How to Develop a Successful Strategy for Your Loyalty Program in 3 Simple Steps – Step #2: Defining Your Objectives
The Second Step in Your Strategy Development – Define, Where You Want to Go!
Written by Anja Zschoernig
March 17, 2020 | Reading Time: 15 Minutes
As the adage goes:
“If you don’t know where you’re going, you’ll wind up someplace else.”
Your Loyalty Program Goals – Your North Star!
Look at it this way: By establishing clear goals, you are creating your own personal North Star! This North Star will help you confidently navigate all the upcoming decisions and challenges – from the definition of your strategic tactics and program design to the successful management of your loyalty program.
What Is a North Star?
According to Wikipedia: “It is the brightest star in the constellation of Ursa Minor. Since its apparent brightness of 2 magnitudes is relatively high and it is close to the north pole of the sky, it is a suitable means of determining the geographical north direction. For this reason, the North Star has served seamen for many centuries on their journeys.”
And What Does the North Star Have to Do With My Loyalty Program Goals?
Just as the North Star served seamen to effectively navigate, your goals will help you set up and manage your loyalty program to get you just where you want to go.
What Do I Want to Achieve With My Loyalty Program? 3 Valuable Assistance Points for Your Goal Definition
What do I want to achieve with my customer loyalty program? If you have successfully worked through Step #1 of our Guide (the status quo analysis), you will already have a good idea: You are aware of the goals and strategies of your company as a whole, as well as its individual departments – especially the Marketing/CRM/CX departments. You have also worked out how your loyalty program can play a supportive role in this.
You will now “pour “this knowledge (in Guide #1 we called it your “gold” 😊), into a powerful definition of your goals. To best assist you to this end, we have prepared 3 valuable support points for you:
- 3 success principles, that will help you immensely in your goal definition.
- Background information regarding the foundation of your goal definition (determining your loyalty program’s internal and external target groups).
- A summary of possible objectives that you can use as an inspiration for your program.
Ready? Let’s go!
Assistance Point #1: Three Success Principles for Determining Your Loyalty Program Goals
As you clarify your customer loyalty program goals, we recommend you keep the three following success principles in mind:
1. A stronger start by focusing on a few core goals:
As you begin, focus on a few central goals instead of a complex combination of targets. This simplifies the work and greatly increases the likelihood of a successful outcome.
2. An iterative, flexible development process of a starter-MVP:
The first point goes hand-in-hand with the second success factor. Bank on a so-called “MVP” (minimum viable product). This concept from the lean start-up scene describes the first iteration of a product, for which the development effort is kept low to quickly collect valuable feedback and to improve the product based on it.
Applied to your loyalty project, it means: You start with a few core goals, roll out the first iteration of your loyalty program, and develop it continuously using a data-driven approach. Based on this approach, you may add additional goals over time and make them the central focus.
3. SMART Goal Definition:
Make sure your goals are defined in a “S.M.A.R.T.” manner:
Specific (as clear and concrete as possible)
Measurable (based on predefined KPIs)
Accepted (agreed upon and accepted by relevant shareholders)
Realistic (realistically achievable, as backed by necessary resources)
Timed (provided with clear deadlines)
Through transparency and acceptance, all shareholders can thus proceed with united strength in the right direction. And you can regularly evaluate the target achievement and identify necessary optimizations as early as possible.
Assistance Point #2: Determining the Internal and External Target Groups as the Basis for Your Goal Definition
Before you now define what you want to achieve, we recommend another foundational step: First, determine for whom these objectives are relevant.
On the one hand, that means: Who are your “program-operator-internal” target groups? In other words, for which departments and which stakeholders within your business/program are you creating your customer loyalty program? Do certain departments play a special role (i.e. marketing or customer success), and does the program have less relevance for other departments?
With an insurance company, for example, only individual insurance lines could be involved. For an automotive manufacturer, only the new car sales and the after-sales area could be relevant, for example. Within a coalition program, the future program partners can also become relevant program-internal target groups.
After you have clearly defined your stakeholders, you can then go ahead and prepare the goals of your program as a whole as well as separately for each stakeholder.
You must naturally also decide for which customer segments (“company-external” target groups/ program members) you want to create your loyalty program. Do you want to make your loyalty program available to all customers, or limit membership to only specific segments or base membership on payment (premium subscription-based access)?
After you have clearly defined your target customer segments, you can also define which goals you wish to set for these (e.g. which added value would like to offer and which behavior do you want to motivate?).
Assistance Point #3: Possible Objectives Catalog: Choose the Right One for You!
With this preparation in the bag, things will start to get very exciting! What do you want to achieve for your target groups? Which goals will you set for your customer loyalty program?
A loyalty program is a true powerhouse! It can accomplish a tremendous amount for you, and most companies are unaware of its massive potential. The possibilities are so diverse, that we have prepared a catalog for your own program as an inspiration:
1) the Foundational Goal of Your Customer Loyalty Program: A Real Added Value for Your Customers and a Unique Selling Point for You
The key foundational goal of your loyalty program should always be the added value that you can offer your customers through the program. Why? Simply put: only when your target customers perceive your program as truly valuable, will they register and be motivated towards a certain behavior by your various loyalty program tools and tactics. In other words, all other objectives depend on this foundational goal!
