How to Develop a Successful Strategy for Your Loyalty Program in 3 Simple Steps – Step #1: The Status Quo Analysis

The First Step in Your Strategy Development – Know Where You’re at!

Anja Zschoernig
Stephanie Patchev, PhD

Written by Anja Zschoernig & Stephanie Patchev, PhD

March 17, 2020 | Reading Time: 12 Minutes

The Status Quo Analysis as the Basis of Your Loyalty Strategy Development: Know Where You’re at based on an inventory of your current business

Welcome to the first step in our three-part guide! As summarized in the Intro, you will get to know three simple steps in this Enterprise Guide that will show you how to develop an outstanding loyalty program strategy:

The basis of your strategy is an inventory of your current business and market position (“where are you at?”).  On the basis of such an analysis, you can make an informed decision on “where you want to go” with your customer loyalty program (i.e., goal definition), and also “how you want to get there” (strategic levers and tactics).

Now perhaps you are thinking: “A Status Quo Analysis?! That sounds complicated and time consuming!” But no worries – in this article, we have put together all the important questions in a clearly organized catalogue for you. Thereby, you can execute Step #1 efficiently and quickly come to the desired result.

Imagine it like a small discovery adventure, where you will collect valuable gold nuggets for an outstanding strategy! Three travel destinations await you: your business, your customers and your market environment.

One handy thing to accompany you along the way: a travel journal 😊 In this practical worksheet, we have put together all the important travel destinations and questions for your analysis. Just enter your findings and, upon completion, you will have a pot of gold in hand – allowing you to perfectly manage Step #2 and #3 of your strategy development.

Off we go!

Destination 1: Your Company

The first stop of your journey will get personal – with an in-depth look at yourself 😊! In the process, we recommend that you prepare systematically from the big picture (the overall company) down to the details (individual departments and products). You can use the following list of questions, which you will also find in our worksheet.

The Company Overall

  • What strategic objectives is your business pursuing? Which of these objectives should your customer loyalty program support?
  • What are the strengths of your company? How can you use them to make your loyalty program successful? And likewise: how can you use your loyalty program to further expand your existing strengths?
  • Does your company have some weak points or blind spots? How can you set up your customer loyalty program to overcome them?

The Individual Departments Within Your Company

  • What goals and strategies are being pursued by the various divisions and departments within your company? How can your customer loyalty program support them in these endeavors?
  • What are the strengths of the different departments? How can you use these strengths for your loyalty program? And how can you use your loyalty program to further strengthen them?
  • Are there weaknesses within the individual departments that your benefits program can help mitigate?
  • Is there a potential for your loyalty program to help foster a more customer-centric approach in your company? Can it help your company align itself more consistently with the needs of customers across all departments?
  • What is the level of cooperation currently between the individual departments? Are there political aspects you need to consider for your loyalty program?

The Products and Offers Portfolio of Your Company

  • What different products and offer categories exist in your business?
  • What are the objectives, challenges, strengths and weaknesses of these products and offers, and which strategies exist to address them? How can your loyalty program be of support here?

The Marketing and (if applicable) CRM, Loyalty and/or Customer Experience Division

Typically, customer loyalty programs are set up from one of these departments. Hence, the goals and strategies of these departments become tightly interwoven with the loyalty program strategies. Here, you can also take note of some valuable input:

  • What are your current marketing, CRM, and customer experience objectives and strategies?
  • Which of these objectives would you want your customer loyalty program to support? What are the particularly important aspects to consider for your loyalty program?

The Existing IT Infrastructure

A penultimate step at this destination is to take an inventory of your current IT infrastructure:

  • Which technologies and tools are already in use? (e.g., ERP System, CRM System, campaign management, CMS, point of sale system, etc.)
  • What needs to be considered here for the new technical loyalty solution?

The detailed requirements of the IT solution for your customer loyalty program will become more concrete as soon as your program strategy and your program design are in place. In choosing a solution, the following aspects will definitely be crucial:

  • Easy to integrate into your existing system landscape
  • Top notch performance and data security
  • Coverage of your desired program functionalities

Your Budget

Last but not least, it is important to know the size of the budget you will have available for your loyalty program. Relevant cost factors will be:

  • One-time program setup costs (which can be kept to a minimum by using SaaS technology from a suitable provider)
  • The program operation from both a technical and personnel perspective
  • The cost for communication and incentivizing your customers

These costs are offset by the profits that can be expected from a customer loyalty program. Often times, the budgets will not yet be firm at the beginning of a loyalty project, due to the uncertainty of expected costs and profits. To help you make an accurate budget estimation, you will receive valuable tips in the upcoming articles on the Loyalty Insights Blog. In addition, you can also request a consultation from us for initial help with ROI calculation.

