This article is part of our Ultimate Guide to Loyalty Programs.
Data is the key to building a loyalty program that will create true value and resonate with your customers.
A loyalty program is a great asset for brands because it gives them tons of valuable customer data that can be leveraged in the future to personalize communications.
But customer data is equally important to use when planning your loyalty program because it dictates the specifications for success.
To truly impact your customers, plan a loyalty program around data collected to improve their experiences with your brand in meaningful and memorable ways.
Typical customer data includes past purchases, as well as the location and frequency of those purchases. Over time this data will help you list the preferences of individual customers, what kinds of promotions they are likely to respond to, and what days they prefer to shop.
Creating customer profiles with meaningful data will help you craft marketing messages, whether they are in-store or via email. Planning your loyalty program with customer data will guide you along the correct path.
Here are 5 ways you can use customer data for loyalty program planning.
1. Project Your Loyalty Program Enrollment
Data can help you project enrollment in your loyalty program.
Leverage historical response rate data (purchase data, preference data, and email responses) and existing consumer data to project total registrants for Year 1 and beyond. Each data point can be used to set baseline program benchmarks to gauge post-launch impact.
Registration volume is a key component to developing the point economy and setting the overall rewards budget for your program.
Projecting your program enrollment helps you figure out your loyalty strategy, what types of benefits, if you should include tiers, etc. Loyalty programs should be built using a combination of quantitative and qualitative data because you receive a mix of behavioral and emotional data points.
When these data points are used with your demographic data from customer account profiles, you begin to develop a well-rounded view of your program members. This all leads to developing more valuable benefits and messaging to engage them.
2. Develop a Point Economy for Your Loyalty Program
What is a point economy?
A point economy contains transactional, spend, and event behaviors that govern the actions your loyalty program members can take to achieve specific outcomes.
Within a point economy, you can offer multiple tiers that award different benefits for members. Each tier is guided by member behaviors that control entry, the benefits received in the tier, and what is required to remain in that specific tier.
You can leverage purchase data, pricing data, competitor pricing data, and more to develop a point economy that offers incentivized value while still providing a positive program ROI.
There are four types of member behaviors: Tier entrance, tier purchase, tier event, and tier maintenance.
You can set up rules and outcomes for each behavior section that are awarded when the rules are met.
Creating a point economy can help your customer segmentation efforts based on grouping program members based on similarities they share that differentiate them.
Segments can be based on distinct types of data, including purchase history and spending habits, typical spending amounts, length of time as a customer, demographics (age, gender, religion, ethnicity, household size, etc.), and geographical and other factors. Geographical location can also be an important customer segment.
3. Determine Your Loyalty Program Structure – Tier Inclusion
If you’re going to include tiers in your loyalty program, you can leverage historical consumer purchase data to determine key program targets.
If there are multiple valuable targets for the program, a tiered structure can be used to provide differentiated benefits for each tier focused on driving purchase incrementality.
With the addition of tiers, you can incent your higher volume and lower volume purchases differently to drive incremental spend to get specific rewards.
A great example of a tiered loyalty program is Best Buy. My Best Buy is a traditional program while Totaltech is a premium loyalty program. If you become a member of Totaltech, you also receive all the benefits from My Best Buy.
One of the timely benefits included in the Totaltech loyalty program is hard-to-find holiday items.
Totaltech members receive:
- Unlimited tech support from the Geek Squad 24/7/365.
- Up to 24 months of product protection with an active membership.
- Free delivery and standard installation.
- VIP access to dedicated phone and chat teams.
- Access to exclusive Totaltech member prices.
- Free two-day shipping.
- Extended 60-day return and exchange window.
- Everyday savings on repairs, advanced services, and more.
When consumers join Best Buy Totaltech, they also are automatically enrolled in the company’s traditional loyalty program called My Best Buy, which allows them to earn reward points, shop exclusive deals, and more.
4. Create a Valuable, Relevant Rewards Catalog
Use existing consumer data along with third-party insights through data appends to get a 360-degree of consumer demographics, psychographics, purchase behaviors, and interests to help create a relevant and targeted rewards catalog.
Consumers want brands to know them and make them feel special so your rewards catalog should be relevant and valuable to them. If you truly listen to your customers, creating an appealing rewards catalog should be easy. Your rewards should match the member action.
Sephora Beauty Insiders know that in addition to points for purchases, they’re also getting an exclusive experience not available to non-members.
In-store beauty services, free beauty classes, and access to the Beauty Insider Community come with membership and members know they’re not getting those experiences at the competitors.
Retailers should use their loyalty programs to showcase the best of their respective brands.
That special feeling consumers get from brands comes from experiential benefits. Making them part of your overall rewards catalog is crucial.
5. Optimize Your Loyalty Program Post Launch
After your program launches, monitor program data across key segments to determine which earning actions are motivating to each segment, which rewards are motivating to each segment, and how to win back lapsed members.
These insights can be used to optimize your loyalty program to reach/exceed established objective-based KPIs.
When designing a loyalty program, consider what data can be gleaned from each engagement activity and how these insights can be used to deepen relationships with customers.
When your loyalty program data gives you key behavioral insights, it helps identify your brand advocates. Catering to your best customers will make them exponentially more valuable.
Optimizing your loyalty program is a forever process because the process adapts to your members’ needs and desires over time. As your member base changes, along with expectations and wants, so too should your loyalty program be based on your customer data.
Let Member Data Guide Your Loyalty Program Path
In the Age of the Customer, data truly is the most essential element. A successful loyalty program is built on data and optimized from it.
If you use quantitative and qualitative member data, your program will be a success and you’ll gain key customer insights.
Everyone wants to feel special. And that sentiment holds true for members of your loyalty program.
Use your customer data to launch a loyalty program and, after that, leverage member insights to refine it.
If you listen to your customers and give them things they want, you will retain them and their loyalty.
Click here to read the next article in the Ultimate Guide to Loyalty Programs series: Is a Soft Launch for Your Loyalty Program the Way to Go? 3 Reasons Why This Could be a Smart Move for Your Brand