Insights

Brand Equity: Steps to build a solid loyalty program

Loyalty programs are used across the board among service industries. There is a difference in creating a successful loyalty program and a program that fails to increase customer satisfaction.

Terry Vavra, who is on the ICC/Decision Services team, shares the process in building a great loyalty program. Taken from “Loyalty Myths”, co-written by Vavra, Timothy Keiningham, Lerzan Aksoy, and Henri Wallard, here are the essential steps in starting a loyalty program:

5 Step Customer Loyalty Program

1. Observation. The first step is dedicated to accumulating customer data. This would include purchase history, service costs for each customer, demographic data, and share of wallet the customer contributes.

2. Scoring. If you organization took no further steps to promote purchases with a customer, what portion of sales would future purchases be? The value of doing nothing to excellerates more purchases from customers. This is a base score from where a loyalty program would improve on.

3. Selection. Prioritizing each customer based on scores from the above information, with further delegation into three categories: Desired, Break-even, and Costly customers.

4. Prioritization. Companies should prioritize the consumer categories in order of importance. Then narrow the focus of the loyalty program to concentrate on the biggest priority. Each company will have to decide what their desired goals are from the loyalty program. For example, determine whether it is to improve share of spending or controlling costs per customer group.

5. Leveraging. This is the combination of brand equity, value equity, relationship equity, and satisfaction, used to create a loyalty program. The end result is have the combination of four tools to move the customers from the starting score to the next level.

There are numerous aspects to creating a quality loyalty program. These are your first five steps to help get your organization off running. You can read more information on loyalty programs and the customer experience effect in “ >Loyalty Myths“, or contact Terry Vavra at ICC/ Decision Services.

What tactics has your organization used to develop loyalty programs? Are you measuring the effectiveness of the programs?