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Making decisions about loyalty programs

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1:1 had a nice piece on the growing role of loyalty programs in retail. This noted the “Growing sophistication in loyalty programs” among retailers and, in particular, the use of loyalty program data not just to calculate lifetime customer value but also to build competitive advantage. This second aspect is the one I always find compelling. If you can use data about the behavior of your customers to see how loyal, profitable, expensive, new, longstanding or other kinds of customers behave then you can build better models and make way better decisions. As a longstanding promoter of intense personalization and consistency across channels I was particularly pleased to see that more than half the responders were using customer loyalty data for “elements that suit specific customer affinity and preference” (53 percent) and “personalized promotions across channels” (52 percent).

Besides recommending strong customer ownership, the study suggested two particular areas where retailers should focus. The first is on customer reactivation, the second on multichannel loyalty campaigns. Mapping these to decision management and we get the following advice:

  • Make loyalty offer decisions explicit so they can be consistent across channels
  • Make loyalty offer decisions explicit so they can consider the value of a customer, the likelihood of attrition and more before spending money on loyalty offers
  • Make channel choice decisions explicit when prioritizing a channel for communicating with customers e.g. in a loyalty campaign
  • Make the decision to try and reactive a customer explicit so that effort is spent reactivating the kinds of customers you need now – don’t try and reactivate Christmas-only shoppers in Spring, wait until Fall
  • Make the decision on what to offer someone to reactivate based on what has worked for people like them in the past, the cost of offers, the expected value of reactivation and more.
  • Make sure the reactivation program uses up to date information so you don’t make offers to people who just reactivated themselves

and so on. Two previous posts seem particularly relevant. This one on using decision management to build loyalty and grow and this one on using EDM to keep loyalty where you want it – with the company not an individual employee.

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