Design your

Loyalty program
in 2 weeks.
Learn how to build an effective program that attracts and
retains customers, generates more revenue and delivers
loyalty as the outcome.
 Contents.
WEEK 1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

How to use this guide? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

DAY 1 What can a Loyalty Program do for me? . . . . . . . . . . . . . . . . . . . 6

DAY 2 How should I structure my Loyalty Program? . . . . . . . . . . . . . . . . 9

1. Basic Rewards Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. Tiered Program with status-based rewards . . . . . . . . . . . . . . . . . 11
3. Personalization Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Engagement-first Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Premium Loyalty Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

DAY 3 What to consider when creating a loyalty scheme? . . . . . . . . . . 16

The desire for personalization is universal . . . . . . . . . . . . . . . . . . . 17
Generational differences are extreme . . . . . . . . . . . . . . . . . . . . . . 17
Men and women want to be treated differently . . . . . . . . . . . . . . . 18

DAY 4 What behaviors should be rewarded? . . . . . . . . . . . . . . . . . . . . 19

Find behaviors worth rewarding . . . . . . . . . . . . . . . . . . . . . . . . . 20
Let’s do the math . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The intangible benefit of rewarding small behaviors . . . . . . . . . . . . 21

DAY 5 How to reward the desired behaviors? . . . . . . . . . . . . . . . . . . . . 24

 WEEK 2

DAY 1 How to create a category-leading Loyalty Program? . . . . . . . . . . 28

Loyalty in Luxury - Do’s and Don’ts . . . . . . . . . . . . . . . . . . . . . . . 29
Loyalty in Retail - Do’s and Don’ts . . . . . . . . . . . . . . . . . . . . . . . . 30
Loyalty in Fashion - Do’s and Don’ts . . . . . . . . . . . . . . . . . . . . . . . 31

DAY 2 How to check if the Program is financially sound? . . . . . . . . . . . 33

DAY 3 How to assess the Program’s effectiveness? . . . . . . . . . . . . . . . . 37

Extend your projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Refine your figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Subtract the costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Pull out the top success metrics . . . . . . . . . . . . . . . . . . . . . . . . . 40
Schedule monthly reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

DAY 4 How to bring the Program to life? . . . . . . . . . . . . . . . . . . . . . . . 42

Choose a great name your Program . . . . . . . . . . . . . . . . . . . . . . . 42
Help customers visualize the offer . . . . . . . . . . . . . . . . . . . . . . . . 44
Create a launch plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

DAY 5 How to embed the scheme within the organization? . . . . . . . . . 47

Elect or hire a Loyalty Manager . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Who and how to onboard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Integrate with other marketing activities . . . . . . . . . . . . . . . . . . . 49

It’s your turn now! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Manage your Loyalty Programs with Splio. . . . . . . . . . . . . . . . . . 52

 Introduction.

What type of loyalty and program today?

It’s a broad question that marketers are trying to answer. A lot of brands are
calling into question the current format of their Loyalty Programs to adapt to
changing marketing conditions, integrating new digital channels, mobile, latest
innovations and rethinking their plans for a new type of consumer loyalty.

Consumers are continually changing over time. Millennials will represent 75%
of the global population by 2021. They are today’s customers and with them
entire new generations with their own buying habits are coming up. Immediacy,
digitalization, speed, simplicity but also trust, transparency, on and offline
engagement are values and habits that matter today for your Loyalty Program.

Loyalty is first an experience offered by a brand that brings clients into a

universe they like and where they want to spend time. Loyalty Programs need
to move in this direction by combining client experience, new consumer habits,
and innovation.

Loyalty Programs also must answer to an economic model that uses loyalty
strategy as a basis to guide the growth of a brand. A brand must also make sure
that its Loyalty Program is profitable.

Thanks for reading this guide and congratulations on taking the first step
towards helping your organization strengthen its performance through Loyalty
Marketing. We were inspired by brands from all around the world to illustrate
our points with Loyalty Program examples that have already demonstrated their
success.

4
 How to use this guide?

Whether you want to develop or rethink your Loyalty Program, this guide will
help you:

! 1. Understand
the reasons for having a Loyalty Program in the
first place.

2. Make sense
of the different formats and structure available to you.

3. Design the Program

considering financial considerations, branding, and
launch activities.

For best results, we suggest spending 30 minutes working through this

guide every day for the next two weeks. This should give you enough time to
understand the concepts and apply the learnings to your own organization by
completing the set exercises.

By the end of the process, you will have the first draft of your Loyalty Program
completed and ready to be shared within your organization.

Book the daily 30-minute sections in your diary now and let’s get going!

5
 DAY

Week 1 1

What can a Loyalty

Program do for me?
The concept of rewarding loyalty has
been around for decades and has
inspired a large set of case studies across
different geographies, organization sizes,
and product categories.
This means that today we have detailed
knowledge of what kind of impact a
Loyalty Program can have on business
performance. Here is the most important
conclusion.

??

6
 On average, Loyalty Programs lead to a
28% uplift in sales year on year.

This is achieved by making the most of the existing buyers and consistently
encouraging them to come back. When they do so, they are 9x easier to convert,
and their average spend is 3-5x higher than that of a first-time buyer. Over the years,
this adds up to them spending 40% more, compared to the scenario in which they
had not enrolled in a Loyalty Program.
With time, the business can expect around 41% of its revenue to come from repeat
customers. This gives the company an opportunity to be much more strategic about
its marketing spend.

Retaining an existing customer is 7 times

cheaper than acquiring new one.

Focus on loyalty and save on your marketing spend, then reinvest it to provide a
better customer experience. Can you imagine being able to cut your media spend
by 10% and maintain revenue targets? This can happen if you boost retention by as
little as 2%.
A loyalty scheme can improve your acquisition tactics too. In some cases, the
expectation of loyalty perks can be the reason for a first-time purchase. Moreover,
it will be easier for new customers to find you, as those who are part of the loyalty
scheme double their rate of referrals and branded social media shares.

What do consumers say ?

81%
are more likely to
66%
spend more to
50%
spend more to
continue doing business maximize loyalty achieve a higher
with brands that offer points. loyalty tier.
loyalty programs.

