An interviewer once told me he was thinking of creating a loyalty program and wanted to know what he should do. Loyalty programs can be a valuable tool for driving revenue and fostering customer loyalty as I have written about here. As I noted in another post, they can help you make smart marketing and merchandising decisions.
However, a loyalty program needs to be grounded by your business needs. Ask yourself first:
- What am I trying to achieve? Do I want to improve customer retention, drive revenue or encourage customers to purchase multiple products and services from my company?
- How will I measure success? What metrics will I use to measure if I am achieving my goal and can I track those metrics on an ongoing basis?
- Will my program be public or private? Some luxury brands enroll customers in loyalty programs based on their spending habits and reward their best customers without letting them know they are in a loyalty program.
- Will my program have tiers? Explicit tiers can encourage customers to stretch and reach the next level.
- How will I reward my customers? It is important that customers value what they receive in return for their loyalty.
There are significant financial considerations to any loyalty program so Finance will need to be involved in the development and design of the loyalty program. But these questions will begin the dialogue about what the loyalty program should look like. Once you have it in place, you should monitor the program’s health.