The following guide is designed to help you to make the right strategic decisions when planning and setting up your loyalty program, from scratch to an active plan.
We highly recommend reading it together with the follow-up guides and the product documentation, before and during the decision-making and definition of your program.
Loyalty Strategy Guides:
What is your objective?
When thinking about your Loyalty program, consider the following points, as they will affect the way you structure your plan concept, tiers, rewards and redemption workflow.
The business need you are addressing will have a direct impact on the decisions you make when you set up your plan.
For example:
- If you want to increase average order value, you base your tiers on high spending requirements. Additionally, you should incentivize customers to make high value purchases by making them a prerequisite for earning rewards.
- If you want to drive purchase frequency, you base your tiers on a high number of purchases and provide vouchers that are valid for a shorter period.
- If you want to increase engagement, you use the Emarsys API to track interactions on your website and offer rewards to customers who actively engage with your website.
The first step in planning a successful loyalty program is to set clear objectives that you want to achieve.
A clear objective is one that can be measured and improved.
To stay effective, select your three main objectives and be sure to define three main KPIs you wish to improve with the loyalty program. Then, determine how long after the beginning of the plan do you expect to see improvements in these three KPIs.
Such monitoring will help you to understand if the structure of your plan is working or changes need to be made.
What can you learn from your data?
To formulate the objectives and structure of your loyalty plan, it is necessary to understand and analyse some of your historical purchase data KPIs. These will help you to balance your vision and achievable objectives and define an impactful plan.
Recommended KPIs that can help you are the following:
Contact database
- Number of total contacts
- Percentage of Loyalty members from total contacts (if there is an existing plan)
- Percentage of contacts by lifecycle stage
- Lead: e.g. 20%
- First-time buyer: e.g. 24%
- Active buyer: e.g. 25%
- Defecting buyer: e.g. 21%
- Inactive buyer: e.g. 10%
This will help you to define your Loyalty recruitment strategy and track the growth and enrollment of Loyalty members. You can also use this information for targeted opt-in campaigns.
Average order value
- Average order value (AOV) of all contacts in the last 365 days
- Average order value of Loyalty members (if there is an existing plan)
- Average order value divided into Buyer status groups
Example of AOV groups:
Status |
Average order value |
Percentage from total |
---|---|---|
Lead |
O |
11% |
Low spender |
€<50 |
22% |
Normal |
€51-100 |
29% |
Silver |
€101-200 |
23% |
Gold |
€201-400 |
12% |
Premium |
€401> |
3% |
It is advisable to make a division between offline and online as much as possible.
This data helps you to get a decision on how many tiers you should start with, and what is the appropriate entry threshold's requirement for each tier.
This is the stage where you also have to make a decision about the value of your brand currency (Loyalty point). Whether you decide to run with a points-based or spend-based program, this setting needs to be defined to determine the tier requirements and the benefit values.
Number of purchases
- Average number of purchases in the last 365 days for all contacts
- Average number of purchases for Loyalty members (if there is an existing plan)
- Average number of purchases divided into Buyer status groups:
Example of Average number of purchases groups:
Status | Number of purchases |
Percentage from total |
---|---|---|
Low spender |
1 |
21% |
Normal |
2 |
34% |
Silver |
3 |
29% |
Gold |
4 |
12% |
Premium |
5+ |
4% |
This data will help you define the tiers. It also helps to decide whether to focus on increasing your number of purchases and add it as an entry threshold requirement.
In the example above, we can see that only 4% of customers purchased 5 times or more in the last 365 days, while 12% purchased 4 times. Based on this data, we can target 5 purchases as an achievable objective. On the other hand, setting up a tier with an entry threshold of 5 purchases can be an excessive requirement right now for the vast majority of customers.
When you define tier thresholds, match your expectation to purchase history metrics and set achievable requirements. Maintain balance and gradation between the tiers and do not define a tier that currently includes less than 10% of your customers.