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Today, brands have access to many strategies to differentiate their loyalty programmes but success ultimately requires a deeper understanding of the channels their customers interact with and what motivates them, according to Krishna Mehra, co-founder and CTO for Capillary Technologies, who here explains several strategies that can help make a brand the customer's preferred destination. This article is copyright 2013 The Best Customer Guide.

In the quest to retain customers, many retailers have created loyalty programmes. In fact, the average household in the United States has signed up for 14 loyalty programmes, ranging from grocery stores and gas stations to airlines and hotels. The question is whether the consumer really values the loyalty programmes that a retail brand has created and is engaging more meaningfully, as a result. The facts show otherwise: only 6 of the 14 loyalty programme cards are actively used. Hence, companies that offer loyalty programmes have a challenge to successfully win the hearts and minds of their consumers to become the few that are actively used.

However for some retailers, creating a compelling loyalty programme isn't necessary; In some industries, even if a loyalty programme isn't unique or particularly rewarding, it may be successful. For example, a local grocery store retailer may have a regular "run of the mill" programme but consumers will regularly engage with it since they come to the grocery store every week. However, most retail brands, don't have the same characteristics as grocery store retailers so this article will focus on what the other retail brands need.

So, how does your brand become the consumer's preferred destination if your products are differentiated and your stores are ideally located? How do you differentiate your programme if you were a less frequent destination? How do you get consumers to remember to come your store and not your competition? How can you increase programme activity? Should you simply spend more on your loyalty programme?

Before getting into strategies to differentiate a loyalty programme, a brand must be able to measure its success. Examples of success measures include key metrics around customer retention, the total spend and the customer's lifetime value. Finally, determining how the programme is delivering that ROI (Return On Investment) determines the overall success of a loyalty programme from the organisational perspective and also helps sustain future investments into the programme. In summary, retail brands should measure and monitor how well their loyalty programmes are doing and use that feedback to continually adjust the programme.

So, what are some ways to create a successful loyalty programme? Here are a few key strategies to differentiate your loyalty programme that can help ensure a more successful programme:

  1. Increase Engagement
    Creatively use your programme's currency:
    To successfully increase customer engagement, your brand needs to determine your programme's currency: Is it points, milestones, offers or a combination of the above? Brands can get really creative with the currency and how the points are awarded and redeemed. For example, Foursquare partnered with Amex to provide Foursquare points when using an American Express card, and Shopkick partnered with Visa to provide Shopkick points when using a Visa card at locations such as Best Buy, toys "R" Us or Old Navy.

    Seamless multi-channel support:
    Is your brand engaging only in one channel or across all channels - within the store, online, and on social media and mobile apps? - e.g., On social media, are you giving consumers points for activity when they check-in on Foursquare, pin something on Pinterest or share something on Facebook? Retail brands need to make sure to stay at the "top of mind" across channels. For example, 60% of Millennials rate products and services online and upload videos, images and blog entries to the web. Furthermore, 79% of Millennials are using social-media platforms compared to 59% of non-Millennials. Hence, a retail brand needs to bring its online, social, mobile and in-store experience together on a single platform and make recommendations across channels.

  2. Data Driven Engagement
    One-to-one marketing:
    Analytics is no longer aspirational but critical for a loyalty programme today. With Amazon, customers have become used to getting the right content and right products quickly delivered to them, and they expect everybody else to do the same. The days of non-targeted engagement are over and without the analytics to understand customers' behaviour and then segment them on this basis, 1:1 personalised marketing is not possible.

    Lifecycle Engagement:
    Customers are often at a different stage in terms of their buying cycle. Going one step further from the above, it's important to talk to the customer about what's most relevant to them based on when they made their last purchase. For example, if John bought a phone in January, he is not going to buy another phone in the next couple of months, and sending him phone offers at the time will only alienate him as a customer. Now, if a brand knows that John is an early adopter, they might switch phones in 8-12 months, so the right time to talk to him is in Sep-Oct right before the holiday season. A company that utilizes lifecycle engagement successfully is Pizza Hut. This pizza chain understood that when a customer purchases a pizza on a Friday night, they are not likely to buy another pizza the next night so the best time to offer them a promotion on a pizza is 5-6 days from the date of the original purchase when a customer is thinking about their dinner plans for the upcoming weekend.

  3. Experiential Marketing
    Everybody wants to feel special, so if a brand can make the customer feel special by being a premium member, the customer will have a much higher and positive brand recall. They remember when a retail brand went the extra mile to do something special for them. A premium experience is most relevant to a brand's most valued customers, ones that purchase often and in high amounts.

    Make them feel part of the family - Strategies to engage premium customers can include holding special sessions like "meet the author", "talk to the designers", "breakfast with the CEO" etc. Another strategy can be to ask for product feedback or offer a sneak peek into a product launch to make them feel a part of an exclusive club. A brand can even feature them in their marketing campaigns. Dove's "Real Beauty" commercials for its line of skin care products has been particularly effective in featuring their own customers in their advertising and have its brand associated with a positive topic that every woman is beautiful in her own way.

    Special Access and Benefits:
    These types of programmes can make top customers feel special and increase brand loyalty. For example, an airline can offer access to a special airport lounge or a retailer can offer preferred access to "fitting rooms" during the peak holiday seasons, free priority shipping, or "white glove" delivery and set-up of merchandise.

    Customer Satisfaction:
    Identifying customers who speak highly of a retail brands' products ("promoters") and rewarding them through a special programme or increased loyalty status is a great way to recognise their loyalty and ensure that a brand's best customers stay happy.

In conclusion, your loyalty programme's success begins with a deep understanding of what motivates your customers. These insights into the customer's behaviour can make the programme relevant and personal enough that it motivates them enough to increase their engagement with your brand over other brands.

The first step, therefore, is to capture and analyse the data from all the channels through which customers engage, be it mobile, social, in-store or online. The insights from customer data analytics can then inform the design (or re-design) of the loyalty programme.