How to set-up a loyalty program?

In the previous section we already discussed the different components for setting up a loyalty program. Once these components have been chosen and implemented, it is time to kick off your Loyalty program. Here are 5 steps you need to think about:

  1. Setup a test and control group.
  2. Analyze results / KPI’s.
  3. Start small and increase complexity over time.
  4. Involve the rest of the organization.
  5. Set up a Campaign calendar.
  6.  

1. Set up a test and control group

 

If you want to start a loyalty program you need to test it thoroughly. So you begin by selecting a test and a control group. These are two groups of customers of exactly the same quality (buying behavior and customer lifecycle) that you will follow during a number of months in order to measure the change in behavior.

Testing on a test group vs. the control group. [1]

Typically the test group is rather small. The size is based on analytical assumptions on responses. You do not want to expose a new program to a wide audience if you are not sure on what needs to be tweaked before it is successful.

 

2. Analyze results / KPI’s

 

Make sure that you have identified clear KPI’s that need to be met in order to have a successful program. You always want to measure the incremental revenue against the additional costs of the program. Revenue indicators could be:

  • total sales
  • share of wallet
  • number of purchases
  • lengthening the lifecycle
  • level of engagement (how active is the customer sharing his experience)
  • etcetera

Comparing the KPI's of your test customer group versus your control group tells you if your loyalty program is succesful and to what extend.

 

Business Intelegence.jpg
Business Intelligence [2]
 

Keep in mind that the only difference between the groups should be the participation in the loyalty program itself, in any other case they need to be treated exactly the same in order to prevent any bias in the results. Based on the outcome of these analyses you can decide to further roll-out the program. You could test the program on a wider group or even decide to finish up and launch the program officially.

 

3. Start small and increase complexity over time

 

Loyalty programs have the tendency to become increasingly complex overtime. Especially driven by the latest possibilities of marketing automation, the complexity of the program can explode.

At the start you should have total control over the program and identify the incremental benefit of each activity and campaign.

Your customers need to be shown clear benefits of the program (they have to see the added value in a split second) but also the internal organization needs to be able to manage the programs.

The advice is to not start a loyalty program with all add-ons and extra features. Start small and expand the program gradually.

 

4. Involve the rest of the organization

 

Managing the internal organization when setting up a loyalty program is essential. Think about the customer service or logistics teams that need to cope with all kind of different questions and promotions given to different segments. Make sure that you manage your internal stakeholders and involve them from the start.

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