How to design a loyalty program?

Learn how to design a loyalty program according to the needs of your business in order to build customer loyalty

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Loyalty programs are a set of strategies that a company adopts with the main objective of rewarding and encouraging customers, developing a relationship of loyalty so that they continue to consume its product or service. 

For a loyalty program to generate positive results for both customers and the company, it needs to be properly planned .

Here at Indico, we have developed our own planning methodology that has already been applied to projects for major clients. 

Earlier, we talked about the first stage of this methodology, which is the study. Now you'll learn all about the second stage, which is the design of the loyalty program.

How to design a loyalty program

After the study, the second stage of the loyalty planning process consists of designing the program. This is when it will begin to take shape by detailing aspects such as:

• Strategy
• Mechanics
• Gamification
• Benefits
• Communication
• Financial Engineering
• Technology
• KPIs

This is also the stage that requires the most time, effort and resources, as each topic must be carefully designed to ensure the cohesion and success of the program. 

Strategy

The strategy is the foundation on which the entire loyalty program is built, as it defines, in general terms, its vision, concept and operation .

It is at this stage that the main pillars of the program are determined, the points of evolution (if the company already has a loyalty program), the target audience, the general rules and mechanics, the possible benefits and the customer journey. 

With the strategy approved, the team can move on to detailing each aspect of the program.

Mechanics

The mechanics consist of the set of rules and processes that determine how the loyalty program works and how participants can interact with it. 

It is essential that the mechanics are clear, uncomplicated and customer-focused so that participation in the program is easy and intuitive .

Here you need to answer a few questions, such as:

• How does the participant enter the program?
• How does it evolve throughout the journey?
• What is the points and redemption system?
• What behaviors should be encouraged?
• Will there be levels?

Gamification

Gamification is the use of game mechanics and experiences to entertain and engage the user.

Gamification makes the customer experience with your product/service more innovative and exciting, regardless of age group. 

The use of game mechanics motivates users to achieve goals and objectives in order to win prizes and recognition .

By allowing customers to interact with your brand in a fun way, you create an incentive for participation and engagement. 

When using gamified dynamics, there are a number of elements that can be considered to make up the strategy: 

• Stories and narratives
• Levels
• Challenges
• Missions
• Goals
• Rankings
• Instant prizes
• Badges

Benefits 

Benefits are one of the fundamental elements of a loyalty program, as participants value the way they are rewarded for their loyalty to the brand. 

Well-defined and communicated benefits encourage participation and engagement, and also generate a positive perception of the program.

You need to choose an attractive benefits package that matches your customers' efforts in the program and encourages them to continue participating actively.

Remember: loyalty is a two-way street. If the customer perceives that they are not being rewarded for their loyalty to the brand, it is very likely that they will feel demotivated and lose interest in the program.

Therefore, it is also important to monitor customer behavior and carry out feedback surveys to understand their perception of the program and what they want as a benefit.

Communication 

Communication is a key success factor in the Loyalty structure, as it will promote awareness of the initiatives on a large scale, encourage consumer interaction with the brand, reinforce the benefits offered and lead the generation of demand from data-based communication campaigns.

It is important to note that communication is not only necessary to publicize the program, but also to maintain an active relationship with the participant during their journey.

For well-structured communication, remember to map out strategic points of contact, suitable for the program's target audience, and structure personalized interactions for each scenario. 

In addition, a good data collection and analysis strategy helps to understand the various customer profiles so that interactions are increasingly personalized and assertive.

Financial Engineering 

The development of financial engineering includes the preparation of scenarios with projected financial results and the corresponding assessment of the expected impacts to be generated by the implementation of the program.

Financial engineering understands that customers are not all the same and provide different profitability for the company, which is why it analyzes various factors to identify the different profiles of participants. 

The financial model takes into account aspects discussed earlier, such as: mechanics, scoring rules, operating expenses , incremental revenue and profit, investment in communication, prize costs, etc. 

Here we will define the fundamental topics for a loyalty program: the minimum balance for redemption, the value of the point and its validity, the prediction of redemption behavior and the investment needed to launch the program. 

This whole process is carried out with a focus on the profitability that the project will generate for the company. 

Technology

The technological platform is an umbrella that aligns and enables all strategic efforts.

It is necessary to invest in a platform that can be integrated with the company's systems and strategic partners, adaptable to any type of technology and with security protocols. 

From this, it will be possible to make decisions based on data to guarantee excellent usability and a fluid connection with the company's technological infrastructure.

The platform must also meet the needs of consumers during their journey and evolve with the complexities and movements of the market, as well as having a simple interface. After all, this is where the participant's entire relationship with the program will be. 

Invest in UX/UI studies to ensure a frictionless experience that facilitates navigation and interaction with the program through intuitive usability.

KPIs

Loyalty programs encourage integrated work to create a single view of the customer in consistent and organized Big Data.

With the consumer at the center of the project, data capture and management must follow the brand's loyalty strategy, the aim of which is to promote the rewarding of desired behaviors and the generation of a unique experience.

Data is the core of the program, it serves as the basis for all its development. It translates the reality of the consumer and their relationship with the brand. They need to be exploited intelligently within the structure.

And in order for the data collected to be put to good use and used in the program, it is important to define the main KPIs right from the start. These indicators will make it easier to understand the results, provide greater insight into the participants' behavior and will be key to recalibrating the program over time.

About Indico

We create and manage loyalty programs that connect brands and customers, generating the engagement needed to develop your business.

Count on the expertise of +100 loyalty programs developed and implemented. Contact us us and turn your customers into fans!

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