THE CLARUS Blog

The Ultimate Guide to Loyalty Management

Did you know that a loyalty increase of 7% can boost lifetime profits per customer by as much as 85%?

It’s no wonder that loyalty management is such a hot topic among retailers today.

If you’re in retail, you’re thinking about it. But loyalty management is also a complex topic.

Your loyalty program touches so many parts of your customer experience.

From your website to your stores to your backend resources like development, marketing, customer service, and finance, loyalty is complex.

Do you tackle it in-house? Do you find a specialized loyalty partner to work with?

With so many different platforms, consultants, and vendors out there, it’s daunting. Not to mention, every brand is different and your loyalty program needs to be tailored to your unique customers.

Whether you already have a loyalty program that needs some updating, or if you’re thinking about launching one for the first time, there is a lot to think about – and a lot of questions to ask potential partners.

Whichever bucket your company falls into, this guide will show you everything you need to know about loyalty management and help get you started on the path to building better customer relationships.

A great place to start is defining loyalty management.

 

What is Loyalty Management?

Simply defined, loyalty management is strategy, tools, and tactics around how your company acquires, engages and retains customers.

This includes your loyalty marketing strategy, loyalty program platform itself, and all of the managed services that are required to build and run a successful program.

This is not only about acquiring new program members. It’s also about retaining existing program members and maximizing your relationships with them.

  • How can you entice them to join with the right marketing?
  • Once they’re in, how to keep them engaging?
  • Is the loyalty program experience consistent with your brand? Are you in-store associates properly trained on selling the program?
  • How are you able to upgrade your program over time? Who’s running the day-to-day?
  • Do you have the internal resources to manage it all or should you outsource it?

The answers all lie within loyalty management.

Related Content: What is Loyalty Management and Should you Tackle it In-House?

So, now that you have a solid understand of loyalty management in general, you should start thinking about software.

 

How Do You Choose the Right Loyalty Management Software?

The best place to start is by asking these questions:

If you have an existing platform, ask yourself:

  • What are its pros and cons?
  • What does it do well and what could be improved?

And whether you have a platform already or are looking for a new one, ask yourself:

  • Is it flexible enough to support the loyalty currency my customers want?
  • Can I use it to send marketing communications and promotions that are personalized for my members?
  • Does it do a good job of collecting first-party data that can be analyzed to improve the program over time?
  • Can my platform even be easily updated and added to over time?
  • What does my budget look like?
  • Can it be customized to look and feel like my brand?
  • How much of a lift are implementation and ongoing maintenance from a technical resource standpoint?

For example, if you wanted to offer a premium loyalty tier where you best customers pay to sign up for instant, elevated benefits, you need to make sure your platform can support it.

This would include the ability to offer discounts, cashback, and free shipping. Plus, it would need a billing engine to handle the recurring membership fees.

Loyalty programs should never be set-it-and-forget-it. You want to make sure your platform can be enhanced over time.

If you go with an out-of-the-box-solution, it may be difficult or extremely costly to upgrade it in the future.

Whether you partner with a company or manage your loyalty program internally, choosing the right loyalty management software can make or break your success.

Make sure you’re looking at it with your customer expectations in mind.

Related Content: Looking for the Right Loyalty Management Software? Here are 8 Questions to Ask

 

When is it Time to Partner With a Loyalty Management Company?

Now that you know what questions to ask when looking for software, you have to decide whether or not it’s time to partner with a loyalty management company.

Some retailers have taken this on in-house, but struggle.

The truth is, there is a lot involved in managing a loyalty program.

Every brand is different.

Each has different goals and different customers as well as different skill sets internally. That’s why this is a tough one to answer.

The best place to start here is by assessing your needs. Ask yourself these questions:

  • Have my best customers been engaging with my program?
  • Have I revamped my loyalty program within the last year, or has it gotten a little stagnant?
  • Do I have the budget to work with a partner?
  • Can I afford to take my time with a launch or revamp?
  • Is my program very unique and not at all like that of my competitors?
  • Does my ambition align with current capabilities?
  • Are my customers evangelizing for my program?
  • Can I wait for changes and updates to be made?
  • Does my program have robust data and analytics capabilities?

If you answered no to many or even some of these questions, it’s time to start thinking about working with a loyalty management company.

Many times, retailers try to take on all of these pieces, but struggle.

Loyalty management partners specialize in all the above areas which takes all of those responsibilities off of your shoulders so you can focus on your business.

We live in the age of the customer. Their expectations are changing constantly and rapidly.

That’s why it’s so important to analyze data and be able to enhance your program nimbly over time.

Speed is essential as is customizability. Your loyalty program should be a differentiator. Look for a partner that can build a custom program that your best customers will love quickly and within your budget.

Related Content: Thinking of Hiring a Loyalty Management Company? Ask Yourself These 10 Questions First

 

What Loyalty Management Services Should You Expect from a Partner?

There are a staggering number of partners out there. Not all of them are created equally.

And while they all offer various loyalty management services, what matters for your brand may be different than another.

Yet there are seven essential services that you should ask any potential partner about.

  • Client services
  • Loyalty strategy
  • Technology services
  • Creative services
  • Marketing campaign management
  • Data and analytics
  • Customer service and billing (for premium loyalty programs)

You already know that a one-size-fits-all loyalty program doesn’t work.