7
Finally, creating a loyalty program allows the brand to quickly and effectively grow
its understanding of the customer. Enrollment forms, tracked omnichannel purchase
history, redeemed rewards, responsiveness to special offers, as well as product reviews
and social engagement - together, they create an unbeatable and ever-growing
level of customer insight. Even in the early days of launching a loyalty scheme, this
type of database allows for more thorough segmentation of the customer and the
delivery of more personalized offers and communications. Over time, as the size
of the customer database grows, it can support not only the development of new
marketing tactics, but in some cases even the longer-term business strategy of the
brand.

All in all, a Loyalty Program is proven to boost your sales and cut your costs - your
audience is expecting to be rewarded for their custom and is ready to engage. The
only catch is that to benefit from all of this, you need to get started right now.

Standing out is getting more competitive by the day - by now 47% of global B2C
marketers already have loyalty solutions in place. The good news is that the rest
spend less than 19% of their budget on customer retention, which means that you
won’t have to shift your budget too much to catch up.

Time to take action !

Review the business effects of
implementing a Loyalty Program and
answer the following questions:
1. What is the most pressing problem
your business is facing? Is it awareness?
Conversion? Sales figures? Marketing
costs?
2. How could creating a Loyalty
Program help address these issues? To
what extent?
3. What would the updated metrics
be, were you to implement a Loyalty
Program?

+1
+1

+1

8

Week 1
How should I structure
my Loyalty Program?
Since loyalty schemes have been around
for a long time, they have gone through
a few stages of evolution. Today, we will
explore the five main types of Programs,
the pros, and cons of each one, and see
DAY
2
how they can work in the real world. By
the end of this section, you will have all
the knowledge to help you decide which
Program structure is the best fit for your
business.
9
1. Basic Rewards Programs

Let’s start with the basic rewards Program, in which the customer earns points
based on transaction numbers or value and can redeem them on selected
products or benefits according to a pre-prescribed set of rules. This type of Program
is popular because it’s so simple to create and run.
Unfortunately, this also means that for some product categories, a customer is likely
to be part of multiple Programs at the same time. In order to stand out, you need to
either innovate with the kind of rewards you are offering or beat your competitors
on the value of rewards given out. Let’s look at an example.

case study 7-Eleven, an American chain of conve-

nience stories runs a Loyalty Program
called 7Rewards. It enables customers to
earn points for product purchases and
redeem them against other products in
the store. 7Rewards is clear that as much
as 80% of its product range, including the
bestsellers, is available for redemption.

This provides customers with exceptional

value for money and enables them
to decide whether they want to treat
themselves to extra products or subsidize
their daily shop. As of 2018, 12 million
customers were enrolled in the scheme,
7-Eleven according to 7-Eleven Corporate.

10
2. Tiered Programs with status-based rewards

The second type of Loyalty Program is a tiered structure with status-based rewards.
Just like in the basic rewards Program, the customer can earn points for selected
purchases or activities, but the remuneration is more complex. One can redeem
points against rewards but is also encouraged to keep spending in order to obtain a
higher status with bigger privileges. This can be very effective for the retailer, as most
customers will stay at the lower tier, in which providing rewards is very cost-effective.
The challenge is to ensure that the customers are still interested in progressing
through the Program and feel able to fulfill the conditions for the next status level.
In order to strike this balance, the business might need to test the scheme with a
small sample and go through a few rounds of iterations.

case study
Sephora is an LVMH-owned international
chain of personal care stores. Its Loyalty
Program called VIB Rouge & Beauty
Insider is so popular that 80% of the
company’s transactions are made by its
members.

This was the figure reported by Forbes in

2014, and the Program has only grown in
strength since. Today the 3-tier scheme
rewards shoppers with free beauty
classes, monthly gifts, custom makeovers,
and exclusive events.

Sephora

11
3. Personalization Programs

It was only a matter of time until all the data collected through reward Programs
were used to deliver the most personalized experience possible for each customer.
This type of Program is primarily focused on data capture across all touch points to
ensure individually relevant offers are served both online and in-store.
The Program may or may not be outwardly combined with the tiered approach but will
naturally result in the biggest spenders revealing the most data and therefore getting
the best service. The benefit of this approach is that the business can be certain it is
allocating its largest efforts towards high-spending customers. The disadvantage
is that customers may be put off by the idea that they need to prove themselves first
to receive personal treatment.

case study
Burberry, a British luxury fashion
house, has mastered personalization
so well that its customers are now 50%
more likely to buy again, compared to the
time before the approach was introduced.

Forbes has extensively covered the

industry-leading investment by Burberry
into personalized customer management
programs.

The company was among the first to

track customer information, social
media activity and purchase history
online and in-store, in order to deliver
relevant buying suggestions.

Burberry

12
4. Engagement-first Programs

This is the most investment-heavy and sophisticated type of loyalty program, which
is often used by brands who are already leaders in their respective product category.
That said, smaller businesses should explore this option as well, because creating
this type of program can help make the brand a category leader in the prospective
customer’s mind.
The trick is to focus on identifying customer needs and start delivering on them even
before mentioning the product that can help solve them. While building this out, view
all the engagement activity as a way to qualify the customer ahead of purchase, e.g.
give free access to online fitness classes before selling workout gear, deliver lessons
in managing one’s budget before offering a savings account. More sophisticated
marketers can even evaluate how engaged the customer was with their content to
adjust the kind of product they should serve and what type of offer will resonate most.
These types of programs focus on the engagement component of loyalty and look to
identify ambassadors to their brand by allocating points, rewards and VIP access
for activities that the consumers perform promoting the brand e.g. Facebook page
like, product review, referrals, consistent readers of their emails/blogs, etc.

case study Nike, a Top 3 global athletic brand has used its
digital channels to launch the new Nike Zoom
Fly trainers in 2017. The marketing activity invited
customers to attempt to run a sub-25-minute 5K
through the Nike+ app. Those that were able to do
so were awarded early access to a pair of trainers,
creating a sense of scarcity and further justifying
the premium price of the product.

This non-monetary incentive has paid off,

generating disproportional word of mouth in the
running community and stimulating demand. As of
February 2018, Nike maintains its global leadership
position in sneaker sales, according to Business
Nike Insider.

