Convincing your CEO to invest in a loyalty programme

Contents page

1. Why loyalty? 3

2. 10 steps to building your business case 5

3. Overcoming obstacles and objections 6

4. Pilot programmes 7

5. The cost of a loyalty programme 8

6. In Summary: Your quick pitch to the CEO and SMT 9

Why Loyalty?The customer landscape is changing; and as a result it is becoming increasingly difficult to keep your customers loyal. But that’s just half of the problem, if on top of that you need to convince your CEO and Senior Management Team (SMT) why your customer experience and loyalty need to be invested in.

With so many options available to customers, it’s becoming harder for them to differentiate between you and your competitors – especially if you’re all offering similar products at similar prices. And as their options increase, customers are becoming very savvy, with higher demands and expectations.

There’s increasing competition coming from angles you wouldn’t expect; more and more brands are diversifying into new services and products, think Homebase – a DIY store - selling bikes, and supermarkets selling homeware. Simply offering efficient service is no longer enough.

The importance of customer loyalty

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Loyal customers (those who visited stores at least 10 times) account for about 20% of a company’s customers.

That 20% drives 80% ofyour business’s total revenue, and 72% of total visits to your business. (Source: Five Stars)

46% of customers admit to spending more due to a loyalty programme. (Source: Total Research Corp & Custom Marketing Corp)

It is six to seven times more expensive to acquire a new customer than to keep a current one. (Source: Bain & Company analysis)

When you think of it like that, why wouldn’t you need a loyalty strategy?

There are countless benefits to investing in a loyalty programme and it is important that you focus on those that your CEO and SMT will value most.

Loyal customers:· Keep coming back, and will spend more over their ‘lifetime’ with your business.

· Are likely to purchase more expensive products. Research states loyal customers spend 13% more during each transaction. (Source: Forrester Research)

· Are the best advocates for your brand - your ‘Superfans’ will recommend you to their friends and families. Word of Mouth is one of the most powerful marketing tools.

· Shop more often. There are 20% more transactions from members of a loyalty programme. (Source: Forrester Research)

· Are more likely to embrace new initiatives.

Loyalty programmes:· Are more likely to attract new customers (as well as referrals from your existing loyal customers), and so contribute significantly to your customer acquisition strategy.

· Encourage customers to purchase in order to be rewarded, rather than expect discounts.

· Provide you with valuable customer data which can be turned into actionable insight. You can track customer engagement with you across multiple touch-points, which then allows you to refine and target your marketing efforts; for example creating relevant content that makes your brand more ‘sticky’ to the customer.

· Help you track customer patterns and behaviours. For example, you may be able to identify when a customer is about to leave you and take action to retain them.

· Enable you to identify where improvements are needed, either to your service or products.It takes 12-20 customers to

replace the value of a loyal one

Get to know your customer base. Some of our partners’ loyalty programmes have up to an 80% penetration rate! Imagine being able to recognise and understand 80% of your customers and the impact this could have on all areas of your business?

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10 steps to building your business caseIt’s clear how important loyal customers are, and in turn how rewarding this loyalty benefits your business. Now we’ll explore how to build a business case to convince your CEO and SMT.

What are your objectives? Be clear on exactly what you aim to achieve. How you will achieve it and why now? Continually refer back to what success looks like for your brand.

Prove the effect the programme is expected to have on profitability and the customer base. Ensure that any claims you make are well supported with evidence- we’ll explore this further below.

Take your existing customer data and show how a loyalty programme can grow your business. For example, if you find you have customers who repeat purchase the same products, a loyalty programme could stretch their spend to buy new items. Or, if you have lots of one-off customers, loyalty rewards could keep them coming back.

Demonstrate that what you’re proposing has been fully researched. Show how you’re responding to your customers feedback and therefore needs. You could conduct a survey of customers to gain insight on what they want out of a loyalty programme and how they are likely to respond to it. If your customers are expressing a huge desire for a programme, it can only strengthen your case.

Use case studies and examples from others in your industry to show how well loyalty works for them.

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Work with colleagues from all areas of the business (finance, marketing, merchandising etc.) to get input and support across the organisation. They can act as a sounding-board for your initial ideas, and you can also highlight your collaboration with other departments when presenting your business case.

Clearly explain the programme structure and how it will work, but keep this on a high level. Explain who will need to be involved and what it may cost, but show what the ROI will be.

Reassure your SMT by committing to reporting back on the programme at all stages. Agree how this will be done, at what stages, how often and in what format. Don’t forget to discuss the risks, and how you will overcome any potential negative results. If you can show you have a plan to tackle any potential issues you are much more likely to get the SMT’s buy in.

Be prepared to answer difficult questions and justify how a loyalty programme would work for your business - see the next section for more details.

Keep it simple! Whilst supporting your business case with data and examples is vital, don’t overcomplicate things. Don’t use jargon, the SMT will not understand or engage with marketing speak; they want to see numbers and ROI projected in plain English.

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You may well be faced with sceptics when it comes to loyalty programmes, particularly the age-old argument that a loyalty programme is often unnecessary because it’s just a way of spending money to reward customers who would probably have spent anyway.

We often find that when we keep a control cell of highly engaged customers back froma campaign – guess what, they don’t spend!