Destination 2: Your Customer Base

The next location in your journey takes you deep into your customer base. Your situational analysis is searching for clues in order to identify the largest potential for your loyalty program and to answer the following questions:

  • Which customer segments are you currently serving?
  • How are sales and profits generated across these segments?
  • What are the needs, motivations and wishes of these segments?
  • Where and how do your customers interact with you currently? It is extremely helpful, at this point, to create a customer journey map if you do not already have one. It will show you not only when and where your customer segments interact with your brand, but also what motivations or obstacles exist at every step of the journey. This will give you important clues for how to optimally structure your customer loyalty program!

The above analysis provides you with the necessary information to clarify the following key questions regarding the design of your loyalty program:

  • Which customer segments will your loyalty program be focused on? Where do you see the greatest potential?
  • Which behaviors would you like your program to motivate in your customer segments?
  • What will be the required success factors to achieve and sustain the desired change in behavior?

Destination 3: Your Market Environment

You know all too well – it’s not enough to offer your customers an excellent brand experience and to make them happy with your offers. You must also make them happier than your competitors, and achieve this in a way that is both sustainable and profitable for your company. For this reason, you will need to examine and analyze your competitive environment:

  • What customer retention approaches does the competition pursue?
  • What does the customer experience look like for your competitors?
  • Where do you see opportunities to deliver clear added value (a unique selling proposition) to your customers as compared to the competition?
  • Which loyalty best practice examples can you draw inspiration from?

Along with the competitive analysis, remember to think outside the box and keep an eye on the overall trends in your industry. Are there any significant emergent changes that you should be prepared for?

Some examples are the trends towards personalization and data-driven marketing automation as well as, in Europe, the GDPR. This is precisely where a customer loyalty program can be of strategic value in several ways – helping you stay ahead of the curve in the face of rapid developments: It can provide the necessary opt-ins from customers, as well as the necessary data basis and tools to efficiently and effectively drive customer behavior through personalized, data-driven direct marketing.

The Grand Finale of Your Journey

What a successful discovery tour! You will be thrilled with the many new insights and findings you have acquired on this journey through the innermost workings of your company. You found lots of “gold” along the way for your strategic foundation and, using it, you can now make some informed decisions:

Before you move on to steps #2 and #3, it might be a useful final exercise to grab your travel journal and summarize the findings from your inventory in a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats).

SWOT Analysis

The method contrasts the internal strengths and weaknesses with external opportunities and risks; it aims to maximize the value achievable through strengths and opportunities and minimize the potential losses due to weaknesses and risks.

You typically want to use your customer loyalty program to support one or more of these strategic action areas:

  • Build on existing strengths
  • Mitigate existing weaknesses
  • Take advantage of emerging opportunities (particularly with existing and cultivated strengths as well as reducing obstructive weaknesses)
  • Minimize current risks (particularly with existing and cultivated strengths as well as reducing obstructive weaknesses)

The SWOT analysis thus provides you with important starting points for the next 2 steps in your loyalty program strategy development, i.e. answering the next two key questions:

  • “Where are we going?“ (Step #2)
  • as well as “How do we get there?” (Step #3).

Congratulations! You have now successfully completed your comprehensive discovery tour and can move on to the goal definition for your loyalty program – perfectly informed!  Click here for Step #2 of the guide!


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About The authors

Anja Zschoernig

Anja Zschoernig

Head of Marketing | Loyalty Prime

With her 10+ years of experience in the loyalty industry as well as in digital product management and marketing, there is no question for Anja: excellently set-up customer loyalty programs, motorized by the right tech stack, make the heart of every data-driven marketer sing! As Loyalty Prime’s Head of Marketing, she loves to inform and inspire about the great possibilities of powerful customer loyalty programs and Loyalty Prime’s award-winning technology!

Stephanie Patchev, PhD

Stephanie Patchev, PhD

formerly Content Specialist | Loyalty Prime

Stephanie is truly passionate about outstanding, well-researched content that inspires people. With her background in Neurosciences, she has a deep understanding about the bio-psychological basis of customer behavior and customer loyalty.