13
5. Premium Loyalty Programs

This is an emerging trend in loyalty, a format in which consumers agree to pay a fee
to access better deals and enhanced services. So far, this innovation is most popular
among 25-34-year-olds, with 77% of them claiming they would be happy to sign
up. Large-scale retailers are best positioned to capitalize on this, with Amazon Prime,
ASOS Premier, and Barnes & Noble being the early adopters. This approach should
not be considered by those new to loyalty. Instead, it should be seen as an opportunity
to convert one’s Loyalty Program into a revenue stream in the long term.
Those who decide to go for a premium loyalty program will expect that charging a fee
upfront will help generate ROI faster, but there are other advantages too. By offering
customers great value without needing to wait for a coupon or a reward, premium
loyalty schemes also bring forward standalone transactions. On top of this, the brand
is more likely to become part of the customer’s everyday lifestyle, since paying a
membership fee creates a sunk cost and the need to ‘break even’ on this investment.

On the other hand, a premium loyalty program can come with a set of significant
limitations :

First of all, premium loyalty schemes will only ever be attractive to returning
customers and can leave the rest feeling left out, forgotten, and misunderstood by
the brand.

They also come with the pressure of having to get the offer right from the
start, because customers are likely to push back on future changes to the deal
they have already paid for.

Finally, even after a heightened marketing spend in order to ‘sell’ memberships, as

well as the investment into production of exclusive content or services, paid-for
rewards always risk eventually being seen as expected and mundane.

14
Now that you know what type of Loyalty Programs are available to you, it will be a lot
easier to figure out what would work best for your business. Once you have chosen
the approach, the scale of work needed becomes a lot more obvious and the process
for creating a scheme more straightforward.
Before you dive into the next task and note down your ideas, remember one thing
- to earn customer loyalty, it is essential that customers see you as ‘honest’ and
‘trustworthy’. Whatever you come up with, ensure that the process of gaining and
redeeming points is transparent and that customer data is used appropriately.

This may seem like a

small issue, but 91%
of customers list data
security as a deal
breaker.

Time to take action !

Decide which Loyalty Program 2. Which structure could you
structure works best for you, based realistically implement, given your
on the listed pros, cons, and case timeline and internal resource?
studies.. 3. What would you need in order
1. On a scale from 1 to 10, how to implement a more sophisticated
committed is your organization to Program?
creating a Loyalty Program?

15

Week 1
What to consider when
creating a loyalty scheme?
The wisest thing you can do when
creating a loyalty scheme is to always
keep your customers in mind. It may feel
convenient to choose rewards that are
most affordable for the business and
don’t require any time investment, but
this can easily end up costing you more.
You could end up overspending by
giving away individual products instead
of creating mass experiences or be
DAY
3
faced with low enrollment levels due to
rewards being irrelevant.
This section provides you with guidance
on what kind of rewards are considered
more attractive than others, and how to
adjust them to audiences of different
ages and genders. You will be able to use
this information as both inspiration and
a filter once you start working up your
reward offering.
16
The desire for personalization is universal

The first and the most surprising finding from

years of research into Loyalty Programs is that the
financial value of rewards is by no means most
important.
Providing an offer that is relevant to the
customer, be it a discount on the product they
have been browsing but haven’t purchased, or early
notification about an item when it’s back in stock, is
more impactful.

Using personalization makes the

customer 8x more likely to say they
are satisfied with the loyalty scheme.

Generational differences are extreme

With such strong desire for personalization, you shouldn’t be surprised to learn that
generations put a different value on certain types of rewards. For example:

Baby Boomers, with their great spending power, want to be given access to
premium and exclusive products, and simple processes to redeem them.
Baby Busters also want easy redemption, but in order to get better value for money,
not in order to treat themselves.

Younger generations are more tolerant of more complex Loyalty Programs and
redemption terms.

Millennials crave being part of a like-minded community and the social credibility
that comes with it.
Gen Z wants to do good and feel good - give them opportunities to be charitable
and create authentically branded events.

17
Men and women want to be treated differently

Men are interested in tiered Loyalty Programs and motivated to

progress upwards and receive status-based rewards. The biggest
struggle is to get their attention and sign them up in the first place, so
you might need to consider giving away rewards for registration alone.
Women are more likely to sign up driven by the simple promise of
personalization, but the retailer needs to deliver on it! Birthday rewards
go a long way and will generate enough goodwill to warrant word of
mouth. If she gets rewarded for spreading the word - even better!

Once you have decided what type of rewards are most relevant to your audience, it’s
time to consider how to make these affordable for your business. If you’re looking at
giving away your own products or services, choose the ones with a margin of at least
10%. This way the giveaways won’t erode your bottom line.
Only ever compromise on this in the top tiers. If your loyalty scheme is well-designed,
less than 10% of your customers will ever be at the upper tier, and their extra spend
during the journey through the tiers would have more than covered for the loss of
margin.

Time to take action !

Consider what kind of rewards are
most appropriate for your business
1. Who is your target audience and
what kind of rewards do they find
appealing?
2. What is your competition doing?
Can you afford to match their loyalty
scheme?
3. What kind of rewards would be
both competitive and attractive to your
audience?

18

Week 1
What behaviors
should be rewarded?
So far you have decided on the most
relevant Loyalty Program structure for
your business and the type of rewards
that would make your offer attractive and
competitive without undermining your
bottom line.
DAY
4
Today we will focus on what behaviors
should be rewarded and why. Before
we think about what actions we deem
valuable apart from the transaction itself,
let’s imagine the Program from the point
of view of your customer.
19
Most Loyalty Programs are run according to the same monetary equation of giving
back 1% of the purchase value, e.g. spend $1 to get 1 point and earn 100 points to get
$1 off.
This is applied to all entry-level customers and built upon when they progress through
the tiers. In most cases, retailers choose to give away 2 points per $1 in the middle
tier and 5 points per $ at the top tier.

Find behaviors worth rewarding

When thinking about what behaviors to reward, one thing is key to remember:

77% of customers of Loyalty Programs

are not happy with how rewards can be earned.

