The two most important stages in the process of creating a loyalty or incentive scheme are identifying the reasons behind it and setting its objectives. Directly linked to these are activities such as defining the target group, choosing the nature of the programme, determining the measurement tools and selecting the indicators to be used to assess the results.

Loyalty scheme. How do you create a good loyalty scheme?

The process of setting up a loyalty scheme This involves identifying a number of variables that have the greatest influence on its form and ultimate function. First and foremost, these are:

1. Rationale for organising the programme

2. Objectives set

3. Target audience

4. Duration of the campaign

5. Nature of the project

6. Tools for assessing impact and outcome indicators (KPIs)

 

 

Defining the criteria for organising a loyalty scheme

It’s hard to believe, but many loyalty schemes (aimed at both customers and sales agents) are set up without giving this point any thought at all. Even if the other stages have been carried out correctly, the organisers do not always realise why they actually decided to embark on such a venture.  

This approach has led to a proliferation of loyalty schemes on the market, which simply seek to outdo the competition’s offerings. However, it is not possible to identify any specific reasons that led to their creation. This is reflected in the way they are implemented, as well as in the programme’s objectives themselves. These do not stem from values characteristic of the organiser, but rather from vague motivations driven by the need to compete.

In the now-iconic book *Start with Why* by Simon Sinek (a renowned American motivational speaker), you can find a detailed explanation of just how important it is, in the design process and in all other situations in life, to ask yourself the right „why?” question. Reflecting on what actually drives the actions we take helps us to remember our true motivations. Organisers of loyalty schemes They should be guided by values (why?), objectives (what?) and plans (how?).

 

 

Objectives of the loyalty scheme

The second most important stage in the process organisation of a loyalty scheme It is important to clearly define its purpose. The greatest satisfaction is felt when a previously set objective is achieved. It is difficult to carry out a task that is not specified in any way, for example by setting a timeframe. Clearly defined objectives allow the loyalty programme to be structured in such a way that it is perfectly tailored to the company itself. It is best to visualise the outcomes directly – that is, the company’s market position once all planned activities have been carried out and the set objectives have been achieved.

The results may include, amongst other things, an increase in market share, additional financial gains, or a large dataset comprising loyal customers and sales agents. There are as many objectives – and ways of visualising them – as there are businesses. There is no doubt, however, that such a vision is a great source of motivation. At the same time, however, it is important to bear in mind that a goal without a set deadline is more of a dream than a realistic plan. Every action must have a deadline, as it is this that determines the preparation of the implementation plan. Nor, I suppose, does anyone need reminding that goals must be written down. If they exist only in one’s mind, they will undoubtedly be subconsciously modified time and again, depending on current circumstances or even one’s mood.

Objectives should be specific tasks, set out in writing, in accordance with the SMART method. This acronym is derived from the first letters of the characteristics that a properly formulated objective must have, namely:

• Specific = specific – formulated in a clear, unambiguous manner, leaving no room for interpretation or misrepresentation;
• Measurable – the extent to which it has been achieved should be expressible in numerical terms;
• Achievable – overly ambitious plans cause numerous difficulties and may simply dampen enthusiasm for work;
• Relevant = significant – the goal should genuinely have some value, and achieving it should be seen as an important event;
• Time-bound = time-specific – the timeframe for completion must have a specific deadline.

Objectives may, of course, be subject to some modification over time, but if they are clearly defined in quantitative terms, there will always be a specific way to achieve them.

 

 

The target audience for the loyalty scheme

The organisers of loyalty programmes face the task of creating a tool that will encourage its users to become loyal to a particular brand or product. The biggest challenge, therefore, is not to create a programme that appeals to regular customers. For whatever reason, they are already loyal to the company, so there is no point in offering them additional incentives. Doing so would only serve to reduce sales profitability.

