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A successful loyalty program can effectively connect your customers with your business. It helps to establish a strong relationship and ongoing success. However, with time, the factors that drive your success may change; even your definition of success can shift. When that happens, it is essential to evolve the program to keep it relevant and effective.
We often see brands wait five to seven years before updating their strategy. But does your business look the same as it did five or seven years ago? Do your customers and their expectations?
If you’re wondering if now is the right time is to give your program a refresh, ask yourself three questions:
- Are my customers changing?
- Is my business evolving?
- Have my priorities & opportunities moved?
We recommend brands review their program strategy every few years
Program to Customer Alignment
When we design strategies for clients, we always start with the customer. This includes analyzing and segmenting customers based on their needs, wants, and perceptions of value to find groups that need distinct consideration in our strategy. This helps you find the right way to motivate the customers you want to engage. However, your customers and their needs should be re-evaluated over time to help your loyalty program (and business) continue to grow.
New sources for growth.
It may sound counterintuitive, but your program may be too well aligned with a customer profile. It may be so successful that there’s no more growth to get out of your original target segment.
That’s a downfall of being highly successful and is something you’ll want to protect. But if you’re looking for growth, you’ll need to acquire more of your ‘old target’ customers, find a different way to create revenue from them or shift your strategy to appeal to a new segment.
You may also find that it’s your customers, or customer behavior, that are creating more costs in your program than benefits. In this case, you will also need to adjust your loyalty program strategy to avoid rewarding unprofitable customers.
A different customer.
Are you engaging with different types of customers than in the past – intentionally or unknowingly? For example, shifts in channel use often reflect shifts in customer profiles or at least in occasions. These customers may have different preferences and needs than those for which you originally designed your program. Your next generation of customers likely have different loyalty preferences and expectations too.
New expectations & value.
As your program has gotten older, your customers have too. They may have different needs than when you first engaged them. Kognitiv’s global research shows that the value a loyalty program provides is the strongest reason consumers engage with it. However, what consumers see as valuable – for example, VIP treatment, access to special events, or the ability to donate rewards to charities – varies by demographics and customer segments.
Customers’ expectations may have changed with exposure to new programs, competitors, or other experiences. Ask yourself if your program has the same relative level of experience and perceived relative value as it did when you launched. Do the customers you’re trying to engage today value the same things as the customers you’ve been focusing on, and do they present the same opportunity to your business? If your customer profile has shifted, or you’re targeting a new one, your approach to loyalty should adapt.
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Look at how customers are progressing through their lifecycle with your brand. Check if it varies by customer segment. You can research (or test) ways to engage the underperforming segments. Once you’ve identified that, use this in your design – and as a way to acquire more of the customers you’re looking for.
Our AI-powered martech suite can help you track and predict your customers’ lifecycle journey at an individual level and create relevant hyper-personalized communication in real time.
Program to Business Alignment
Loyalty programs, of course, don’t only need to work for your customers; they also need to work for your business. Has your business shifted since your program was launched?
Priorities change.
If your business is entering a new geography, focusing on a new product, or changing its market position, the right loyalty strategy should help support it. If it doesn’t – or if you need it to do more – re-evaluate your program’s design. That includes changes to your brand positioning. Whether focusing your brand messaging on everyday value or luxury, your design should reflect how you present yourself to your customers.
Teams & processes change.
Changes in your structure and teams can impact your loyalty performance and opportunities. If you’ve changed your operations, check that your program design and delivery still fit with how you deliver to your customers. Those changes include new leaders in your organization that may have new priorities or views of loyalty. These changes might present challenges for loyalty program design or opportunities that will enhance your program.
Financials change.
What was profitable in the past may not be so today. The behaviors your program encourages may be worth more or less than you designed for – and you need to adjust your incentives and focus. Consider how profitability has changed for behaviors, channels, customers, and markets. What counts as a good return on your spending changes as other marketing activities show better or worse performance, and loyalty is weighed against other spending opportunities. If your program isn’t passing your hurdle rates, it may be time to spend more, less, or differently.
Program to Opportunity Alignment
Spending differently reflects that the opportunities you have with loyalty are likely different today than when you launched.
Older & wiser.
Areas of opportunity shift as a loyalty program matures. Scale and increased customer engagement make your program more attractive for partnership and opportunities for monetization.
Your program should also transition from emphasizing acquisition to growth and profitability. Many programs – particularly those that have launched across multiple markets like Starbucks and McDonalds – have a visit-based design, like a punch card. Simplicity makes it easier to explain the program’s value to customers and get them to join and start participating. As their programs matured, they changed their programs from visit-based earning to spend-based earning. That gives their brands more flexibility to drive higher-margin activities across a wider range of behaviors.
Simplicity makes it easier to explain the value of the program to customers and get them to join & start participating.