This is further backed by the finding that the most successful Loyalty Programs
reward at least 6 types of actions. This means that for your loyalty scheme to work,
you need to provide options and reward customers beyond the purchase. Here are
some examples:

200 You could give the customer 200 points for creating an
pts
account. The data you will gather and the incremental sales
you will generate by using it will far outweigh the $2 you
spent on it.

$2 You could splash out and spend the same on a Birthday treat
too! That would be the cheapest way to deliver personalization,
also giving you permission to invite the customer to treat
themselves and spend the extra points there and then.

$1 Give them $1 worth of points for writing a product review

and see the social proof disproportionally boost your sales.

20
 Another $1 could go to incentivizing customers to follow
Follow you on social media. That’s a small price to pay to stay top
of mind and the act of following your account alone puts your
brand in front of their friends.

To boost the relationship with your customer’s friends, invite

the customer to share your brand on social media or drive
friends to explore your offering. At $1, this is the most cost-
effective approach to acquisition.

Let’s do the math

Imagine a scenario in which a first-time customer just spent $100 with you and created
an online account mentioning their birthday. They enjoyed their purchase and wrote
two product reviews, followed two of your channels on social media and referred a
friend. All of this would cost you no more than $10 but would rapidly accelerate your
growth with exponential increases in awareness, relevance and credibility metrics.

The intangible benefit of rewarding small behaviors

Once you know who your customers are and can follow them back on social
media, you get exposed to open data on their browsing behavior. The accounts
they choose to follow and the posts they like provide a seamless way of
gathering preference data. Still, only 30% of companies do this at the moment,
and even of those that do collect the data - only 60% bother to use it.
This is the most untapped opportunity in loyalty marketing right now - make the most
of it! Here are a few more innovative case studies to broaden your thinking about
behaviors worth rewarding.

21
case study Farfetch, an online fashion retail
platform that sells products from over
700 international brands, has started
rewarding friend referrals. The offer is
available to all customers - invite a friend
to get free shipping for yourself and 10%
off for your friend’s first order.

The scheme is part of the company’s

ongoing exploration of new approaches
to growth and has contributed to a 74%
increase in revenues in 2016, according
to Business Insider.

Farfetch

case study Starwood Hotels and Resorts, who own,

manage, or franchise over 1,200 properties
around the world are rewarding its
guests for sharing the information in
their Uber account. By opening access to
one’s Uber data, the guest receives extra
points to their Starwood Preferred Guest
account.

The generous rewards Program has

contributed to the 60% boost in
Marriott stock price between 2016
and 2017, according to Fortune.

Starwood Hotels

22
case study
Turkish Airlines, part of the Star Alliance network,
positions itself as an airline that helps you ‘Widen Your
World’. Its Frequent Flyer Program ‘Miles & Smiles’
supports this mission and rewards customers not just
for flying, but also for spending with organizations that
stand for self-development. One of those is Istanbul
Aydin University, which allocates Turkish Airline miles for
investment into its postgraduate and doctorate degrees.

According to the Turkish Airlines Annual Report, the

proportion of tickets purchased with miles has been
growing rapidly since 2014, helping the airline win three
Travelers’ Choice Awards from TripAdvisor in 2018.

Turkish Airlines

Time to take action !

Brainstorm all the possible beha-
viors of your customers that you
could reward.
1. What does your customer do before,
during, and after their purchase?
2. Which of these activities could
benefit your business if done more
often or made public?
3. How much value do you put on
each activity in relation to others? How
many points are they worth?

23
 DAY

Week 1 5

How to reward
the desired behaviors?
Now you know what range of behavior rewards you choose are sustainable for
you could be rewarding and how these your business and give you ideas on even
can benefit your business, let’s focus on more cost-efficient rewards you could
what you will be rewarding them with. add to your offer.
Today we will help you ensure that the

24
First of all, you need to know the ultimate rule of thumb in loyalty marketing - set
the value of your reward per customer per order to be lower than your cost per
acquisition. You obviously don’t want to pay more for your customer to come back
compared to how much you spend to acquire a new one. Remembering this rule
allows you to quickly evaluate your ideas about new rewards.

Now, let’s look at rewards that work best for entry-level shoppers compared to
loyalists. The logic is simple - a first-timer doesn’t have any loyalty to your business
just yet, so you will have to earn theirs by providing rewards that are valuable and
instant. These include but are not limited to free shipping, money or % off the retail
price, or free product.

Returning customers already know you, your product range, and have demonstrated
their loyalty to you. Reward them with experiences that make them feel special.
These can be special events, early access to new products or sales, special offers
on best-selling products, or even gift cards. Gift cards are a particularly great option
because a returning customer already knows your offering and will find the gift
valuable. For maximum benefit, deliver them unannounced. This way they are likely to
trigger an extra sale while bringing even more positive emotions.

79% of consumers report being excited about

the idea of a surprise reward.

Finally, consider values-based rewards, as the positive emotions they deliver make
them appealing across different genders, ages, and geographies. Locate charities
aligned with your brand’s and your customers’ values and create a way in which a
customers’ points or even actual rewards could be donated to them.

25
case study
Best Buy, an American multinational
consumer electronics retailer rewards
their customers with an enhanced service
experience. Among other benefits, the
3-tier scheme features an increasing
returns and exchanges window, from the
standard 15 days for new customers, to 45
days for the top tier.

In an interview with CNBC, Best Buy links

its new customer-centric initiatives to
ongoing revenue growth.

Best Buy

case study Kimpton is a group of boutique hotels

owned by Intercontinental, who invented
the idea of surprising customers when
they least expect it. Kimpton Karma
Rewards includes unpublished benefits,
such as chef’s treats or a ‘Raid the Bar’
voucher, that get given away based on a
set of 300 unpublished behaviors.

