Loyalty and Engagement programs, when running well with the right strategy and technology in place, have many levers to adjust to suit the market at a given time.
Seasonal based promotions, overstocked items, redemption discounts, bonus point offers – there are many.
And it is prudent to use these levers based on your data and other external factors to ensure your program generates a positive and robust ROI. And this is before we even look at Breakage.
Earn Burn Churn
You don't want all three in this world, only the first two. In a well-oiled program, there is a healthy balance of both Earn and Burn, and with a distinct goal of low Churn, or high Retention.
Unless you are from the Finance Department, Points Earning in your program is a good sign. Earn shows that customers are showing good brand behaviour. Depending on the program, it could be typical spend, plus other non-transactional activities such as social or media consumption.
The more points issued, the more 'things' your customers are doing in terms of interacting with your brand.
Points Burn demonstrates a level of engagement with your program. So, when a customer redeems, it proves that they have spent enough time and money with your brand to deserve some level of reward. A well-structured program will make sure the financials are correct, and the high perceived value or benefit for the customer is there.
What is exceptionally important is the timing of that first redemption. The faster the path is to that initial redemption, the more engaged the consumer becomes with your brand. The core reason for this is that the member can not only see value in the relationship but have a tangible experience of that value.
High Churn (or Low Retention), obviously shows the number of people leaving or no longer interacting with your program and brand. This number is the metric to control. And you can do this with various tactical executions. However, a healthy balance between Earn and Burn will help to keep the Churn levels under control.
Many programs seeing the high liability on the balance sheet for earn, plus, money out the door or revenue reductions as a cost on the redemption side, as a risk or negative.
That is correct if you looked at the transactions individually. However, on a customer level, it is more profitable for the business overall. And should also be on a programmatic level depending on the age of the program.
If your program is not profitable and has been in the market for some time, some elements are just not working. These elements should be identified and rectified immediately.
Factors such as Breakage, Liability Management and your Accounting Methodology for the program are critical to ensure program profitability. We will go deeper into these areas in another post - while it sounds complicated, the concepts are not, but do require thorough explanation.
What Can You Do?
There are some strategies you can implement immediately.
- Program Performance Review. Determine the areas that need attention. Whether it be Anti Churn processes, adjusting point levels during promotions, or even the wrong offers. You need to find the gaps.
- Invest in Analytics. Now. Data is the lifeblood of every program. And I don't mean web stats and campaign performance, or any of the other basics. With the right approach to analytics, you can use elements such as Predictive Analytics, and other metrics to understand critical points in your Customer Journey(s). And the right trigger points to act upon before your member does.
- Test. Marketing 101 is; test and learn, test and learn, and test and learn some more. Before making changes, test on a small segment or group of customers to understand the impact. Never stop testing.
Remember, any time you make a change, there is another balancing act - the benefit to the business vs the impact to the member. That is the balance that is most important in every program.