5 Questions You Should Answer Before Creating a Loyalty Program

by Ben Gaddis

In our experience creating successful loyalty programs for brands across multiple categories, we’ve found if you don’t put the customer at the center of the plan, you’re doomed.

Customer expectations have changed. They want their loyalty recognized and rewarded differently—more personally. Consumers care about what you can do better than your competition. They want to be able to work with your company effortlessly across channels and at any time. Basic convenience is now table stakes. Rewards are more than points.

The true differentiator for any brand is the experience a customer has when they’re interacting with your locations, people and services—either in-store or online. So, it stands to reason that if you’re launching a loyalty program, and you consider technology or financials before customers, you’re starting off on the wrong foot. That’s something we’ve learned building customer-first loyalty programs that have reached over 100 million customers and counting.

So, how do you get started? Here are the questions you have to answer before launching a truly customer-centric loyalty program.

  1. What’s the customer experience going to be?

When business owners or marketers start thinking about loyalty programs, they often go straight to the wrong places. They start with technology question: How can we get our customers to adopt a new tool? Or they start with the financial model: If we’re giving away points, how are we going to keep our margins? Both are mistakes. When you take this approach, you’re building to a lowest common denominator rather than giving your customers what they truly want.

We always start with the customer. What will they find delightful? How do we create a set of experiences that they won’t be able to get anywhere else? We build out user journeys and we test ideas with users to discover what motivates customers. That way, when we start building a loyalty program we know exactly what your brand’s customers truly want and what will make them want to engage over and over. The goal is building true loyalty to your brand.

  1. What are the economics of the program?

While we don’t start with the financial question, it’s always a close second. Once we know what motivates customers and what they want from a loyalty program, we then identify the key value proposition that would make that customer want to keep coming back for more.

For this to make sense for them and for the brand, we help you define a value-based structure (literally, what do they get and when). Then we build the financial model with a rewards-system pro-forma and a competitive analysis to ensure that it will drive the business in a profitable way.

  1. Will the technology disrupt operations?

Not that long ago, brands wanting a loyalty program didn’t have many options when it came to technology. There were a few large legacy systems and they were the only game in town. That meant you had to take what you could get in terms of technology and try to fit your existing systems into the loyalty technology—or change them altogether. It was super disruptive and expensive, not to mention the fact that the customer was nowhere near the top of the priority list.

Times have changed. We use a microservices-based architecture to add a loyalty layer on top of existing systems. This allows brands to keep in place the technology they already have (POS, CRM and ordering systems) while adding a new loyalty capability. It’s much more affordable and much faster to implement. It also doesn’t lock you in when you have to quickly adapt to a market opportunity, a competitive threat or a new technology that is disrupting your category.

  1. How will you know if it’s going to work?

Many dollars have been wasted and many egos bruised when large loyalty programs are launched into the wild with good intentions but poor execution. We advocate for a test and learn approach. By testing in market with real consumers and real data, we can quickly launch a minimum viable product, test user journeys and build a solid roadmap before launching a mature product to the entire market.

We used this approach for a loyalty program with one of our largest clients, a QSR brand with over 6,000+ units in the U.S. By rolling the new loyalty product out to 40 stores, we were able to iron out a few bugs and get some critical real-time feedback. We adjusted the program and then rolled it out to the entire market, and quickly saw a 33% boost in net sales in its first quarter. In short, a test and learn approach can get you to market faster and with better results.

  1. How can I get my internal management, store managers and franchisees to buy into this new program?

We work with brands with thousands of locations and a mix of company-owned and franchise locations. We understand the financial and operational pressures of introducing or upgrading a loyalty program. It can be hard to convince everyone that a loyalty plan is in the best interest of the bottom line, and that it won’t get in the way of operations. But having a clear, consistent communication and training plan in place is critical.

To help with internal buy-in, it’s important to outline a change management and internal sales plan. That plan should wrap each work stream into a consolidated story to show a prototype of the customer experience, the financial and rewards model, data flows and the technology plan, and a test and learn plan for rollout.

Generating a large amount of return customers can be a game changer for a brand, but only if you can execute a loyalty program efficiently and in a cost-effective manner. Asking the right questions up front is the best way to get your brand—and your customers—headed in the right direction.

Ben Gaddis

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