A truly excellent customer loyalty program can provide you with an effective USP (unique selling proposition), which is the reason why buyers choose you over your competition. This is especially important when your product offers are very comparable or interchangeable with those of the competition. In such a case, a loyalty program can help you establish a truly effective USP.
2) an Additional Strategic Foundational Goal of Your Customer Loyalty Program: The Access to 360° Customer Data, Opt-Ins and a Direct Communications Channel With Your Customers
Depending on the industry in which your company is based, you may not yet have a direct communication channel with your customers: either because you do not have their contact data or because you are not permitted to use it (which, due to the GDPR, has become a major obstacle in Europe).
A customer loyalty program can now give your customers the incentive to make their contact information available to you and to give their consent to communication, as well as to the collection and use of their personal data (opt-in) because in return they will receive clear added value.
This alone represents an immense strategic value, and thus a foundational goal of a loyalty program: You can pave your way to 360° customer data and, with it, an in-depth understanding of your customer. Equipped with this knowledge and the necessary opt-ins, you can execute highly efficient direct-marketing and communication measures (see below), optimize data-driven price-, promotion- and incentive-strategies, derive valuable insights for your category management and much more.
3) the Third Strategic Foundational Goal of Your Customer Loyalty Program: Access to a Highly Efficient, Data-Driven Direct Marketing-, Promotion- and Incentive Engine
A customer loyalty program can allow you to forego wasteful price wars and classic advertising measures with high waste coverage, in favor of driving customer behavior in a sustainable, data-driven manner.
Therefore, an additional strategic foundational goal that you should set is access to a highly efficient direct marketing-, promotion- and incentive-engine via your loyalty program.
Such an engine may include:
- Personalized communication
- Point-based incentive engine
- Behavior based status levels
- Basic privileges
- Data-driven promotions
You can use these tools to demonstrate your appreciation to your customers, to excite and engage them, to bond them to your brand and to efficiently motivate the desired behavior.
4) Financial Goals: Increasing Sales, Growth, and Profitability Through Various Customer Loyalty KPIs
Often, loyalty programs are used to reach financial targets: e.g. increase sales, growth, profitability, etc. All of the foundational goals listed above support these overarching financial goals. Furthermore, with the help of smartly defined KPIs, you can make your financial goals measurable and manageable – a few examples:
- Increased customer loyalty, reduced customer churn, increased repurchase rate
- Increased customer lifetime value
- Cross- and upselling
- Increased shopping cart value and purchase frequency
- Increased revenue through data-driven optimized category management
- Increased marketing efficiency, higher marketing ROI (through the use of data-driven direct marketing instead of low-yielding traditional marketing channels; achievement of higher ROIs through budget shifts towards customer loyalty instead of costly customer acquisition)
- Increased profit margins (e.g. through reduced price sensitivity and use of data-based knowledge about individual price sensitivities)
- Cost savings (e.g. savings on expenditures for external market analysis, as the customer loyalty program with its own data base and direct customer feedback can serve as a replacement)
- New customer acquisition (because your customer loyalty program is so attractive, it also gives new customers a reason to choose you over the competition)
5) Sustainability of Business Goal Achievement Through Increased Customer Satisfaction and Customer Brand Engagements
Additionally, you can ensure the sustainability of your business success through your loyalty program, by defining goals such as high customer satisfaction and the active co-creation of your brand through your customers.
This takes account of the fact that, in our digitalized and saturated economy, a good customer-brand-relationship must be based on much more than mere transactions. A successful customer loyalty strategy is thus not only geared towards the goal of customer loyalty in the sense of promoting sales, but rather to encourage the following in buyers:
- Loyal customers and satisfied brand fans: this can be measured through transactional KPIs (repurchase rate, reduction of customer migration, etc.) but also through various customer satisfaction surveys and indicators
- Happy brand ambassadors: this can be measured by high NPS, referral rates, (positive) activity on social media (e.g. mentions, likes, shares) and positive product and brand reviews
- Active brand co-creators: positive product and company reviews also fall under this category, as well as sharing brand experience moments over social networks for example and thus generally the topic of “social proof”
- Engaged innovators + optimization-trendsetters: the customer as a part of the continuous optimization process in your business through actively soliciting feedback and involving customers in the innovative process
6) the Icing on the Cake: Loyalty Programs as Drivers of Company-Wide Customer Centricity
In addition to the program targets outlined above, there is another strategic value to customer loyalty programs that can become part of your loyalty program’s target-set: driving customer centricity.
Even when a customer loyalty program is typically initiated and run from a particular department (e.g., marketing, CRM or CX), its success can inspire company-wide changes towards a real data-driven customer-centric approach. Your loyalty program can thus be a strategic initiative, which helps your business align itself across all departments to better meet the needs of your customers.
Congratulations on Your Own Personal Loyalty Program North Star!
We very much hope that, through this article, we were able to provide you with valuable assistance in defining your personal “North Star” for your loyalty program. If you need more help in this area or would like to review your goal definition with one of our loyalty experts, you may contact us at any time!
So then: Congrats! You now know “where you want to go” and can begin to define your strategic levers, tools and tactics (“how do I get there”)! Click here for our Guide #3 which covers this topic in-depth.
About The authors
Head of Marketing | Loyalty Prime
Anja is a customer loyalty & digital product enthusiast with 10+ years in-depth experience in loyalty, digital product management and marketing.