Maritz's 10 strategy tips for planning a loyalty scheme

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By: Wise Marketer Staff |

Posted on December 5, 2005

Maritz's 10 strategy tips for planning a loyalty scheme

When it comes to planning, defining and implementing a new custom-built customer loyalty programme, there are several basic factors that need to be considered, according to Graham Burt, general manager for Maritz Loyalty Marketing, who offers a broad-brush ten-point guidance list.

According to Burt, the following ten-point strategic process is essential to build a customer loyalty scheme that's tailor-made to identify, retain and grow any company's best customers:

  1. Loyalty situation analysis Before designing a loyalty programme you need to understand your current situation and your capabilities for instituting and managing an effective programme. This analysis will provide you with a combined overview of your needs from an operational, revenue growth and communications perspective.  
  2. Data gathering and gap analysis Drilling down into the customer-specific data allows you to determine how to grow your best customers. Segments could be defined by company; product profit margins; channels by which products were purchased; and customer communication channel (e.g. e-mail, direct mail, and so on).  
  3. Identifying best customers You could conduct additional research during this phase to understand why customers are loyal to one company s brand versus another, and to identify the loyalty profile of best customers and customers who have the best opportunity to become your best customers.  
  4. Earnings overview Project earnings based on well-established loyalty marketing models. For example, earnings models would usually include recency of purchases, number of purchases, and the overall margin of specific products purchased. When these earnings are quantified for key stakeholders, you can begin to identify where there is greater promise to generate profits. In simple terms, develop a model based on mutual reward incentivising and rewarding profitable behaviour.  
  5. Potential programme impact Once you know where to focus, you can set up profitability goals that you want your loyalty programme to reach. During this exercise, you will identify potential cross-sell, up-sell, segment migration, retention, and customer acquisition opportunities.  
  6. Loyalty programme design You should now be able to design a programme that will include the structure, payout levels, and reward recommendations that will drive the desired behaviours of your best customers. The following loyalty reward programme characteristics are essential:
    • Reward: The quality of the reward must match the expected quality of the brand. The total reward mix should be difficult to duplicate, incorporate variety and be perceived as having high and aspirational value and motivate customers to change their behaviour and increase spending to reach a certain level. At the same time, the reward level should be achievable.  
    • Convenience: Once earned, make it easy for customers to redeem, obtain or use their rewards.  
    • Communication: Create better-targeted offers, messaging, rewards and services relevant to individual customers based on the subtle differences in attitudes, preferences and intent.
  7. Estimate your programme investment Quantify the cost to build, maintain and refine your customer loyalty programme on an ongoing basis based on your situation and gap/needs analysis; how far you want to move the needle; and how much profit you want to generate.  
  8. ROI model An ROI model should detail investment, incremental profit, breakage (points never redeemed) and liability projections at 1, 3 and 5 years after implementation. Generally speaking, a well-crafted loyalty programme should break even the first year, covering both set up and implementation costs.  
  9. Test the programme Before you undertake a widespread implementation of your new loyalty scheme, test it with a small number of existing customers. This allows you to test your introduction method, reward mix, redemption structure, and communication schedule vehicles.  
  10. Technology platform Having done all the necessary research and analysis, ensure that you build your loyalty programme using a technology that has the flexibility, scalability, and capacity to change and grow as the scheme develops and matures.

Maritz Loyalty Marketing provides full-service loyalty marketing solutions, and designs, launches, and operates customer rewards and loyalty programmes.

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