Blog Post #6
Loyalty and rewards programs are a useful tool for brands to build loyalty with their customers and increase purchases. However, the process of developing a rewards program can easily go the wrong direction if the correct steps are not considered. In the book Loyalty 3.0, Paharia (2013) states, “The road map covers four essential steps, steps that will probably sound familiar to you if you’ve ever run a development project of any kind: plan, design, build, and optimize” (ch.8 para. 2). While it initially appears to be simple, there are many concepts to consider within each step. The brainstorming and planning for a loyalty program is valuable to discuss first because it builds the foundation for the entirety of the program development.
In the first few steps of development, the team creating the program must first identify the very core of their program. The brand or organization needs to identify what the loyalty program is going to do, who will be using it, and the actions of the consumer that they want to be taken as a result (Paharia ch. 8 para. 4–11). A loyalty program needs to have purpose behind it, and the implementation cannot be done halfway. The creator needs to pay attention to these initial details and utilize research to inform their decisions from the beginning.
Moving to the next step of program development, the key performance indicators, otherwise known as KPIs, must be declared (Paharia ch. 8 para. 12). According to Saura, Palos-Sanchez, and Cerda Suarez (2017), “…we see that there is a gap in skills development in terms of monitoring and assessing marketing actions in DM. This gap will potentially weaken marketers strategically because it means they will have an incomplete or even erroneous understanding of the effectiveness of their interventions” (p. 11). The ability to measure how a loyalty program performs is vitally important. The marketing industry needs to be able to gauge if they are hitting their goals or not. Therefore, the decisions made on KPIs for a loyalty program are an impactful step of the process.
Now that a lot of ground has been set for the loyalty program, the next couple of steps build on that for understanding, vision, and goal setting. Step five and step six of creating a loyalty program are to develop a mission statement and take note of the resources needed and available for the program (Paharia ch.8 para. 13–21). The goal of the rewards program should be put down on paper to ensure that it has the proper direction and mission. Also, the person that builds the program needs to understand what they will need to get the program up and running, and they will need to take inventory of their resources (Paharia ch.8 para. 21).
In the last couple steps of the planning process, the program needs to prove itself effective through the numbers and build a solid case to get others on board. The loyalty program needs to have its estimated ROI, or otherwise known as return-on-investment, calculated to ensure that it will actually be helpful to the company (Paharia ch.8 para. 24–31). Lastly, the rewards program and all the research gathered prior must be presented to those that need to provide approval and investment (Paharia ch.8 para. 32–33).
Overall, the planning process for a loyalty program should be detailed and involved. A rewards program that is not carefully planned for will be more likely to fail and feel disconnected at its core. A solid loyalty program is strategized and researched well prior to its creation.
References
Paharia, R. (2013). Loyalty 3.0: How to revolutionize customer and employee engagement with big data and gamification [eBook edition]. McGraw Hill. https://learning.oreilly.com/library/view/loyalty-3-0-how/9780071813372/ch01.html#ch01lev3
Saura, J. R., Palos-Sanchez, P., & Cerda Suarez, L. M. (2017). Understanding the Digital Marketing Environment with KPIs and Web Analytics. Future Internet, 9(4), 76. https://doi.org/10.3390/fi9040076