With age also comes better data and a deeper understanding of customer behavior. That presents new marketing opportunities. Consider shifting your design to spend less on its everyday earn rate, and more on promotions. Dutch Bros, a US coffee chain, changed their program in 2023, after two years of rapid growth from its launch. They emphasized that they were reducing their base earning rate – and even some mass promotions – to free up budget for more personalized offers, leveraging the relationships and insights they now have on their customers. As Joth Ricci, their CEO at the time, said, “I can run a personalized promotion, so I don’t have to spend dollars on a macro promotion that only gets traction for 5-to-10% of customers.”
Younger & faster.
New technology has opened opportunities that weren’t available, effective, or affordable in the past. Inside your own organization, a new app or new POS means there are new opportunities available for a renewed design that weren’t possible in the past.
The essential component of a loyalty program is recognizing individual customers and identifying their behavior. This rich customer data powers more intelligent marketing that helps influence customer behavior and drive program growth. It’s now cost-effective to use off-the-shelf AI tools to track and predict customer behavior and deliver self-optimizing personalized campaigns. And to do so at a scale and specificity that would otherwise make your data, deployment, or finance teams crazy.
Increasing the power of personalized communications can mean reducing the focus on your core earning and redemption rules, and giving more to enhanced lifecycle journeys and promotions. If you do this, though, make sure what’s visible above-the-line in your program is attractive enough to bring customers in – and share the data you need to deliver the personalization in your strategy.
How do you know you’re ready for a change?
If they’re trending down or are plateaued at a level below your peers, review your program tactics and design.
Some KPIs naturally drift down over time. Your acquisition rate and even acquisition quality will slow as your program matures. So may your redemption rate if you have significant welcome bonuses or you’re being more selective about how much loyalty currency customers earn on promotions.
Some shouldn’t go down – particularly members’ engagement with communications, the impact of redemptions on their behavior, and your overall program ROI.
Stable and even improving KPIs can hide problems.
Look for hot and cold spots.
Stable and even improving KPIs can hide problems. Engagement may be concentrated in only a few members or member profiles – or may only be profitable here.
Your program may be impactful only in select channels or only at specific milestones in your customers’ lifecycle with your brand. For example, a stable active customer count may hide that your program is successful in acquisition but less so in converting joiners into regular purchasers.
Our loyalty experts can help you identify new opportunities for program growth and design personalized customer experiences to help keep your customers engaged with your program.
Imbalance in incentives.
You may be keeping customers active but with an over-reliance on promotional spend. It might not be customer engagement that’s the problem, but the profitability of how you’re capturing it.
Your design should be more than a coupon-delivery channel. It should have components that deliver value in multiple ways, whether that’s status, convenience, emotional engagement, or building a personal connection with your brand.
Where to start?
Identifying one of the challenges or opportunities above doesn’t mean that it’s the right time for a full reinvention of your program.
Understand where your problems & opportunities are.
In addition to your KPIs and customer data, talk to your internal stakeholders and, if possible, your customers. Be open to their challenges with your current strategy.
Look for simple solutions.
You may be able to change program elements, or even how you use the program to address your gaps in place of a design change. Elements including your customer experience, promotions, and redemption can be tweaked for improvements. The counterpart, though, is that these changes likely aren’t enough to address bigger gaps and opportunities.
See what you have to work with.
Understand the resources and buy-in you have to support a program change, including how much time you have to address the issues you’re facing. Your first step may be to build a case for change. Bolt-on enhancements or the simpler adjustments mentioned above may be easy to implement and buy you time.
Be thoughtful with your approach.
Your loyalty strategy touches all elements of your business – and most importantly delivers a valuable connection point to your customers. Be thoughtful with your approach.
- Think about the alignments discussed above and how your design will address them. Focus on the areas of the biggest opportunity.
- Be realistic about what you can and can’t deliver. Don’t build a strategy that you can’t implement successfully.
- Spend time on transition planning. Your transition plan should consider segments of your members who have differing views on the changes you’re making and communicate to them where they’ll benefit from your design changes.
- Get value quickly. It can take time to redesign a program. But that doesn’t mean you have to wait to see value from the process. In our approach, we scale our design work to our clients’ timelines and complexity. But even in longer engagements, early components like customer segmentation and lifecycle analysis tools can be used right away to improve the performance of clients’ current programs.
Loyalty is a powerful tool that connects your customers, business, and vision for the future. As these shift, take a look at how you’re using loyalty to keep all three in profitable alignment.
Does your loyalty program feel more like a cost center? Reach out to one of our loyalty experts to discuss how you can improve and optimize your loyalty program to help you grow your business.
Want to build deeper relationships with your customers and grow a loyal customer base? Let’s chat!
Discover our suite of AI-native loyalty and martech solutions to propel your customer engagement.
- Track, predict, and optimize your customers’ lifecycles with Kognitiv Pulse. Learn more.
- Enable 1:1 personalization at scale with Kognitiv Ignite. Learn more.
- Launch and manage a successful loyalty program with Kognitiv Inspire. Learn more.
- Intelligently acquire and engage customers across paid channels with Kognitiv Amplify. Learn more.