Assessing your company’s readiness for a loyalty program is a complex project. The decision to invest in loyalty must be well informed; knowledge is power. But what kinds of knowledge provide the greatest leverage to help make smart decisions?
Behavioral data? Research? Opportunity analysis? Target audience expectations? The latest Best Practices?
The short answer: all the above. But available information – even customized primary research – may not provide the sharp loyalty focus you’ll need to assess loyalty readiness and eventually inform program design. We have found that there are three critical types of insight most helpful in informing a company’s loyalty decision making: consumer insight, competitive insight, and loyalty landscape insight.
Consumer Insight
Most marketers have tons of consumer research and have often collected useful behavioral data. Smart companies have done their homework to understand how different audience segments respond to different offers and messages, and how their customers choose – and stay loyal to – brands. But these insights are usually somewhat broad; seldom does market research drill down into the specifics of how loyalty programs influence consumer behavior.
Breaking the mold, Lululemon Athletica focused their consumer research by testing their program on a small segment of Canadian consumers. Using this test launch, they focused their attention wholeheartedly on the program members and gained useful feedback from those in the group. This allowed them to make meaningful changes to their program structure before implementing the program to their full consumer base.
Since customer loyalty is driven by a combination of emotional and behavioral factors, a company considering launching a loyalty program should focus on both those aspects of loyalty.
Behavioral loyalty is understood as, “What do I get when I do business with your brand?” To identify the relative effectiveness of different program components, research must be designed to probe specific potential features, benefits, messages, and experiences that could be part of a loyalty program. Which audience segment is motivated primarily by discounts or member pricing? Which has more power: a members-only shopping night or a birthday gift? Which customers would rather collect and redeem points for merchandise, and which would be more motivated by a travel reward?
Emotional loyalty – “How do I feel about doing business with your brand?” – is at least equally powerful, and it has historically been more difficult to measure than transactional behavior. However, recent breakthroughs combining academic research, statistical analysis and years of practical loyalty experience now allow marketers to better understand the drivers of emotional loyalty. There are three key drivers: Status, Habit, and Reciprocity. And those drivers can be scored based on customer survey responses. Kobie’s ELS® (Emotional Loyalty Scoring) is a tool that provides guidance to help brands decide which emotional program elements would be most effective at motivating specific customers. Such emotional elements include recognition, customized services and messages, special events and a feeling of community with other program members.
Knowing which factors motivate your customer base is a critical part of being ready to launch a loyalty program.
Competitive Insight
Most marketers monitor their direct competitors and use competitive insights to guide such key decisions as location, pricing, merchandise mix, store set, channel mix, and promotions. But as with consumer insights, competitive analysis to inform loyalty investment decisions must be focused on the specifics of loyalty in your competitive set.
That means researching loyalty programs and programmatic efforts in your vertical. Are programs typical in your category? Why or why not? Do the economics and consumer behaviors in your category suggest an approach to loyalty – and equally important, do they help you identify and avoid pitfalls?
When we review and analyze competitive loyalty efforts, we include both classic structured earning-and-reward programs as well as “softer” efforts focused on content, access, service and experiences. We look behind the consumer-facing program experience to take an expert view of program structure and economics, helping you understand what the likely costs, returns and risks might be associated with each competitor’s program. We assess the probable operational challenges that might impact each program. The goal should be to develop the deepest possible competitive insights so you can learn from your competitors’ experience, not your own mistakes.
Loyalty Landscape Insight
In addition to competitive insights, we also suggest reaching beyond your category to see what loyalty tactics are proving effective in other verticals, especially for products and services that your customers also purchase. The experiences your customers have with the loyalty programs of entirely different products may well influence their expectations and perceptions of your program. Companies should develop broader “peer groups” of relevant brands that may have analogous challenges or serve the same consumer cohort. Often strategies from a different category can be best practices applicable to your business.
Some of the best creative program design comes from this kind of insight. Understanding how brands address customer experiences across channels, formats, and touchpoints can set off light bulbs over your head; synthesizing and applying smart strategies from one category to another can be a game-changer.
A current example is the convergence of restaurants and grocery stores with delivery services. Now, restaurants are cashing in on the ability to partner with Uber Eats, Grubhub, Postmates and other services to expand their consumer base daily. Customers who do not have time or simply do not want to cook dinner at night previously had to grab a ready-made meal from the grocery store or order a pizza; now, they have far more options at their fingertips. Plus, the centralized location for all the restaurants allows each venue to have increased visibility; dining establishments that run independent delivery services, such as Chili’s, have standalone website or mobile apps for menus and ordering systems. With all the restaurants on one app, the level of effort for the consumer has decreased, and they are more likely to browse on that website than to check several individual sites. Thus, to many restaurants, expanding their audience to mobile delivery apps allows them to increase brand visibility and recognition, along with increased sales and more frequent transactions with their customers.
Being ready for loyalty means understanding the loyalty landscape and what emerging features are a good fit for your customers.
Knowledge is Power
As we’ve seen, there is a lot to consider when assessing your company’s loyalty program readiness. But no matter how much effort you invest in a thorough, objective readiness assessment, it is a very smart investment. Gaining as much insight as you can before building a program can help avoid very expensive mistakes and help ensure a successful program for years to come.
Ready to start your loyalty journey? Contact us at info@kobie.com for more information.
