Study

5 Essential Elements of a High-Performing Loyalty Program

Par 27 February 2024 Aucuns Commentaires
Un gestionnaire de marketing listant les 5 essentiels pour développer un programme de fidélité performant

Every year, new loyalty programs are launched while others are improved. As competition intensifies, managers need to ensure that their loyalty program is high-performing and outperforms their competitors. Here are 5 essential elements to consider.

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In addition to over thirty years’ experience, our experts at R3 Marketing conduct LoyalT, the most comprehensive study on the performance of loyalty programs in Canada, with six editions to date. The essentials listed below are mainly drawn from the findings of the latest editions, including the 2023 editionpresented in conjunction with Adviso, a consulting firm of which R3 is now a part.

1. Perceived generosity

The perceived generosity of a program relies on a member’s ability to accumulate points in a variety of ways (promotions, personalized offers, mobile app engagement, contests or reviews) and not just on their total purchases (base points).

As revealed in our 2021 LoyalT study2, perceived generosity is very important, as it improves a program’s ability to modify its members’ purchasing behaviour (increased visits and annual purchases). In other words, a program that is generous is likely to increase its performance and sales.

Read our full article on the subject: The influence of program personalization and generosity on purchases

In 2023, this notion has once again proved its importance, not least because of the inflationary context. Nearly one in two Canadians (45%) said they had abandoned a loyalty program they considered too ungenerous1. In fact, 69% said that if a competitor’s program in the same sector became more generous, they wouldn’t hesitate to switch to it. Member loyalty is compromised if the program is not generous enough.

Recommendations
  1. Measure the perceived generosity of your program against that of your main competitors
  2. Identify which program marketing activities maximize the perception of generosity
  3. Survey your customers on their preferred ways of being rewarded

2. Onboarding strategy

Canadians have never been members of so many loyalty programs. On average, they carry almost 15 programs in their wallet and/or phone. Nearly one in two (52%) are members of 13 programs1. However, only 7 programs are used on a regular basis.

With so many programs to choose from, it’s important to implement a detailed onboarding strategy that clearly explains a program’s features and quickly engages members.

Such a strategy prevents the program from being treated with indifference a few weeks after a member has signed up, and falling into oblivion. In concrete terms, the aim is to design a sequence of communications (e-mails and/or SMS) that will quickly encourage members to:

  • Interact with the program
  • Use the functionalities
  • Accumulate rewards

This step is crucial to making a member active once the registration process is complete. Any good manager should measure the number of active members, not just the total number of members. The latter is still relevant, but is no guarantee of a high-performing loyalty program.

Recommendations
  1. Explain the benefits of your program. Consider a video format.
  2. Quickly reward your members with points when they complete their profile, download the mobile application, subscribe to the newsletter or make their first purchase.
  3. Renew your sequence if members remain inactive over the next few months, and improve your rewards (points offered). In this respect, an A/B testing approach is very useful, as it helps to discover the optimal level of rewards to offer, and helps to improve conversion rates.
  4. Take advantage of this opportunity to collect customer data (zero and first-hand) that will quickly make your communications more relevant. For example, incentivize the completion of a communication preference form (SMS or e-mail) by offering points.
  5. Track the number of active members globally and by segment.

3. Engagement strategy

A solid engagement strategy is a key factor in the performance of a loyalty program. It not only ensures active participation and an emotional connection, but also contributes to customer retention and word-of-mouth marketing.

Further reading: Top 10 Loyalty Programs in Canada in 2023

By focusing on engagement, companies can maximize the impact of their loyalty program and foster lasting relationships with their customers. Engaged members are more likely to:

  • Interacting with the program
  • Collect and redeem rewards
  • Increase their “share-of-wallet” with the brand

Regular interaction helps create a habit of engagement in the loyalty program, strengthening the customer’s bond with the brand. Gamification activities, contests, useful time-saving features and communities are all highly effective in fostering engagement.

4. Personalization

Today, a successful loyalty program goes beyond rewards on total transactions. It offers exclusive content and personalized offers. Like perceived generosity, personalization is proven to have an impact on members’ frequency of visits and annual purchases2.

While points on transactions and free products remain essential in the eyes of Canadians, personalized offers and exclusive content are not far behind as sought-after assets in a program1.

SAQ Inspire4 as an example. This loyalty program is one of the highest performing in Canada because of its personalization. Over a million newsletters are personalized and sent out every week. They contain product suggestions and offers of additional points based on members’ preferences and purchase history. A whisky enthusiast won’t receive offers on gins if it’s not part of his preferences.

Consumers are increasingly aware of the notion of exchanging value with a loyalty program. They understand that sharing their transactional data gives them access to exclusive and, above all, relevant content. This is particularly true of young millennials, who are the quickest to share their personal data3 but also the quickest to unsubscribe from brands that don’t make relevant use of this data.

Recommendations
  • Develop initiatives that allow you to collect zero-party data that will enable you to get to know your members better
  • Use customer data to understand your customers, their needs and their buying behaviours, so you can personalize your communications

5. User experience (UX) and omnicanality

The customer’s experience with the program is just as important as the benefits or rewards. In the 2023 LoyalT study, an omnichannel experience and an easy-to-use mobile experience were as the most sought-after benefits in a program by Canadians1. These results corroborate those of a recent survey of British consumers5.

Often offered as a mobile application, the experience of a high-performing loyalty program must be easy to use and fluid. It must enable members to:

  • Interact quickly with the brand
  • Easily collect and redeem points in-store and online
  • Benefit from useful features that save members’ time
  • Enjoy the same user experience across multiple channels

Is your loyalty program high-performing? Let’s evaluate it together.

 

LoyalT Study, Top 10 loyalty programs in Canada and latest trends


1 2023 LoyalT: Web survey conducted by Léger from June 27 to July 25, 2023, with 10,000 Canadian respondents, including 4,000 Quebecers aged 18 and over, selected from the LÉO panel.
2 2021 LoyalT: Web survey conducted by Léger and R3 from September 13 to October 14, 2021, among 10,000 Canadian respondents, including 4,000 Quebecers aged 18 and over, selected from the LÉO panel.
3 2019 LoyalT: Web survey conducted by Léger and R3 from spring 2019 among 5,000 Canadians aged 18 and over, including 3,000 Quebecers, selected from a panel of Internet users with over 400,000 members in Canada.
4 The Société des alcools du Québec (SAQ) is a government corporation whose mandate is to sell alcoholic beverages.
5 Retail Week and American Express, Lessons in Loyalty, www.retail-week.com/customer/three-charts-revealing-uk-consumers-biggest-retail-loyaltydrivers/7044627.article (Accessed October 12, 2023)
Hans Laroche

Hans Laroche

With over 35 years of experience in relationship marketing, loyalty program management, and development, Hans Laroche contributes to the relationship strategies of numerous companies, including Nespresso, The Royal Canadian Mint, Fido, belairdirect, Cirque du Soleil, Énergir, McKesson, and Desjardins. He has also been sharing his passion with master's students at ESG UQAM and the University of Sherbrooke for 30 years.

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