As soon as it was announced that Kimpton

Karma Rewards was being folded into the
wider Loyalty Program of Intercontinental,
the leading frequent flyer blog Boarding
Area published a post bemoaning the loss
of special benefits.
Kimpton

26
case study
Aeroplan
Time to take action !
Brainstorm new non-monetary cost-
effective ways in which you could
reward your customers.
1. How much does your business
currently spend on acquisition of new
customers?
Aeroplan, a coalition Loyalty Program
created by Air Canada, offers customers
an option to donate their miles to
charity. Its Beyond Miles Program helps
offset travel costs of charities that
support international projects.
According to Aeroplan owners Aimia,
500 million miles have been donated
by 5 million members so far, all to
support non-profit projects all over the
world.
2. Which of the reward ideas
mentioned above could be most
attractive to your target customer?
3. How can you refine them to ensure
they are as desirable but cost-effective?
27
 DAY

Week 2 1

How to create a category-

leading Loyalty Program?
Welcome to week 2! So far you have
learned about the business benefits of
Loyalty Programs and chosen a structure
that will work for your business.
Together, we have looked into ways
to make sure what you are offering
is appealing to your audience and
broadened your thinking when it comes
to behaviors worth rewarding and the
rewards you can offer.

Today we look at ways of making your Program not just effective, but category-
leading. As before, this does not imply the need for a higher spend on rewards, but
simply another layer of thinking based on best practice.
To make this process more effective, we have divided this section into three product
categories - luxury, retail, and fashion. If your business does not fit into any of these
categories, please still complete today’s reading. Review the tips you find here against
the dynamics of your product category and the needs of your business. You may be
surprised by how much of this will be applicable to your situation.

28
Loyalty in Luxury - Do’s and Don’ts

The time is right for luxury brands to put the effort into encouraging their customers
to become loyalists, as 56% of high-income consumers feel less loyal to brands
now than they previously did. The great thing is that luxury customers won’t think
twice about joining the Program, as they display a natural desire to be acknowledged
for their high-spending behavior.
Unlike with other categories, luxury brand loyalty becomes a status symbol in itself,
giving the Program extra exposure through disproportionate word of mouth.

Do Don’t
Focus
Offer
on publicly visible image-based rewards, e.g.
exclusive products, services, or experiences. subtractive discounts, as
this will instantly dilute
the power of a luxury
Give brand.
additional value - free complimentary products
or even gift cards to trigger instant excitement.

Support
existing behaviors - reward customers for
sharing images of their purchases on social
media.

case study Moda Operandi is an online luxury fashion

retailer that allows customers to preorder
looks directly from designers, immediately
after their runway show. Its VIP Loyalty
Program is available to customers who
spend $100,000+ and includes wardrobe
consultation and concierge services, which
can go as far as planning daily outfits for a
client’s vacation.

Business of Fashion reports that sales grew

54% between 2016 and 2015 when the
scheme was launched.
Moda Operandi
29
Loyalty in Retail - Do’s and Don’ts

Retail is a notoriously difficult category for earning customer loyalty because it is so

easy to switch to a competitor who stocks similar products. Recent studies reveal that
91% of customers around the world are ready to cheat on their favorite retailer
with a competitor.
A Loyalty Program can help generate customer reviews and social mentions to
illustrate the intangible advantages of a superior customer experience and help keep
the retailer front of mind.

Do Don’t
Personalize
Restrict
your rewards - not doing so annoys over 50%
of retail Loyalty Program customers. best-selling products
from being redeemed
with points, as this
Reward will cause major
disappointment.
customers for opening accounts and sharing
personal information, then use it to cross-sell.

Invite
social follows and reviews to build a
community that acts as proof of a positive
shopping experience.

case study
Nordstrom, an American-based chain of
department stores, offers those who spend
over $5,000 access to exclusive products.
Their premium-priced Extraordinary
Experiences are kept secret from the
general public. Past examples include a day
out with a fashion designer and a training
session with a coach of a top athlete.

According to Forbes, the Nordstrom

Rewards scheme had 7.8 million active
members as of April 2017.

Nordstrom 30
Loyalty in Fashion - Do’s and Don’ts

With its ever-changing stock, fashion is a category where loyalty schemes serve a
pragmatic purpose - to ensure customers come back to view it. Unfortunately, this
means that the loyalty area is oversaturated and extremely competitive.
47% of shoppers are part of a fashion loyalty program and often hold multiple
memberships with different brands. What’s even more challenging, few of these
seem like a good deal - only 31% of members report being very satisfied. Still, there
are a few tactics that will achieve strong results.

Do Don’t
Offer
Stop
€ competitive value with discounts or gift cards,
to quickly trigger preference for the brand. at mundane rewards.
Only exclusive products
and events will entice
Invite members to move up
the tiers.
social media follows, so shoppers are
continuously exposed to your full range of
products.

Reward
visual social media shares to drive awareness
of the product to new shoppers.

case study Urban Outfitters, an American fashion retail

brand targeting young adults worldwide, has
seen its stock prices more than double in the
12 months leading up to July 2018, according to
The Financial Times. Its new scheme rewards
not just purchases, but a total of 10 actions
including in-store browsing, social posts with
a brand hashtag, attending brand events or
reading the blog.

The rewards also aren’t all transactional - one

can earn celebrity meet-and-greets and tickets
to exclusive events.

Urban Outfitters 31
 Time to take action !
Think about your industry and
product category, research if needed,
and refine your thinking to date.
1. What are the recommended tactics
in your category? How can you apply
them to your offer?
2. What are the practices to avoid? Do
you need to adjust your offer to make
it fit?
3. Are your competitors taking this
advice into account? What can you
learn from them?

Z Z

Z
Z
Z

€
32

Week 2
How to check if the Program
is financially sound?
Now you have your loyalty scheme
structure in place and have refined how
it works according to best practice, it’s
now time to review how it will perform in
the real world. Today we will create the
financial model for your Program and
seek to predict its potential ROI.
These steps are essential to ensure you
are able to generate internal buy-in for
DAY
2
the development and implementation
of this Loyalty Program. Done right,
this process will help you position the
Program as a revenue generator, as
opposed to a cost center.
The implementation of the Loyalty
Program will require financial and time
investment and this approach will make
such negotiation run smoother.
33
Follow this process to make the initial performance predictions:

1. Divide customers into behavioral segments based on past purchase behavior.

For example, create one group that has shopped with you once, one that has shopped
with you 2-4 times, and one that has shopped with you 5 times or more. Alternatively,
split them by the total amount spent with your brand to date, purchasing frequency
or even demographics. The more segments you are exploring, the more precise your
calculations will be, but watch out - don’t overwhelm yourself with data!

