When is it time to update your loyalty program? Don’t fall into the trap of updating your program just to be trendy. Updating the program needs to be done with careful consideration of member experience and communications, particularly if the changes are not to their benefit.
When should you update your program? Most reasons are obvious: when the program is:
1. Not meeting KPIs.
You had designed your program to meet certain measures of success (e.g., profitability, incremental sales, enrollment, penetration, etc.). When the market has changed, when costs have increased significantly, or when you are not hitting the KPI targets, it may be time to revisit re-evaluating the program, from a richness, goals, or segmentation perspective.
These types of changes are typically not advantageous to members. As such, we recommend careful consideration and co-creation with your best customers. Additionally, we advocate for transparency and ease of language, and advance notice of approximately 30-60 days.
2. Not driving the right customer behaviour.
Sometimes, your program inadvertently drives the wrong customer behaviour. Prior to 2016, Starbucks’ loyalty program, for example, used to reward stars for every transaction. This drove frequency, but not average transaction value. And in some cases, it caused savvy customers to split their purchases into multiple transactions to maximize their Star earnings. This was not the behaviour Starbucks wanted to reward, thereby changing the program to earn Stars for each dollar spent instead. This encourages higher basket values, which may be more in line with the program’s desired outcome.
3. Not competitive.
Programs are typically measured by customers along two metrics:
- Dividend: the (perceived) value they receive per dollar spent with your brand, and
- Time to reward: how long does it take to accumulate enough value/points to redeem for something meaningful.
If either or both measures are not within the acceptable range of your competitors, you may want to increase the value/richness of your program.
4. Stuck in the sea of sameness.
Unfortunately, this is a common problem. Your customers, your data insights, and your unique assets (e.g., sponsorships and partnerships) can be valuable sources on how to differentiate your program and make it stand out among the myriad of choices your customers face.
For more information on how to design a good program, check out What Do Members Want and How to Design a Loyalty Program for the 21st Century
