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Loyalty: You've got to give to get

I've long said that a loyalty program shouldn't be about 'free hugs' but a fair exchange between the business and its members.  Both sides need to give something to the other in order to receive something of value back.

Businesses want the right to access and use member data to drive behavior in a way that generates incremental income.  Members want to feel understood and valued, and receive compelling offers and benefits.  Businesses need to devise their loyalty program's business rules to facilitate this fair exchange.

From the perspective of the business, what they give depends upon what they are seeking from their members in exchange.  This is illustrated in the following matrix:

Loyalty Matrix

Each business objective determines where the corresponding benefit sits within the matrix.

Predictable benefits are important because members must understand core benefits of the program and exactly how to get the greatest value from it. A program that only features unpredictable surprises risks members muddling about blindly before becoming disengaged.

Instant gratification is useful for a 'big ask', and is most effective when predictable.  For example, a program may require members to complete their own personal information online or it may need to motivate members to validate their information as part of a program refresh, or database cleanse.  These are critically important to the business, and so members should be strongly incentivised.  Instant gratification upon sign-up also provides a simple hook for frontline staff to use to encourage guests to join the program - "Join our program and you'll receive 'x' as soon as you sign-up".

Loyalty programs should seek to drive incremental earnings through extra visits and/or spend.  A transparent and simple points or credit system blends predictability and delayed gratification to help achieve this.  Benefit thresholds should be set and communicated to motivate a member to strive beyond their ordinary behaviour.  They should show members the goal and the clear path to reach it.

Once the program's 'predictable spine' has been agreed, then surprises come into play.  A well-timed, personalized surprise (determined behind the scenes through data analysis and targeting) can be immensely powerful.  Research has shown that a 'surprise and delight' offer can do more than anything else to generate advocacy.  These can be extended by email, SMS or in the cinema by frontline team.  Examples may include a concessions upgrade for visiting three times in the past month, a free ticket for being a member for five years, or an invitation to a special event to a member who has been latent for 90 days.  As these examples demonstrate, surprises are generally delayed until a member passes a threshold or milestone.

A compelling loyalty program will have an arsenal of predictable and surprise benefits with different trigger time horizons.  It will also have the analytical capability to determine when to deploy each in order to facilitate the fair exchange with its members.

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