Designing, building and launching a loyalty program from scratch.
The challenge
A retailer tasked us to design and launch a loyalty program, but with a number of major challenges. Specifically:
Design a new loyalty program in a marketplace crowded with competing programs
Increase share of wallet
Identify a greater percentage of customers to drive personalization at scale
Grow customer engagement and increase lifetime value
Develop a business case to determine the value of customer loyalty.
The Approach
We started with a base case scenario: What is the expected trajectory of this client’s business without a loyalty program? Then we built a future-case scenario to demonstrate what their business could look like with a loyalty program.
We did this by leveraging existing internal client data, as well as competitive benchmarks sourced from industry publications, competitors’ published financial reports, media announcements and published syndicated reports.
The future case took into consideration the four bonds of loyalty: emotional, structural, social and financial. Of the financial bond, both revenue and cost had to be considered. On the revenue side, for example, there was potential for increased visits as well as increased basket size.
On the cost side, the primary elements were benefit costs, marketing costs, technology enhancements and overhead costs to administer the program.
Then we compared the future state to the base case to determine whether the financials were viable.
Review available data, metrics, reports, research, etc.
Develop assumptions for each metric
Build model and refine as necessary
Deliver and refine
Customer/member counts, trends, frequency, distribution
Sales revenue and trends, margin
Transactions/visits, trends
Current program investments
Nominal changes to current trends
Changes based on direct experience with other loyalty programs
Loyalty industry information and/or studies
Discussions with clients over expected impact
Build structure, including variable cells for sensitivity analysis
Iterate changes in the structure and assumptions as needed
Sense check to ensure results are realistic and achievable
Prepare several scenarios for review
Review model with client and modify per feedback
The Results
The five-year business case for the proposed loyalty program projected the results you see here, and the client chose to move forward with our recommendations.
ROI of NearlyX
Reducecustomer attrition by
~%
Xincrease in
identifiable
customers
%Profit increaseover baseline