Loyalty program design is mission critical, according to Adam Craig, vice president of product management, Deluxe Rewards.

Craig talked about this key element for loyalty programs during Tuesday’s Loyalty360 webinar titled, “How Loyalty Programs Influence the Customer Journey,” which was presented by Deluxe Rewards.

To illustrate how loyalty programs need to be designed, Craig shared one of his favorite catch phrases.

“Start with the end in mind,” he said. “While that phrase was designed for use in sales training, it applies to loyalty program design just as well. Loyalty programs are not one-size fits all. To be successful, they need to be customized and designed with the end in mind.”

Craig noted three key questions that brands should answer when designing a loyalty program:

What are the objectives of the program? 

What is the behavior, emotion, or feeling you are trying to drive with your program?

What if you are successful in hitting your targets and goals?  What happens if you’re not?  What if you’re way more successful than you expected to be?

Participation in loyalty programs continues to rise – more than a 25 percent increase in membership between 2012 and 2014, with more than three billion people engaged in programs. On average, each U.S. household belongs to 29 loyalty programs. But, Craig said, consumers are active in fewer than half of these programs and, in general, are not satisfied with them.

Some of the reasons behind the dissatisfaction were:

A failure to drive the desired engagement or purchase behaviors

The inability to successfully glean meaningful insights from the data

Not getting the customer satisfaction benefit they expect

Some keys to a successful loyalty program include:

Simplicity (Simple programs generate great interest and higher satisfaction from members in those programs)

The 3 V’s (Value, Velocity, or how quickly members receive rewards, and variety)

Financial management

Data & analytics

Continuous customer dialogue

What’s more, Craig said that success comes from well-conceived program design, with a focus on simplicity and alignment to overall program strategy and value. 

“Measuring early and often will allow you to make small changes in the program before it’s too late,” he said. “Maybe you need a different rewards mix, maybe you need to incorporate short-term promotions to increase awareness, or maybe you find that consumers aren’t in the channels you expect them to be.”

Lynn Grubb, managing director, Deluxe Rewards, said keeping loyalty program members happy is the key to retention.

Retention, as the primary goal, isn’t surprising when you consider that the probability of converting an existing customer to purchase is 60 percent to 70 percent while for a new prospect, on the other hand, it’s only 5 percent to 20 percent for an existing customer.

“There’s tremendous value to be gained by leveraging loyalty tactics to improve customer satisfaction and satisfied customers generally lead to higher retention,” Grubb said. “I’m calling this out separately from satisfaction because of the impact retention can have on an organization. And yet, what we typically see are loyalty program tactics that are focused more heavily on acquisition. That’s because it’s generally easier to draw a direct line between the cost of an acquisition tactic and its return, and because the results, good or bad, are seen more quickly. “

Studies show that retention can improve acquisition as a result of referral and word of mouth. Surprise-and-delight strategies are also more common today, Grubb noted.

A successful loyalty program can be used to support the customer journey by inserting rewards at key points in the journey that influence or reward behavior and engagement. In this way, the loyalty program helps support the key interactions with the customer journey and helps create a loyal and engaged fan base at the same time.

For example, if a key touch point in a customer’s journey is to watch a video about a product or service to inform a purchase decision, then a successful integration for a loyalty program may be to reward the customer for watching the video, taking a quiz on it, or answering a survey about the video. The customer is incentivized to act and is rewarded for doing so. Studies show that small, meaningful rewards early and often in a customer journey can be powerful motivators and have a lasting impact on customer satisfaction and retention.

Grubb noted that a totally satisfied customer contributes 2.6 times as much revenue to a company as a somewhat satisfied customer and four times as much revenue as a somewhat dissatisfied customer.

“It’s really become table stakes to have a rewards program,” Grubb said. “You need to make sure there are aspirational things, sales, and different reasons for them to come back to the site. Creativity comes into play.”

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