It’s a commonly known fact in business that customer retention is far less expensive than customer acquisition. Depending on the industry, it can be 5 to 25 times more expensive acquiring a new customer than keeping an existing one.
So implementing a winning loyalty program makes sense. As shown in our previous article, in Australia alone, the market is expected to reach over 6.5 billion US dollars by 2026. So how do you implement a loyalty program that brings you success? By using modern mechanics in your loyalty program that focus on experiences that help the customer shop rather than engagement gimmicks.
To drive engagement, advocacy and long-term customer retention, you need the right mechanics that can be tailored to your target audience. You should be able to recognise their purchasing habits and reward them with greater incentives, which in turn provides loyalty and adds to your bottom line.
Discover how Omneo incentives can help your business
When brands want to engage a few high-value customers and optimise resources spent on those who are less active, tier programs can be a great way to maximise business revenue from a small cohort of customers.
Whether used in conjunction with a specific Point scheme or based on spend alone, tiers are typically designed as part of a broader incentive strategy.
They come in two parts. One is for customers to achieve, i.e. move up a tier. The other is for customers to maintain or keep their tier, tapping into consumers’ loss aversion biases.
Customers earn Tier points from their actions as well as their transactions. For example:
Points are an ideal tool to acknowledge customers. Using points in conjunction with a tier program is a great way to reward customers proportionately to their patronage, but they can also be used as independent mechanics in their own right.
Tier points
These are a special class of points used specifically to calculate and determine the customer’s tier level, which can also be linked to purchases or any other action that is being tracked.
Purchase points
Purchase points are only earned once a transaction has been completed and directly relate to total spend. The value of a transaction Point is either: one to one, e.g. spend 1 dollar and get 1 Point, or a multiple, e.g. spend 1 dollar and get 5 Points.
In the case of a purchase return, your point system will subtract points from their balance, which in turn may affect the customer’s tier level.
Purchase point value can be modified based on customer attributes, such as Tier or Status, or be temporarily increased as part of a points redemption campaign.
Action points
Action points are a set amount of points associated with a particular action, for example:
A Status is a special type of label, categorisation or tag that can be applied to a customer profile. It’s also a great way to recognise and acknowledge specific customer traits without requiring any action from that customer.
Status labels are useful if you’re looking to identify key customer groups at a glance or modify incentives or other experiences based on known customer profiles.
Here’s a list of example statuses to consider: staff, ex-staff, VIP, stylist, influencer, media, corporate, friends-and-family.
A benefit is a percentage off discount or free product, with an attached expiry date, similar to promo codes, coupons or vouchers, except that these are issued (or made available via claim actions) to a particular customer profile based on set logic.
Benefits can be earned by doing (or not doing) a predetermined action, such as moving between Tiers, Achievement levels or Status.
The main difference between a benefit and a reward is that a reward is a set dollar amount and can be collated and redeemed, and a benefit is a stand-alone percentage off.
Benefits generally fall into three categories:
1. Product discount
Broad discounts such as 10% off full-price or specific category discounts such as 15% off denim clothing.
2. Free products
When this benefit is applied, specified products are discounted by 100%. Other conditions may apply to achieve a ‘Gift with Purchase’ or 'Buy X get Y' benefits.
3. General entitlement
Such as free alterations or early access to a sale. It can also be used in conjunction with tiers or operate independently.
A Reward is a dynamic dollar-off discount with an attached expiry date. It can be earned by doing (or not doing) any number of predetermined actions.
Customers can have more than one Reward attached to their profile at any given time. For example:
Discover how Omneo can boost your reward strategies for your loyalty program.
Reward type examples:
Achieving a high enrolment rate will depend on what your loyalty program offers your customers. However, if your program’s benefits are not in tune with your audience, you could be left with enrolled customers but minimal participation.
Measuring what your customers purchase can give you an in-depth profile of their spending or usage habits. For example, you could measure how long customers take to make another purchase and what channels they use. With this information, you can tailor specific rewards and build on customer retention.
You should measure the following attributes on every customer profile and then roll these up for insights on whether your loyalty program is making a difference over time.
Gaining insight into the annual average spend per member lets you track your program’s performance and gives you insights into how to increase their spend with you.
Knowing how much a customer spends on average given a full year to shop can highlight the overall known customer asset value and also indicate whether loyalty initiatives are making a difference.
An Annual Average Profit per member is also a good variation of this metric to track.
Measuring sales from loyalty members will give you an insight into how well your program is performing and its value within your marketing framework.
See what sort of transaction value is more likely to be gained from a known member vs an anonymous guest customer. But as your sales-to-member ratio increases past 90%, this metric becomes less useful as it becomes more of an edge case.
An indication of how long customers stay with you. With a successful loyalty program, this number should increase over time as the number of loyalty program members grows.
Omneo has the expertise and deep insights to help maximise all these crucial components of a successful loyalty program that leverages modern mechanics.
Transparency and honesty keep customers loyal
Implementing any successful loyalty program needs customer permission. Respecting and guarding customer privacy is paramount. Not only does it protect your brand, it builds customer trust, loyalty and, in turn, advocacy.
What does it mean for your customers to be opted-in? For many brands, this is a binary on/off setting, but in reality, it can be far more nuanced.
To enable your customers to create and own a personalised profile with the brands they care about. By doing this, you’ll understand them better and provide greater personalised service, experiences and incentives. Omneo will help you get there.