The benefits of a loyalty programme can initially be felt by you as you begin to gather vital information about your customers that will feed into everything your business does: from how your marketing budget is spent; to the products/services you offer; right through to merchandising or how your front-line staff communicate with customers.

As we mentioned in the Building a business case section, the key to avoiding sceptics in the first place is to work with all departments. Make sure you educate everyone from the beginning on how important customer loyalty is and the benefits it will bring to your business. Your colleagues won’t want to find out about the new programme once it’s all in place, and plus they might have valuable ideas to input!

Here are three key tips for overcomingthe tricky questions:

Overcoming obstacles and objections

As they say, prevention is better than cure. Identify the potential sceptics in your organisation – find out their concerns and address them, talk them through your plan and how it will benefit the organisation. This way you’ll hopefully have tackled (and have answers for) the toughest questions before making your pitch.

Be prepared to use your data, research and examples of successful loyalty programmes – these are brilliant tools for proving the value of loyalty.

Run a pilot programme to test and learn.

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Pilot programmesPilot programmes are a great way to test your idea without the cost of a full-scale programme, and allow you to present your CEO and SMT with real results. We often work with retailers on pilots to explore the value of their customer data. Here are our top tips for running a pilot:

Start small · You don’t need to launch a full blown customer loyalty programme. Budget supermarket Lidl recently trialled a loyalty programme in just one region (Scotland), enabling them to explore whether loyalty works for them before they make a decision to roll it out to the rest of the UK.

· Pick something that requires the least amount of resource and financial backing.

Regularly report on how the pilot is going· Test and refine the results to improve performance.

· Ensure the data is simple and outlines exactly what the findings are, and highlight the key points.

· To convince your SMT or CEO you need to prove the ROI for the time and resources spent on the pilot.

Demonstrate the outcomes of the pilot by comparing the before and after results · Highlight how it affected customer engagement and sentiment; for example run a brief feedback survey or undertake social media listening.

Recognise any pitfalls· What were they?

· Why did they happen?

· How can they be overcome?

Think beyond the pilot· You’ve demonstrated that this works, but what would you do next? Consider how you would evolve the programme and provide a plan of how you plan to do it along with costs and the expected ROI.

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The cost of a loyalty programmeCustomer loyalty should be viewed as an investment, not a cost. We have found for some partners that for every £1 invested they get £6 return - quote us on this if you like! Does this seem a lot to invest given the amount of data you will now be able to collect to start driving the desired behaviours of stretching spend, increasing frequency and consistency of spend and to deliver a retention strategy?

Develop a comprehensive financial plan to cost up your proposal with potential expenses and expected sources of revenue, including increased physical and online visits, increased spend, referrals and other behaviour changes likely to increase profit. Customer insight and loyalty programme providers like Ikano Insight can package this all up for you to show the costs vs. projected ROI.

Here are some of the costs associated with creating a loyalty programme:

Technical The platform used to design, manage and report on your loyalty programme. You could choose to purchase an off the shelf solution, which could require training investment and staff resource; or you could opt to work with specialist loyalty and insight providers such as ourselves.

MarketingPromoting your loyalty programme is key to its success. You need a clear strategy as to how you will consistently talk about your loyaty programme as well as considering your ‘Welcome’ and retention tactics.

BenefitsThese will vary in cost, and can be selected based on your budget. For example, will you offer limited-time discounts for customers who hit a certain spend threshold; free gifts; or different rewards for different tiers of customers? Our clients all operate their programmes differently, but using their customer insight we have helped them to identify the most suitable rewards.

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In Summary: Your quick pitch to the CEO and SMT

The data· On the back of the data-driven activity you can measure how successful a campaign/loyalty programme has been.

· Data lets you determine for every £1 invested what the ROI’s going to be - remember that we find on some accounts that for every £1 invested, some of our partners are getting a £6 return - these are the numbers you need to present.

Show them examples of success· Give them an idea of what could be achieved and what success could look like. For example, show case studies of campaigns who have achieved similar goals to those you are setting; whether this is to gain new customers, retain existing ones, or stretch spend. Browse online for examples, or take a look at our website for case studies on our partners’ success.

If they’re still sceptical suggest a pilot· A small scale project that can be evaluated to prove its

worth and that can be scaled up.

Help them understand why they’re in business (to deliver shareholder value)· In order to deliver shareholder value (i.e. profit) they must put the customer at the heart of everything.

· Loyalty programmes give the customer a value exchange - you receive their data to better inform your business decisions, they receive relevant benefits.

The benefits of a loyalty programme· Increased data collection.

· Satisfied, long term customers who refer others to the business they love.

· Regular customers stay longer, buy more and more often = increased profit.

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And finally, for support, advice and best practice, just give us a call!

www.ikanoinsight.com @ikanoinsight

Ikano Insight is awesome with data,but even better at relationships.And that, ultimately, is what turns customer loyalty into a business’s success.

? Do you want to build a new loyalty or customer engagement programme?

? Do you want to improve an existing one?

? Or, do you simply want to turn customer data into actionable insight?

No matter what stage you are at with your customer engagement we have the intelligent, intuitive insight to help you achieve ROI and drive incremental revenue:

Wherever you are with customer engagement, we have the

intelligent, intuitive insight to help you achieve greater ROI and

drive incremental revenue.

For more information please contact:Barry Smithbarry.smith@ikano.net07551 671 8250115 850 3644