Loyalty Program Lifecycle: When the Program is Mature and How to Deal with it...

In simple words, a loyalty program is a structured reward program that optimizes customer retention and experience and maximizes the revenue of the company with each interaction. Over time, even the most exciting marketing initiative becomes obsolete as participants are desensitized to the offer. The good news is that you can predict it and react in the right way.

The five stages of the loyalty program lifecycle:

If the company wants to maximize business benefits, it is crucial to prepare an appropriate strategy for each step.

The planning phase of the program must start with determining its goals. It will be essential to establish the budget, analyze the target, choose the type of reward/incentive, and identify the main KPIs. A program operator has to choose a technological platform that will accompany them during subsequent stages. Decisions made during the planning phase have a significant influence on the performance of the program during its whole lifecycle.

The start-up phase is when a company implements the loyalty program. Its main goal is to generate hype and actively promote the program by word of mouth among members to encourage enrollments. The program operator has to push the program to the market and reach a broad audience. No matter how stunning the program is, it will fail if it does not get enough attention.

The growth phase is when your program takes off. Customers earn points, get rewards, and become an integral part of the program. Two main objectives for the program operator are leveraging involvement to create genuine brand preference, and driving engagement by offering personalized promotions and incentives. Towards the end of this phase, it is natural that the performance indicators start to decline slowly. 

During the maturity phase, the interest of the customers in the program begins to flatten. Members start to become less sensitive to the value proposition. When growth starts to stagnate, it is time to evaluate and optimize the program. The new strategy should be based on three pillars:

• Finding new ways to make the program more efficient and reduce costs

• Recognizing weaknesses and turning them into strengths

• Looking for fresh trends and technologies to replicate the initial success of the program.

Below you will find a few practical hits about re-designing your program.

Use of gamification dynamics. Giga information reports some impressive online results to support the use of a gamified strategy. With gamification, online customer activity increases by 68% on average and sharing on social networks increases by 22%. Be clear about what behavior you want to generate. If you want to ask your existing customers to help you acquire new ones, you could offer your customers certain rewards for getting a friend to sign up (member gets member mechanism).

Do not allow your members to get bored. Having simple gamification elements such as badges and rankings to show the status of members within the program offers a form of recognition and creates competition between people. There is one condition: your customers must be able to track their progress, and that of others, all the time. If your customers lose track of where they are, they are likely to lose interest in the loyalty program. 

Take advantage of the new technologies that loyalty providers offer. Over the past few years, loyalty and CX have taken on a new meaning, driven by the “data revolution”. Since data will continue to play a fundamental role, emerging technologies based on data analysis, such as artificial intelligence and machine learning, are at the forefront of creating new opportunities for engagement. Brands use artificial intelligence to take the customer experience to a new level. Segmentation, for example, has been the key feature of loyalty programs for decades but is now much more effective if powered by AI technology. It is possible to begin to validate the behavioral data of a program member indirectly by extracting geographic, demographic, and psychographic attributes. This will make it easier for you to gauge which groups of members are most likely to engage with your brand at the optimal time, based on varying factors such as sentiment and price.

The decision stage typically occurs 48 months after launching the program. At this point, you have two options: re-launch the loyalty program with a new engagement strategy, or implement an exit strategy.

Customer retention is not something that companies can only do once and then forget about. It must be reasonably constant in the brand's activities. It is crucial to use the data the program returns to make any necessary changes along the way. From this point of view, modular technologies will help companies to be more agile and improve their programs without having to throw everything away and redesign from the beginning. Collaborating with an experienced loyalty provider and with dynamic solutions is essential to bring a loyalty program to success.