Marketers are increasingly recognising that building an effective loyalty programme is crucial for the long-term prospects of any business, especially as acquiring a new customer can be anywhere from five to 25 times more expensive than retaining an old one; also customers who stay with a brand are likely to spend more money.
In fact, Pets at Home recently shared that members of its kittens and puppies club typically spend a third more than non-members across the group.
Loyalty schemes such as these are among the most effective ways of retaining customers. According to one recent study, over half (52%) of customers will prioritise brands where they have points and rewards in their account and a customer who signs up to your loyalty programme is 47% more likely to buy from a company again. Not only can a loyalty programme help to keep existing customers it can help attract new ones – 75% of customers say they would switch brands for a better loyalty programme.
But how do you go about creating an intelligent retention marketing scheme? Setting up and developing a loyalty scheme requires a development plan. Typically, this may take place across a one to five-year cycle but can be adapted depending on the specific dynamics of the market – or a business’ ambition.
Stage 1: Strategic Development
The first step in the process is to determine what kind of scheme you want. Clear goals will keep the business on track during the retention journey. Identify how data will be collected and deployed as well as the measures to be used to determine the success of the scheme. Consider how these new sources of customer data and the resulting insights flow into and will be used by the wider business, for instance, how they may influence price and promotions strategy.
Incorporate the needs of other departments into your planning from the outset and keep them informed. Ensure that you’re able to demonstrate to finance managers the cost-effectiveness of the scheme and how it will produce a return on investment. You may also need to set up training outside the core marketing department and develop new operational processes to make the scheme a reality.
Stage 2: Build and Operationalise
In the second phase, start to design and build the scheme – potentially deploying a pilot scheme towards the end of this stage. Decisions such as where the database will be hosted; how the systems interfaces work without slowing core business operations; and how technical capabilities are to be developed and stress tested, need to be clarified. In this phase you should also consider the level of business readiness within your organisation to adopt the new scheme along with any changes that need to be made to roles or processes.
Stage 3: Launch
The scheme rollout needs to be approached as carefully as the build and operationalise phase. A pilot or test phase may be valuable, with a customer feedback panel to make sure you learn all you can. Crucially, consider how staff and internal departments will be engaged and motivated to make the scheme a success. Begin to identify the staff internally that can be recruited to run the basics of the scheme. Planning strategies to deal with under-performance or accelerate over-performance will be imperative to the success of the scheme.
Stage 4: Refinement and Embedding
Finally, this is the stage where the scheme becomes truly embedded in core business systems and strategies. The CRM programme should not only deliver truly tailored and relevant customer communications, it should also be informing fundamental business analysis for new store openings, pricing and promotion strategies, range development, and so on.
You need to be clear about how the scheme helps move from amplifying existing behaviours, to driving the behaviours you want to develop. As more data becomes available, start to get an idea of what to do with emerging groups and subsegments. You may wish to create new layers in your loyalty scheme to cope with high value subgroups. Protocols need to be put in place for iterative learning. As the scheme becomes more successful you should have an idea of milestones to trigger the next phase of your in-house recruitment policy.
Some believe there are five ‘R’s for loyalty: Reassurance (in a world of pandemic risks); Robustness (helping people to stay well and safe); Responsibility (for the less well-off in society); Re-invention (as our patterns of behaviour change post-pandemic); and Resurgence (preparing for renewed consumer demand).
Loyalty schemes can be used as a tool for boosting profits, but also to give back. For instance, Pets at Home raised a total of £2.2m in 2018 alone through its Lifelines programme – allowing customers to accrue points based on spending, and choose benefits for pet charities of their choice.
But the likelihood of finding developmental experts and capabilities in-house is extremely slim, meaning most companies will need to turn to outside help from a third party. The risk in developing loyalty schemes does not merit the huge investment required until the scheme can prove its value.
However, once stable and successful, schemes can be brought fully under in-house control. The best outsourcing partners will be able – and willing – to enable a smooth transition back to the corporation. Regardless of whether they choose this route or not, companies must make sure they are fully involved in each stage of the development journey, to ensure that the desired objectives are being achieved.
Helen Godley is loyalty and retail strategy director at Go Inspire Group
