The Intricacies of Loyalty Program Design - Part 1

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By: Mala Raj |

Posted on July 13, 2023

A plethora of decisions!

Would you tell me, please, which way I ought to go from here?

That depends a good deal on where you want to get to, said the Cat.

Alice In Wonderland

Loyalty program design is a deeply involved exercise fraught with decisions. Many decisions. Difficult decisions. No right or wrong decisions!

In this three-part series we look at the most critical decisions a brand team needs to take when designing a loyalty program. Be forewarned there are no clear-cut answers – what we are attempting to do is highlight the key issues on which decisions need to be made.

In this first installment we deal with two specific areas of planning:

  1. Setting Objectives
  2. Defining a Value Proposition

Setting Objectives

Too often not enough thought is given to the clear ARTICULATION of objectives. It seems obvious right? “I’m launching a program because I want to retain my customers.”

Not so simple in reality.

A discovery interview process with key stakeholders within the organisation will often make it seem like the loyalty program is a magic wand that will solve all business issues in a flourish.

What we need to bring to the process is

  1. Focus
  2. Clarity


What is the single-most important deliverable for the program? This takes a lot of discussion, even more introspection. What is the single reason you will attribute to program failure if not achieved? Is it retention of your best customers? Is it driving growth amongst your existing customers? Is it driving greater profitability from a certain customer segment?

CLARITY comes when you LAYER YOUR OBJECTIVES. Structure your objectives as:

  • BUSINESS OBJECTIVE – What does the business want to achieve? (There may be many, but what can loyalty tackle)
  • LOYALTY OBJECTIVE - What does the Loyalty Program need to do to achieve the business goal?
  • BEHAVIOURAL OBJECTIVE – What specific customer behaviour do you need to drive in order to achieve the loyalty objective

It also helps to ARTICULATE your objectives clearly. A smart tool to use is the WHO, WHAT, WHEN, WHERE HOW MUCH.

  • WHO are you targeting? What segment/s?
  • WHAT do you want them to do?
  • By WHEN does this have to be done? (One year?)
  • WHERE does this have to be done? (Any specific channels?)
  • HOW MUCH needs to be done? (A targeted number for increase, decrease etc)

Defining a Value Proposition

“The things that make me different are the things that make me, me.” Winnie the Pooh

A Value Proposition is a Statement of Purpose. It is the reason WHY customers should join your program.

The key is to arrive at a holistic proposition that

  • Reflects the brand values
  • Appeals to the rational
  • Appeals to the emotional

Arriving at the value proposition is again a process involving a lot of iterations and discussion. And articulating the same is an equally involved process. Take the time and effort to do this correctly and the rest of your design will fit in place like a beautiful jigsaw.

Some useful guidelines to keep in mind when defining the proposition:

  1. The most holistic proposition combines HARD BENEFITS and SOFT BENEFITS
    • Hard benefits refer to “economic” and more tangible rewards – points, offers, discounts, sweepstakes etc. They provide RATIONAL value. They are almost hygiene in a program – and remember they can be easily replicated.
    • Soft Benefits are the softer and more intangible offerings – special service, exclusive access, privileged invitations, more enhanced and seamless shopping experience etc. They provide EMOTIONAL value. Soft benefits are what will truly differentiate your program brand from others. The feel-good value cannot be over-emphasised on.
  2. It is also important to STRETCH PERCEIVED VALUE. When you give a discount or coupon or a gift certificate, the value is transparent and, in the member’s mind, is equal to the value offered. A 10% discount is a 10% discount. When you offer special services (e.g., a Limo drop to the airport for a top-tier frequent flyer), the value in the member’s mind is far, far greater than the cost to the brand. When you enable celebrity access (Meet your hero), no price can be put on the offering. So, include a set of exclusive, hard-to-price offers. The value boosts the program will get from these is immense.
  3. DELIVER ASPIRATION – This is similar to stretching perceived value. It also means that you check with your members on their aspirations and include those offers. Have the “difficult to attain” rewards that members will aspire for and accrue their currency. Which means they stick to your brand! Curate rewards that are customized and not available off-the-shelf. Have a set of experiences that are aspirational – e.g., Redeem your points for an Everest Helicopter Tour in Nepal.
  4. HAVE A LARGER CAUSE – While this is not mandatory, it is what will make your program stay the course. Keep in mind Gen Y, Gen Z and Gen Alpha’s mental framework and social consciousness. To resonate with this audience, programs will need to go beyond the transactional. Don’t force fit a social cause into the catalogue – like a charity redemption option. Take the effort to link the program to a deeper, larger cause – and it will pay off handsomely in goodwill and stickiness. Members who want to leave the program will then think twice because it means leaving the cause they are affiliated to as well.

Follow these simple guidelines, have a structured approach to value proposition building – and that’s the best foundation your program can have.

To continue to the next part in this series, go here.

About the Author

Mala Raj is a Certified Loyalty Marketing Professional™ and faculty member of the Loyalty Academy™. A Management post- grad from IIM Bangalore, she is an experienced loyalty marketing practitioner having worked for over two decades in the field across clients, audiences, and verticals.

Mala has designed many of the successful loyalty programs running in India today. She has authored research on Loyalty as well as been a jury member for Loyalty Marketing awards in India and internationally.

She can be reached via rajnmala@gmail.com and +919821041171.