The customer landscape is changing; and as a result it is becoming increasingly difficult to keep your customers loyal, according to Barry Smith, Senior Consultant at Ikano Insight. Data-driven marketing is the future; and loyalty programmes are the perfect opportunity to collect vital data about your customers that will inform all areas of your business: from how your marketing budget is spent; to the products/services you offer; right through to merchandising or how your front-line staff communicate with customers. This article is copyright 2015 The Best Customer Guide.

Aligning your business around the customer has never been more imperative. Whether you're just starting out, or you have a loyalty programme already in place, here are the questions to be asking of your marketing team to evaluate how investment in customer loyalty benefits your business.

  1. What data/insight can be gathered from the loyalty programme, and how will it bring us closer to our customers?

The ultimate goal of any loyalty programme is to encourage customers to spend more when on-premise or online; spend more often; and to retain them - but to do this you need a thorough understanding of behaviours, profiles and preferences. Technology is driving the convergence of the digital and physical worlds; all of which are a fantastic opportunity to start collecting more valuable customer engagement data across multiple touch points.

The loyalty mechanic, whether this is a plastic card, mobile app, web or social imprint allows for the transactional information to be gathered and drawn together with other data sources such as social media, mobile or email activity etc. into a single customer view. Analysis and insight from this data then allows you to take action to drive the required behaviours; whether you are trying to get customers to stretch spend or increase their frequency.

  1. How much will a loyalty programme cost us?

Whilst the technicalities can be left to the experts, the proposition and reward mechanism should be calculated, considering the key costs associated with a loyalty programme and the returns that your business will benefit from:

  • Technical: which platform will you use to design, manage and report on your loyalty programme? The technology that you chose to invest in will impact on the way customers experience your programme. For example, if you're using CRM to collect basic contact and spending data it's likely that your technology costs are going to be significantly lower than someone who connects data across all touch-points. But remember technology is an essential investment if it presents greater opportunities for data collection.
  • Marketing: You need a clear strategy behind your programme to drive behaviours. What are your 'Welcome' and retention tactics? Consider where and when customers will interact with your programme and ensure that communication is consistent to offer a good experience.
  • Benefits: These will vary in cost, and can be selected based on your budget. Will you offer limited-time rewards for customers who hit a certain spend threshold; free gifts; or different rewards for different tiers of customers?
  1. What value or ROI will a loyalty programme provide?

Customer loyalty should be viewed as an investment, not a cost. 46% of surveyed customers admit to spending more due to a loyalty programme [1] and we have found for some partners that for every £1 invested they get £6 return.

Your marketing team need to provide you with information that enables you to demonstrate to your key stakeholders the effect the programme is expected to have on your profitability and customer base, including potential expenses and expected sources of revenue, increased physical and online visits, increased spend, referrals and other behaviour changes likely to increase profit.

  1. Who needs to be involved?

Loyalty impacts on all areas of the business, not just the marketing department. From finance to customer services, it is crucial that input and support is provided across the organisation. It's the responsibility of the marketing team to educate everyone from the beginning on how important customer loyalty is and the benefits it will bring to your business. Ensure your marketing team is working with key stakeholders across departments to understand your customer experience and journey; where does loyalty fit into this, and what roles will each department need to make the programme a success?

  1. What are our strategy and objectives, and what does success look like?

The programme's aims and timescales should show how a loyalty programme can grow your business. For example; highly valuable, high-spending customers who have low levels of engagement with your brand should be incentivised to spend more often; whereas highly engaged customers who make regular low value purchases should be incentivised to spend more.

Think about your customers, what makes them loyal? Analyse your existing data and the success of previous campaign results. Have you noticed that customers have gone on to achieve consistently higher levels of spending after being exposed to a promotional email campaign or receiving a discount voucher? What makes your customers keep coming back? If you don't have the answers, think about running a survey to understand why your existing loyal customers keep coming back. This can then be applied and maximised within your loyalty strategy.

  1. What are the mechanics of the programme?

Here we're referring to the processes and procedures behind your programme. Consider:

  • How will the programme be managed? For example, will you do this in house or outsource it to a specialist?
  • Will you offer hard or soft benefits? We recommend a mixture of both.
  • What are the rules for what will/won't be rewarded? For example, are certain product types excluded? Or, will you reward for social media interactions, and if so what types (e.g. shares/likes/comments)?
  • How can customers redeem their rewards?
  • Do you need to run a pilot programmes to test your idea without the cost of a full-scale programme?

In summary, your loyalty programme should not just fit into your business, but shape it. Your marketing team should provide you with a clear understanding of what benefits it can bring to your business in terms of ROI and incremental revenue. Data doesn't lie, and the beauty of this data-driven marketing approach allows you to put numbers against engagement.