Five Steps to Building a Membership Loyalty Program


For decades loyalty programs have been growing in the for profit world as a major component for engaging and retaining customers. 

Those old of us to remember will recall collecting S and H Green Stamps which were one of the very first retail loyalty programs.  Merchants gave out the stamps to customers as incentives to shop at their store.  Once enough stamps were collected, they could be redeemed for desirable products from a catalog. 

Today, a huge percentage of companies have incorporated loyalty programs as a core component in their marketing efforts including airlines offering free tickets, hotels offering free stays, and grocery stores offering discounted gasoline.  Even my local sandwich shop and barber have loyalty programs. 

The goal obviously of a loyalty program is to keep and reward your very best customers and members. 

However, it is rare that I come across an association that has overlaid a loyalty program onto its membership.  Many organizations do not recognize the diversity in their members and treat their best members in very much the same way as everyone else without regard to the value they bring to the organization.  In a diverse membership, a loyalty program helps define who these most valuable members are and encourages behaviors that lead to greater value from those less engaged. 
 

In order to build a Loyalty Program, here are five recommended steps to follow. 

1.     Determine what behaviors lead members to loyalty and retention by defining “Key Performance Indicators” (KPI).  Basically to start a loyalty program, you first want to evaluate what behavioral variables correlate with (or are predictive of) longevity and purchases by a member (maximum ROI).
2.     Select a method to calculate loyalty. Once the KPI’s that indicate loyalty are identified, a model can be built using an algorithm to calculate the mix of actions that an organization wants to reward and a POINT system devised to encourage the behavior leading to loyalty and retention.
3.     Find the types of rewards that are motivational.  Building the rewards for loyalty will also be important.  Rewards could be in the form of one or more categories:

a.     Member Recognition
b.     Personal Benefits
c.     Professional Benefits 

4.     Capturing and reporting on Reward Points.  The behaviors that are to be rewarded need to be captured and translated into points.  To encourage these activities, point values can be sent to members and available on a rewards website.
5.     Building a communication strategy.  An incentive for encouraging the behavior that an organization desires is only as good as the ability to make members aware of the program and communicate to them the benefits that they can receive.  Once the system is built, consistent promotion of the loyalty program in membership and product marketing materials really helps to encourage participation.

We all know that there are very profitable members and members who contribute far less economically to an organization.  A loyalty program helps incentivize the profitable members to do more and helps lift the less profitable members to higher levels of usage and engagement. 

However, even if deploying a full loyalty program seems like too large of an endeavor, most organizations would benefit by implementing at least the first two steps outlined above.  Defining what behaviors lead to your most profitable members can drive focus and efficiency in your organization.   

1 comment:

Guy Griffiths said...

Hi Tony,
Great post, as always!
Reminds me of the popular gym 'incentive' often given out far to soon - the welcome pack.
It might be made up of a rucksack, a t-shirt, a towel, water bottle and the like, and is given to all new joiners on day 1.
Instead, consider giving it to all members who make the minimum x visits (say 6?) in their first 30 days. Message everyone else to say they didn't earn it yet, but if they make y visits (say 4) in the next 2 weeks, then they'll automatically receive the pack.