Customer loyalty schemes (B2C – business-to-consumer) programmes are aimed at people aged 16 or 18 and over, and their aim is to encourage participants to buy the organiser’s products. Incentive schemes for sales representatives (B2B – business to business), on the other hand, are aimed at representatives at various levels of the distribution chain, including wholesalers, decision-makers, shop assistants and sales staff. However, these two types of programme are not the only kinds of such schemes. There are also programmes, for example, for senior management, in which rewards are awarded for achieving specific results within the company, or schemes for shareholders or co-owners of businesses.

 

 

Duration of the loyalty scheme

Taking the duration of the campaign as the criterion, loyalty schemes can be divided into three categories. These are the following programmes:

• open-ended,
• taking place on a recurring basis (e.g. annually or quarterly),
• within a specified time frame.

That, How long does the loyalty scheme last?, is directly linked to specific objectives. When a campaign is designed to boost consumer loyalty, it usually has no end date. However, in accordance with the terms and conditions, the organiser has the right to decide to terminate it if certain conditions are met. Programmes treated as a tool to drive a temporary increase in sales, and campaigns that are, in a sense, experimental, have, in turn, clearly defined timeframes. Most B2C programmes currently operating in Poland are run on an open-ended basis, but the points awarded under them do have an expiry date. Most commonly, they are no longer valid two years after the date of receipt. On the other hand, almost all B2B incentive programmes take place within specific timeframes. It is difficult to say definitively which approach is better. The organiser should make this decision in line with the programme’s objectives.

There is no doubt, however, that when loyalty schemes If they prove successful, the organisers decide to continue them. Otherwise, they are discontinued as soon as they fail to deliver the expected benefits. Making such a decision entails a number of obligations. The organiser must then fulfil all the participants’ rights, including the right to the prize promised in accordance with the terms and conditions. In addition, they must announce the closure of the programme within the timeframe specified in the terms and conditions. It is also necessary to close the balance sheet provisions that were maintained for unspent points.

 

 

The nature of the loyalty scheme

Organisers of loyalty schemes can use a variety of methods to build customer loyalty and encourage them to make purchases. Points-based schemes, which first appeared on the Polish market as early as the 1990s, are very popular. These were campaigns organised by petrol stations. The awarding of points and substantial catalogues featuring physical rewards were a real hit at the time.

When most of the available schemes began to operate in a similar way, a new option emerged. The first discount schemes were launched, rewarding customers simply for signing up to the scheme or actively participating in it through discounts and rebates (expressed as a fixed amount or a percentage). It was also common practice to add free products to purchases. Loyalty and discount schemes remain the most popular in Poland. Their combination has given rise to a separate variant: campaigns that combine both approaches – loyalty-and-discount schemes.

The third main group consists of multi-partner schemes, the leading example of which is Payback. Such schemes allow members to collect points and/or discounts in a variety of places, but are run by an independent operator. All partners are merely part of a larger whole and have no influence over the structure of the programme itself. In return, they are exempt from most of the red tape and expenses – the promotion is funded from a shared budget. A major advantage of this approach is that the same points can be earned in different places, enabling customers to redeem rewards more quickly and feel more motivated.

The fourth and most recent type is cashback loyalty schemes. Under these schemes, participants receive a refund of a portion of the money they have spent in return for their purchases. This is transferred to an account within the app, a payment card, a bank account or a special ATM code. This category is currently the smallest, but it is growing rapidly.

 

 

Assessment of results and key performance indicators (KPIs)

The effectiveness of a loyalty programme can only be assessed using appropriately selected tools, as well as key performance indicators. An assessment can be obtained by conducting quantitative and qualitative marketing research into participant satisfaction levels, analysing sales reports, and reviewing the market share of the retail chain or brand. Data from the programme itself should also be analysed – key factors include the number and activity of participants, the frequency and percentage of transactions, and the frequency of logins to the app or website, etc.

The most important thing is that measurements are always carried out using the same tools, on a continuous basis, at appropriate intervals. This is the best way to monitor trends and the dynamics of change on an ongoing basis. 

The tools for assessing results alone are, of course, not enough unless key result indicators are established at the outset and kept up to date. The specific values assigned to these indicators act as signposts – they point the way to the goal we are striving for.