2. Predict how each segment will respond to the introduction of the scheme.
Make assumptions about their enrollment rate, expected engagement rate with the
scheme, the increase in spending due to the Program, and points earned through
shopping and other activities. To boost the financial viability, you could also take into
account redemption levels, which will grow over time but start low.

3. Decide how quickly you would expect each segment to react to the introduction
of the scheme and change their behavior.
This can differ significantly by product category and the customers’ existing level
of engagement with your brand. Be realistic - you will need to start with building
awareness and comprehension, which may take some time unless you are ready to
invest in advertising.

34
Here are the definitions of key terms you need to keep in mind:

Enrollment level
Represents the proportion of either your total number of customers or the number
of customers in a certain segment, who have actively enrolled to be part of your
loyalty program.

Engagement level
Refers to the proportion of people who have not only enrolled in the loyalty scheme
but have also started engaging with it - by earning points through either purchases
or completing relevant actions.
Engagement level is calculated based on the total number of customers who have
enrolled in the loyalty scheme, contrary to the much higher total number of customers.

Redemption rate
Is a measure of the proportion of points you are issuing that are actually being
redeemed on a reward. This metric is essential, as it demonstrates whether the
customers are passively earning points with their regular purchases, or whether they
are actively engaged, loyal, and get value from their membership. Calculate this metric
by comparing the total amount of points spent to a total of points issued to members
over the same period of time. The timeframe should be between 6 and 12 months.

Redemption value
Is a total amount of money, in any relevant currency, that you will spend on issuing
rewards as they are being redeemed. This metric is key when planning your loyalty
program, as it allows you to make sure that the value of the rewards you issue is lower
than the increase in profit that comes from the extra spend by your loyal customers.
When calculating this, remember that you don’t need to attach value to all the points
that have been issued, but a certain proportion of points that are likely to be redeemed.

35
 YEAR 1 Segment A Segment B Segment C

Segment size (number of people)

Enrollment level (%)

Engagement level (% of enrollment)

Average spend (e.g. per year)

Increase in spend due to Program (% annual)

Value of increase in spending due to Program

Value of points earned through shopping

Value of points earned from rewarded activities

Total value of points to redeem

Redemption rate (%)

Redemption value

Balance: the value of the increase in spending

due to shopping - redemption value

You won’t be able to complete this table accurately unless you have a thorough
understanding of how likely your customers are to redeem rewards. Analysis
of international case studies shows that a good Program should reach a 20%
redemption rate after 6 months. The average redemption rate is at just 13%, but the
most successful scheme can reach as high as 32%. Adjust your predictions according
to these figures.

Time to take action !

Create the initial draft of financial
projections by completing the table
above.
1. How does your business segment
its consumers? Can you simplify and
split them into 3-5 groups?
2. What type of insight do you have
about their buying behavior? How
likely is it to change?
3. How easy are they to reach?
How much do you know about their
responsiveness to Marketing?

36

Week 2
How to assess the
Program’s effectiveness?
Yesterday you created the first
predictions of how the Program you
have designed will generate additional
revenue. A lot of the assumptions that
you made still need to be verified and
calculations extended into years 2 and 3.
DAY
3
In addition, in order to talk about overall
effectiveness, you need to consider the
back-end investment into the Program
in the first place. Today we will explore
how to advance from the first draft to a
fully fleshed out proposal.
37
Extend your projections

Follow the process in yesterday’s table to complete calculations for your segments for
Years 2 and 3 in the running of the scheme. Do take into account that the awareness
of the scheme, enrollment, engagement and redemption levels will increase with
time. Also, don’t forget that the sizes of your customer segments will change, as
some become more valuable to the business when they shop with you again and
again, driven by the Loyalty Program. It might be easier to create a separate Excel
spreadsheet for your calculations in order to keep track of your thinking and adjust it
with ease.

Refine your figures

With these initial calculations in hand, you are now able to refine your approach. This
stage will take time, so, for now, just focus on getting to know the process.

1. Conduct customer research to review your assumptions. Choose a methodology

that is most accessible to you - be it a detailed quantitative survey with a significant
sample of respondents, or a series of small focus groups. Remember, you are not trying
to get to one final answer, but to understand the variety of ways in which different
customers may respond to your Loyalty Program.
2. Adjust your projections based on the findings of the research, from Year 1 to
Year 3. Use your critical judgment when refining the inputs. No customer research can
ever deliver accurate projections, as no human can predict their future actions with
any real guarantee.
3. Review metrics and outputs with Finance, Marketing, and even Merchandising
teams and adjust again based on the latest insight available to them. The Finance
team will have a firm grasp on past buying figures, which you can use as a benchmark.
Marketing and Merchandising will have first-hand knowledge of the changing
attitudes and behaviors of customers in every segment.
4. Refine the loyalty scheme offer if needed. You should aim for the Program to
break even by the end of Year 3 at the latest. If your existing calculations don’t get you
there on time, see how you can sustain interest in your reward offers while cutting
costs. Think about the problem creatively. You don’t need to promise high-value
product exchanges to make your members feel special.

38
5. Calculate the timing by which the Program should reach a break-even point
or some profitability milestone. Compare your existing company-wide 3-year
revenue projections with those you would expect to see once you run the Program.
The number representing the difference becomes your new negotiating tool.

Subtract the costs

By using the table above, you have already acknowledged the direct costs associated
with running the Loyalty Program - the value of redeemed rewards. Now it’s time to be
transparent and include other spending that will be needed to get the loyalty scheme
off the ground:
Indirect costs: the value of training and promotional materials, as well as
physical cards if needed.
Variable costs: how much internal resource is required to onboard staff and
manage the Program.
Fixed costs: the development of the platform or access to software, splitting the
depreciation cost over a few years.

While indirect and variable costs will vary based on the type of your business,
geography, and staffing structure, the fixed costs are a little more predictable. As a
guide, you have two options:
1. Hosted solutions, which would be built for you and can be highly customizable.
These take a long time to implement, require cross-departmental collaboration, and
demand a large upfront investment.
2. SaaS, which is hosted separately from your organization, in the cloud, and can
be implemented straight away. While it does offer less customization, this could
be perfect for getting started with Loyalty Programs, as the upfront investment is
comparatively small.

