Next in loyalty: Eight levers to turn customers into fans

All loyalty programs have members who don't redeem points. This "breakage" reveals issues with redeeming points, members forgetting they've enrolled, unappealing or less relevant rewards, and unachievable reward thresholds.

The best loyalty programs achieve their full potential by restoring members to participate in them. They also ensure to:

• Make point redemption easy.
• Enhance loyalty programs with unique features, challenges, bonuses.
• Remind customers of their point balances.
• Give customers options, such as donating their points.
• Introduce points-plus-cash options.

Alliances can give access to new customers or markets, expand benefits, increase brand awareness and provide greater earning options. But partnerships can also backfire when clear governance is absent around key decisions, creating these pitfalls:

• Redemption catalogues with products or services with no customer value.
• Benefits or discounts that can be attained through other channels.
• A frustrating redemption process.
• Unbalanced perceptions of value, creating misplaced loyalty.

Many customers are enticed by exciting rewards in loyalty programs but lack sufficient program currency, or points, to access them. This can discourage them from continuing to accrue points.

With the points plus cash option, members can pay with a combination of their points and cash and reduce the redemption threshold. This can increase redemptions by 20 to 25% and benefit the overall program profitability.

Program memberships or spend by members are a good reflection of the broad potential universe of members. However, members can be split into segments: enrolled, active, and redeemers. The most valuable metric is redeemers.

• A typical active loyalty program member spends 10% more than an inactive member.
• Redeemer members spend 25% more than inactive members.
• Point redemption accelerates the virtuous loyalty loop when the customer achieves the reward.

Loyalty programs provide valuable data about customers. Leveraging the data into meaningful, actionable segments can drive customer experience.

Segmenting by behaviour instead of needs, value, or demographics ensures that the specific intervention will drive toward the behaviour desired and can become the foundation for creating personalised customer experiences.

Loyalty data can create granular segments of customers.

Building a rapid A/B testing capability is vital to leverage these groups fully. It allows experimenting with new ideas, discarding what doesn't work, and scaling those that add value.

A difficult challenge is accurately measuring the incremental impact of loyalty programs. Unclear key performance indicators (KPIs), complicated ROI calculations, and the need to account for the balance sheet impact of liabilities make moving toward a sustainable program difficult.

Measuring performance around a program-specific P&L assessment help to drive performance. The first step is calculating a baseline P&L to help a company understand its starting point and identify its potential paths forward.