Identifying the Details of the Loyalty Program
After setting a high-level loyalty strategy, a retailer should then customize the key components or “the guts” of the loyalty program. Conceptually, this involves specifying key parameters that detail how the program will function. The principal program aspects that need to be determined include program structure, layers, fee structure, loyalty tier/status features, and corresponding promotional segmentation. This easy step-by-step approach can be utilized to assist retailers in the program engineering process:
Step 1—Define the Core Loyalty Program
- Set a comprehensive central strategy for how rewards are established, earned, redeemed, and expired. Consider some common program structures, such as Automatic Rewards, Bankable Points, Discounts, Product Frequency, and Visit Frequency.
- Note: Your program should closely align with brand image and emphasize the elements that differentiate you from competitors.
- Choose further benefits to be offered on top of the core program for enhanced customer connection (i.e. Birthday, Membership, Special Pricing, Charitable, Surprise/Delight, etc.).
Step 3—Determine Core Loyalty Program Fee Structure
- Will program participation be free or fee-based (i.e. Sam’s Club, BJ’s)?
- Note: Ensure that your product type and customer base are considered in making this decision.
Step 4—Decide Core Loyalty Program Tiers and/or Loyalty Status Structure
- Select criteria for how customers are awarded loyalty status, including tiers and number of tiers (i.e. Gold, Silver, Bronze), tier minimums (in $’s or points), loyalty status requirements, etc.
- Identify the reward structure for the program – what does the customer get for the points earned and what is the reward ratio (i.e. 500 points = $5 coupon).
Step 5—Determine Core Loyalty Program Promotional Segmentation and Communications
- Which other offers will be layered on top of the base program to induce purchases? (i.e. coupons, double points, contests, visit challenges, we miss you offers, etc.)
- Which promotions are sent to which customers? How are offers kept relevant and easy to understand? What effectiveness measures will be used to gauge promotional impact and what is finding traction among various customer groups?
For the final post in this series, see Getting the Bang for your Loyalty Program Buck—Part III.
Post by John Eagles and Laura Sossong
About John Eagles, Vice President
John has experience in both retail and restaurant as an executive and consultant. He has held executive positions at Bradlees Department Stores, Ames Department Stores, and Papa Gino’s Pizzeria and D’Angelo’s Grilled Sandwiches. He specializes in strategy, POS, merchandising and mobile solutions. He has consulted on a wide range of retail and restaurant enterprise applications, from selection through implementation.
About Laura Sossong, Management Consultant
Laura is an experienced individual with core competencies in merchandising and retail strategy, product optimization, technological innovation, and team training and restructuring. Her efforts have been instrumental in the execution of various organizational strategies and solutions. She has effectively introduced and implemented initiatives for American Eagle Outfitters and MGM Resorts International, among others.