39
Pull out the top success metrics

While ROI is a great topline figure to communicate the benefit of the loyalty scheme,
changes in other business metrics can help you build your case. What’s even better
- most are already in your calculations, you just need to pull them out and present
alongside the ROI. Others can be easily calculated using those figures. For example:

Member participation: enrollment rate, engagement rate, redemption rate.

Overall sales performance: repeat purchase rate, purchase frequency, average

order value.

There are a few more metrics you will be able to calculate once the scheme is live,
e.g. lifetime value, rate of customer referrals, and average usercustomer acquisition
cost. These rely on too many external variables to issue a prediction with any level of
credibility, so keep them outside of your proposal for now.

Schedule monthly reviews

It’s of critical importance that you regularly review the performance of your loyalty
scheme after the launch. Make sure to keep track of monthly changes in KPIs
after the launch, and ensure you reflect on these within the context of the seasonal
changes in your business. Once you have enough data, compare quarterly and yearly
performance, as well as that of specific months across the years.

40
We suggest tracking the following 5 KPIs as a minimum:

1. Sales Value. Total revenue brought in that month. Look for positive changes that
outpace past trends.
2. Average Order Value. Divide total revenue by the number of orders taken in that
timeframe. Should go up.
3. Repeat Purchase Rate. Divide the number of returning customers by the total
customer number. Easy!
4. Customer Lifetime Value. Total profit to date divided by the number of
customers. Expect slow changes.
5. Customer Acquisition Cost. The average amount you spend to acquire a new
customer. Will decrease.

Time to take action !

Create a process to help you assess 2. Estimate the additional costs of
and articulate the Program’s the Program, including those that are
potential effectiveness. indirect, variable and fixed.
1. Set up a meeting with key internal 3. Summarize the changes to key
stakeholders who could help you success metrics over time, based on
refine your figures. your prior projections.

41
 DAY

Week 2 4

How to bring
the Program to life?
Today is the day it gets really exciting!
You’ve already done the hardest part -
figured out what your Loyalty Program
should look like and calculated the
ON financials behind it.
Now is the time to plan how you are
OFF going to show it to the world! Let’s dive
into branding the Program, creating
the relevant marketing materials and
launching it.

Choose a great name for your Program

At this point in time, the average shopper belongs to 13 Loyalty Programs but is
only active in 7. This means that for your Program to stand out, on its own and within
marketing communications, you need to use the right language. To create a positive
and lasting first impression, aim for an instant emotional response. Don’t be scared
of using humor, if this feels appropriate for your product category! Try alliteration to
make your name and copy more memorable.

42
case study Adidas, one of the world’s top
manufacturers of sports apparel and
accessories, launched a loyalty scheme
for the South African market. The name
of the Program is synonymous with the
brand - 3Stripes.

The Program gained wide adoption

and became one of the reasons why in
2016, Adidas finally caught up with Nike
in terms of top of mind awareness. The
brands were finally going hand in hand in
South African search volumes on Google
Trends.
Adidas

case study
Frostbeard Studio is an American
family-owned business selling literary-
themed handmade candles and artwork.
Its Loyalty Program is called Bibliophile
Rewards - a name the target audience
can identify with and finds aspirational.

Among other things, the Program rewards

social posts about the purchases, which
has helped it gain fame and get featured
on BuzzFeed, Entrepreneur, CNBC, and
Bustle.

Frostbeard Studio

43
 case study
O2, the second-largest mobile network
operator in the United Kingdom has
made its Loyalty Program stand out by
articulating the benefit in one word. While
most competitor Programs offer freebies
and special deals, O2 Priority also gives
members early access to ticket sales and
TV shows.

According to owners Telefonica, since

establishing the scheme, O2 has grown
to 25 million subscribers in 2017.

O2

Help customers visualize the offer

It can be hard to convince your customers to sign up for the Loyalty Program and
share their data if you don’t offer a clear set of attractive benefits. This makes building
an effective explainer page a crucial task for a marketer hoping to launch a Loyalty
Program.
Done well, an explainer page also makes the process of selling in the Program
internally much more efficient. A one-pager should tell the customers what they get
for signing up, how to earn points and redeem them, how the tiers work (if applicable),
and any Terms and Conditions they need to be aware of. Once all the information is
included, customize the page with colors, photography, and icons that are consistent
with your overarching brand story and identity.

44
Create a launch plan

In order to maximize the adoption of your loyalty scheme from the get-go, you need to
make sure the launch is supported by every possible marketing touchpoint:

Include the Loyalty Program prominently within the homepage, linking to the
explainer page.
Call out earning opportunities on product pages and during checkout.
Create interest by allocating points for free or based on purchases during the
last 90 days.
Compose a sequence of reward emails, generic and by segment type.
Add a loyalty banner in transactional emails, e.g. order and shipping confirmation.
Display available points whenever interacting with the customer by name, on
the website or in email.
Invite redemption frequently, as 28% of members abandon programs without
redeeming any points.

With all of these assets in place, you are ready to go live. If possible, it is a good
idea to first complete a small testing round, targeting a certain customer segment
or geographical region. Track customer behavior and Program enrollment rates and
adjust the offer or promotional assets to maximize it. Once you’ve optimized the
performance of the Program on a small scale, schedule the big launch.