That’s why loyalty strategy is so important. Your partner should hold a stakeholder meeting right away to assess what everyone’s’ goals are for the program.

This is also a great time to understand any possible budget or technology constraints, perform a gap analysis, and iron out what the program is going to look like.

You also should know upfront about how your partner will handle the technology aspect of your program. Integrations, custom work, and ongoing maintenance should all be handled by the tech team.

Many loyalty partners can give you access to an API Developer Portal so your tech team can understand just how easy, or challenging, implementation will be.

Once all of the technical details have been ironed out, it’s critical that your partner understands your brand and carries it through seamlessly in your program.

Your brand is everything. Members of your program need to have a seamless experience while interacting with all touchpoints of your program. Make sure your partner adheres to your strict brand standards.

Once your program is launched and in the wild, you have to attract and retain members. Your partner should be able to assist with this.

From marketing messaging to acquire members to ongoing communication to keep existing members engaged, make sure you’re not on your own once the program is live.

As the program runs and members interact, you’ll start collecting first-party data on your best customers.

Ask your potential partner if they have an analytics team that acts as a source of truth for your program. The data that’s collected should act as a barometer for future improvements and optimization.

And if you’re thinking about a premium loyalty program, make sure your partner is experienced in billing and customer service.

After all, your best customers are paying for membership. If an issue ever arises, they should be offered VIP customer service. And when dealing with credit cards, make sure your partner is PCI compliant with a security team.

All of these managed services go back to a great client services team.

They are your loyalty liaison and are the go-between for all the other services. They know your brand, your customers, and your goals.

Related Content: 7 Loyalty Management Services You Should Expect from a Partner

 

How do You Choose the Right Loyalty Management Partner?

Aside from offering the right services, the right loyalty management partner also needs to be a good fit for your brand.

From a resource perspective, how much of your program do you want to manage?

If you’re looking for consulting, help with implementation or even ongoing program management, you may want to talk to a loyalty agency.

Loyalty agencies can manage most of your program, but most of them do not have their platform. Instead, they usually work with a host of different existing platforms. Some can even do customization.

If you’re set on managing your program in-house, but don’t have the technical resources to build your technology platform, you may want to look for a loyalty platform vendor.

These vendors typically build and sell their SaaS-based platforms.

Some of them can offer design services and program management, but this often comes at a high cost.

Implementation of the platform itself can run into the six figures. The managed services around that can be even more.

If you’re working to work with one partner who does it all, look for a hybrid loyalty solution.

Hybrid companies combine the best of both worlds.

They have their loyalty platforms and also completely manage the strategy, build, implementation, marketing, analytics, and optimization to make sure your program is successful over time.

Many of these vendors charge similarly. There are implementation costs and costs for ongoing services.

At Clarus, we handle loyalty program pricing differently than most vendors.

If you’re looking for an end-to-end solution and a true partnership, it’s worth talking to hybrid loyalty companies.

Related Content: Finding the Right Loyalty Management Partner: Categories, Qualities, and Questions

 

How Can You Leverage Loyalty Management Data to Increase Engagement With Your Best Customers?

Now that you have a good understanding of loyalty management, platforms, and partners, it’s time to think ahead to after your program launches.

One of the most important features of your loyalty program is the data that it can collect on your best customers.

But what data matters most? What KPIs should you be working towards?

Here are ten KPIs you should be thinking about to keep a pulse on your program performance and figure out how to further optimize it over time.

  • Join count
  • Conversion rate
  • Member retention rate
  • Churn rate
  • Member engagement rate
  • Purchase frequency
  • Average order value (AOV)
  • Incremental margin
  • Customer lifetime value (CLTV) – for premium loyalty programs
  • Refunds – for premium loyalty programs

These KPIs will show you whether your value proposition makes sense and whether your marketing is breaking through to your customers.

For example, if your join count is low, it could mean that your marketing strategy is resonating with customers. Or, maybe your program just doesn’t seem enticing enough to join.

If your churn rate is high, that means your members aren’t finding enough value to stay active in the program. Then, it may be time to reevaluate the benefits and rewards you’re offering.

If purchase frequency and AOV are going up, it means that you’re loyalty members are engaging with your brand and the loyalty program is driving value to your bottom line.

It’s important to not only track these metrics but also analyze them. Your loyalty partner should act as a source of truth when it comes to data. They should constantly look at this data to figure out what’s working and what can be optimized.

Related Content: What Your Loyalty Management Data is Telling You (With 10 Example KPIs)

 

Loyalty Management Doesn’t Need to be Overwhelming

There’s no way around it.

Managing customer loyalty is a massive undertaking with many moving parts.

But with the right platform and partner, it doesn’t have to feel so intimidating. It can be very rewarding.

The important thing is to put your customers at the center. What would they value the most in your loyalty program?

From there, think about your biggest goals, your ambitions, and your resources.

And if you ever have any questions about loyalty management, please feel free to reach out to us at any time.

Remember, according to our 2020 Premium Loyalty Data Study, nearly two-thirds of customers say their loyalty is more difficult for retailers to maintain than ever before.

How do you think a loyalty management partner could help you get more of your loyalty efforts?

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