Using data analytics as the Loyalty Design engine to maximize loyalty kpi's

The driver behind most loyalty program reviews is a general sense that the current loyalty benefits are not performing well. The opinion is usually formed from a patchwork of observations, for example churn is increasing, redemptions are decreasing, share of revenue is flat, or overall costs are escalating – just to name a few. This article provides an overview of the LoyaltyLevers Foundational Analysis, which provides a fact-based view of Loyalty program performance with loyalty KPI’s across the three crucial questions:
• Is the program activating engagement among the members?
• Driving profitable behavior?
• Building loyalty sentiment and an emotional connection?

The LoyaltyLevers Foundational Analysis is a key part of the Discovery process. You can find more information here on the full loyalty design process and how this critical piece fits in. 

LoyaltyLevers Design Process: Starting with the Data

Any good design process always starts with a Discovery phase, and any good Discovery starts with the data. So, while stakeholder interviews are commencing and benchmarks are being developed for competitors and best practices, Data Analysts should be digging into a snapshot of historical program performance data.
The process begins with a historical data extract including transactional data, and all relevant digital data such as web logs, email performance, app data and the like. The beauty of developing a snapshot is that all the data sources need not be pre-connected, typically match keys can be developed to knit together the purpose-built data view. A secondary benefit is that, once the project is complete, the organization will understand the value of connecting new data sources and can prioritize which ones should be developed on an ongoing basis.

A critical piece of the analysis is understanding member sentiment – what is considered “true loyalty”. Once the behavioral and engagement data is assembled, a quick online survey with a standardized core of 7 questions can be fielded in a matter of days to complete the picture among a sampling of the membership.

The result is an integrated view of Loyalty Program metrics, with standardized measures across diverse KPI’s from Program Engagement to Benefit Usage, Margin Uplift to Member Affinity and ultimately Advocacy.

This three-dimensional view, made up of numerous granular diagnostic metrics, provides a means to evaluate current loyalty program performance overall.

• ROI can be calculated based on margin uplift factor (more details on this here),
• While ROI is important, measuring loyalty sentiment, the attitude behind "true loyalty", completes the picture.  Please see this article for more details on the methodology
• The level of ongoing engagement among members is a key indicator of program health, and a leading indicator towards ROI and loyalty trends of the future.  For more info on how to measure engagement please use this link.

Digging deeper, the analysis will reveal key behavioral and attitudinal segments, because the answer is almost always that the program is working well with some segments, and not at all with others. The game is to position the program towards the highest potential segments and implement strategies that will migrate more members towards the higher value segments with strategies tailored to each group.

Using the sample of members with all data elements complete, clustering is used to develop a member segmentation which identified similar groups based on the major dimensions of Engagement, Behavior, and Loyalty Sentiment. Arraying those segments across a traditional BCG matrix yields actionable strategic opportunities for each of the segments.

• Belongers: Simply joined the program and may use it, with little engagement or true loyalty.
  • Strategy: Increased engagement is pathway towards building loyalty
    
    
• Brand Driven: Likely more brand vs program influenced.
  • Strategy: Engage around how program enhances the brand experience they already love
    
    
• Games Players: Often compulsive loyalty program users.
  • Strategy: Bring your program to the top with sentiment builders that apply to this unique profile and limited promotions they can’t ignore, building loyalty and ultimately return on investment.
    
    
• Engaged Loyals: Better customers who represent the program aspiration
  • Strategy: Grow incremental value per capita, maintain with strong threshold programs and evolving/improving sentiment builders

LoyaltyLevers Take