45
case study
Payback
Time to take action !
Take the first steps towards
packaging your Loyalty Program for
the customers.
1. Think of 3 potential names for
the scheme, referencing either your
customers or the product benefit.
Payback is a German loyalty program
that enables consumers to seamlessly
collect points with hundreds of relevant
companies, from online travel booking
platforms to brick and mortar book shops.
The currency can then be redeemed for
a wide range of relevant products across
multiple categories and brands.
The main selling point of this program is
the simplicity of use - a single card applies
across all retailers and can be replaced
with an app if preferred. This has led to
members using it on average 4 times per
day, resulting in substantial rewards and
growth in popularity. Today, there are
30 million active Payback customers
in Germany and the scheme is being
expanded to other markets.
2. Create a checklist for marketing
collateral that will need to be created
ahead of launch.
3. Consider what customer segment is
most suitable to test the Program on a
smaller scale.
46

Week 2
How to embed the scheme
within the organization?
Congratulations! You are one step
away from having a fully designed Loyalty
Program that has been developed with
your business in mind. Today is about
making sure that everything you have
worked on so far doesn’t go to waste.
This time we will prepare to integrate the
DAY
5
Loyalty Program into your organization.
You will learn how to allocate
responsibility for the Program most
effectively, how to onboard frontline
staff and sync up your activity with any
other marketing automation already in
place.
47
Elect or hire a Loyalty Manager

Unless you yourself are going to be the person looking after the day to day running
of the scheme, you need to allocate an alternative resource. Not only that, this
person should play a crucial role in the launch of the scheme, which is likely
to require full-time capacity. They will need to act as a project manager for
implementation of the Program, organize staff training, and make sure all launch
activities work well together.
As time goes on, this person will need to be the contact point for staff on the ground,
gathering, reviewing and addressing the feedback they get from customers. They will
also need to liaise with Legal and Accounting departments if the scheme requires any
changes.

Who and how to onboard

For best results, it is recommended that the company runs a live onboarding session,
featuring representatives from Marketing, Customer Support, and Web Administration.
All of these employees will need to be taught about the structure of the Program,
the rewards available and what results the business is aiming for by introducing the
Loyalty Program.
The frontline staff must be trained to record points and administer rewards and
would benefit from having first-hand experience of interacting with the scheme as
if they were the customer. To help them retain the information, supply the following
materials:

Marketing posters or handouts to be presented in stores.

Scripts or pitches for employees to encourage enrollment.

Instructions to check and adjust members’ points balance.

FAQs for store and customer service teams.

The process for handling refunds, returns, and canceled orders.

If you want your Loyalty Program to take off even quicker and have the resources to
support this - consider having incentives for frontline staff, for encouraging loyalty
scheme take-up. To make this cost effective and drive participation, try the mechanic
of a monthly competition.

48
 What do consumers say ?

12x
Members are 12x more likely to
engage with the loyalty scheme
once it’s explained to them by staff.
22%
Only 22% of members
believe that the staff
makes them feel special.

Integrate with other marketing activities

First of all, automate the email sequences associated with the loyalty scheme itself
- invitation, member onboarding, alerts of Birthday rewards, and promotions related
to their registration anniversary. Create a system that regularly checks a member’s
status and sends reminders when they are eligible for a reward, are close to a reward
threshold, or to a tier upgrade. Invite sales and redemption by presenting relevant
products just before the point expiration deadline.
Once the basics are pre-set, you can incorporate the Loyalty Program into the rest of
your marketing activity. For example:

Include the opportunity to earn loyalty points into your usual cart
abandonment email.

Schedule for bonus points events linked to holiday shopping.

Follow up on purchases with a request for a rewarded review.

Distribute referral codes following a positive review or a re-purchase.

49
 What do consumers say ?

57% 38% 34%

of members don’t know are unaware of do not have a
their points balance. their points value. redemption goal.

Time to take action !

Decide what you need to do to
embed the Loyalty Program into
your organization most effectively.
1. Is there anyone with the capacity to
take on the role of a Loyalty Manager
or is a new hire required?
2. What affordable incentives can you
provide to frontline staff to help you
enroll more members?
3. How could loyalty be weaved into
your marketing activity scheduled for
the next 3-6 months?

50
 It’s your turn now!
We are officially done! Over the last 2 weeks, you have gained a thorough
understanding of why more and more businesses around the world are looking
towards loyalty to improve their operations and designed a scheme that will
work for your business. By taking into account industry best practices and
inspirational case studies, you were able to devise a Program that will make
sense for your Finance Manager, as well as your customer.

You have learned how to assess the effectiveness of your scheme before launch
and evaluate its performance going forward. Together, we have branded it,
planned how to launch it, and explored ways to keep incorporating it into your
future marketing activities.

If you have been completing the tasks throughout this guide, by now you should
have all the thinking you need in order to start having internal conversations
about implementing a loyalty scheme in your company. While it’s all fresh in your
head, we encourage you to schedule a meeting with the relevant stakeholders
and share the knowledge you have gained to date. Collect all your notes and
refine them to make sure they paint a consistent picture of what you are trying
to achieve and how to get there.

Use this guide to address any questions you may get in the future and to
keep evolving your thinking during the implementation of the scheme.

51
 Manage your Loyalty Programs
with Splio.
Splio is a team of marketers and developers based in Europe and in China
who provides an omnichannel marketing platform enabling you to create
personalized Loyalty Programs for your brand.

With support for both transactional and relational programs, our platform will
help you combine both loyalty and online/offline interactions to place client
engagement and retainment at the heart of your strategy.

Create and manage your Loyalty Programs in a few clicks without the
need for a third-party solution.

Leverage the power of centralized access to transactional, behavioral and

loyalty data.

Combine loyalty with relationship marketing for more relevant and

effective interactions.

Orchestrate your Loyalty Program based on the interactions between your

brand, its clients, and online ambassadors.

Use lifecycle events and customer actions, including campaign respon-

siveness and even app or social engagement, to credit points or trigger
rewards.

Target and customize your communications according to loyalty points,

status, tiered, rewards and your clients’ buying history.

Improve your campaign performance and deliverability.

Analyze your KPIs and adapt your CRM strategy.

With Splio, you can measure, reward and retain your clients’ and ambassadors’
engagement on every channel to maximize loyalty, revenue and profit.

52
 Loyalty. Marketing.
Combined!

Loyalty has become more than just incentivizing purchases and collecting
data. You must now manage loyalty effectively across omnichannel journeys.
Splio uniquely combines loyalty functionality with a consolidated, 360-degree
on-and-offline view of the customer all in one single place, so you can treat your
customers as individuals and offer them a consistent experience everywhere.
Headquartered in France, Splio has offices in China, Spain, Italy, Poland, and
Brazil and serves more than 500 clients. Customers include The Kooples,
Kusmi Tea, Givenchy, Caudalie, Degrenne, Desigual, Lindt, Air China and Cache
Cache.

Book a demo
splio.com

130 500 5
developers customers offices in Europe
and marketers in the world and China