A few weeks ago on our blog, we talked about the evolution of traditional loyalty programs from “one size fits all” programs based on old-style customer segmentation, to intelligent customer engagement, an innovative approach that uses data-driven, individualized incentives to unlock customer profitability.
But is there really a difference between these two approaches to customer loyalty programs? Well, think of an intelligent customer engagement program as a loyalty program that’s individually designed for each individual customer. For example, consider all of the behaviors that your customers could perform that drive value for your business – writing reviews, renewing memberships, referring friends, buying products, etc. Each of your customers may engage in some of these behaviors, but likely not all of them. Your customers therefore have “behavior gaps”, which, if closed, can increase the profitability of your business. But each customer is unique, as are their behavior gaps, so your customer loyalty program should treat them as such.
Here are 5 quick guiding principles to using this innovative approach to maximize your customers’ profitability and lifetime value:
1. Know Your Customers
The starting point is to develop an understanding your customers’ behaviors; what they are doing now, and, more importantly, what actions they could be doing to reach their full potential (i.e. their “behavior gaps”).
2. Make Sense of the Dollars and Cents
It’s not enough to know which customer behaviors are “probably” the most profitable, or which are “likely” to have some sort of value to the company. Once you’ve identified the customer behaviors that you most want to drive, you need to quantify how much each behavior is worth to your company.
3. Sharing is Caring …
Once you are able to quantify what each behavior is worth, next is deciding how much of that incremental customer spend you are willing to share with the customer in order to incent them to perform that behavior. For example, let’s say you determine that a customer renewing their membership with you is worth $100 to your organization. Investing 25% of that value with the customer would mean that you are willing to give the customer $25 — or an incentive that costs you $25 — to drive that behavior. Our clients love this approach. After all, it’s a sure-fire way of driving customer behaviors that guarantees a positive ROI.
4. … But Make it Relevant …
Once you’ve determined how much you’re willing to invest in order to drive a behavior with a particular customer, the next step is to ensure that the incentive is targeted, specific and relevant to that customer. Don’t reward all your customers the same. Make it relevant and treat them uniquely. By giving your customers a choice of incentives tailored to their preferences, you’ll deepen their customer engagement and loyalty.
5. … And Make it Count
By inflating the perceived value of the customer’s individualized incentive – say by sourcing their $25 cinema tickets for $15 – you’re not only creating true value for your customer, but you’re also getting a good “bang for your buck” and increasing your ROI.