trying to upgrade your current one, take a look at this checklist:

1. Never waste an opportunity to gain insight about a customer.

An effective loyalty program will offer a choice of services or treatments in order to reveal more about a customer’s personal preferences. Providing points in return for completing surveys or responding to inquiries can generate a wealth of insights, but so can more specific offers designed to illuminate different customers’ motivations.

2. An effective program offers modularity, enabling participants to mix and match aspects to their own preferences.

Modular offerings are a practical way to allow for customer-driven personalization of a program without going to the extreme of full customization. Key aspects of the program, like member qualification, can be developed with several alternatives, and customers can be offered a set of guided choices to select from. A sophisticated marketing approach would offer different sets of choices for different groups of customers based on their value, so everybody wouldn’t be choosing from the same set. In addition, modularity will allow a program to incorporate partners and co-sponsors more easily.

3. Consumers value openness. They want a service or program that works with other programs.

The more open your program is, the more beneficial and attractive it will be to customers. Transferable points and rewards offer the customer the greatest flexibility in using program earnings. As you gain customer insight, your program can mature into a more open proposition without endangering customer loyalty, because the barrier to a customer’s switching will no longer be purely economic but rather convenience-based. Openness is inevitable in loyalty marketing programs, and companies must choose whether to lead the charge or react to it.

4. A loyalty program should be managed around customers, not products.

Align the organization of your program around certain identified sets of customers, then measure your marketing managers by the impact they have on customer behaviors within these different groups. This is the most direct way to make progress in each customer segment and to improve the loyalty (and lifetime values) of the individual customers in each segment.

5. Above all else: simplicity.

The fewer rules and restrictions you have, the more engaging your program will be for the customer. It’s better to narrow your offers to those you can deliver consistently rather than include elements that can’t be relied upon. Airline programs frequently suffer, for instance, when they publicize high-value redemptions that turn out not to be very readily available. Such offers often do more harm than good, by unnecessarily raising customer expectations and then not delivering. If you can’t deliver reliably on what you promise in your loyalty program, you’ll not only damage your program’s credibility but also undermine trust in your whole brand.

Don Peppers is a speaker, consultant, and co-author of Extreme Trust.

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