Championing investment in loyalty marketing: an essential eight step guide
For every company that loses a customer, another company is prepared to win that same customer and maximise lifetime value through continuous contextual engagement. By Marc Darling of TIBCO Loyalty Lab.
To establish efficient and effective customer loyalty programme management, there are eight steps that will help you remove common roadblocks to investment, gain agreement, and build a strong foundation for measuring and optimising loyalty investments into the future.
Step one – organise and commit stakeholders
Ask stakeholders to agree on objectives and metrics at the outset. Start with high-level questions.
- What defines loyalty for your company?
- What specific KPIs will be improved?
- What level of change can be managed in and outside of the central office?
- How will success impact overall financial performance in the eyes of investors?
Step two – identify value drivers
Four value drivers related to either technology or business outcomes need to be established to ensure both operational and strategic objectives are met:
Value driver one: turn customers into fans
Turning customers into fans describes maximising the lifetime value of your customer by delivering the right offer at a precise moment through the optimal channel.
Value driver two: intelligent contextual engagement
Today, marketers must determine how to integrate data-at-rest and data-in-motion with powerful analytics and real-time decision engines to deliver contextually rich customer engagements.
Value driver three: omni-channel SaaS platform
Plugging into an omni-channel SaaS loyalty management platform requires negligible investment in software, hardware, integration, and maintenance.
Value driver four: accelerated value optimisation
Marketers can optimise return on their investment through immediate testing and adaptive learning about interaction scenarios. Rigorous test and learn is the best way to discover ways to evolve programmes and do more with less.
Step three – ideate and validate
In this design phase, programmes may be all encompassing and provide fundamentally new ways to capture customers and engage them with your brand, or they may be smaller campaign initiatives that allow you to test the strength of your ideas along with the systems that deliver those programmes.
Step four – baseline existing performance
It is difficult to understand how successful a programme is unless you have an understanding of where you started. Mine your dataset to determine how many customers fall into each behavioural segment.
Questions you might ask include:
- How much are they currently spending?
- How frequently do they buy?
- What do they buy, and for whom?
- What is their average order value?
- What gross margin results?
- What is their attrition rate?
- What is their conversion rate?
- How loyal are they now?
Step five – build consensus on improvement
If all the great ideas generated in step three are validated by your customers, how good will your programme be? How does increased improvement on each of the key metrics impact the business? Knowing the economic impact makes it easier to determine how you will prioritise your optimisation efforts.
Ask if-then questions such as:
- If we do x, then how many more transactions will customers make?
- If y happens, how much more likely are they to advocate to friends?
- If a customer advocates to a friend, how likely is that friend to make a purchase, and for what amount?
Step six – assess total programme cost
Building a thorough understanding of the costs and the implications of investing is critical for establishing credibility. The costs of loyalty marketing are many – including technology, rewards, people, marketing collateral, and advertising.
Step seven – calculate ROI
If you’ve done your due diligence in steps five and six, calculating ROI should be relatively straightforward; however, your calculation may be affected by how your organisation views investment risk.
Step eight – understand sensitivity and management risk
Companies take different approaches with regard to ROI and break even. For example, some organisations seek a breadth of inputs that define low, likely, and high scenarios in order to see the range of impact. Understanding, evaluating, and deploying the initiatives that will ultimately drive profitability.
When you:
- Understand your customers and their behaviours
- Establish an effective framework for evaluation and optimisation
- Assemble a committed team working in agreement
- Leverage technology, robust accounting, and efficient businesses processes
Your loyalty initiatives can deliver significant and increasing revenue and profitability.
