Banner Image

On the Eighth Day of Loyalty Marketing Nirvana: Understand Loyalty Program Sensitivity & Risk

We have arrived on the final step in the journey to loyalty marketing nirvana. Hopefully our series has helped you develop or bolster your customer loyalty initiatives. Before you rush off to form a new program, however, it’s important to fully understand the sensitivities and risks associated with them.

First, as pointed out by Meg Haynes, news editor of Strategy Online, there is always the risk of overestimating the value of the reward offered—and underestimating the cost (time) associated with earning the reward. To avoid this misstep, recognize some honest projections about the sensitivities and risks.

To ensure our loyalty program is successful, we must identify the best-case scenarios, worst-case scenarios, and project risk points. There are three reasons why we address these factors:

1.   Any new venture comes with inherent risk, but it’s best when everyone understands it.

2.   You want to determine how far you can go. How pessimistic can your assumptions be when you still feel optimistic about the outcome?

3.   You want to raise flags on critical areas of the program.

For example, you might identify that your program is sensitive to factors such as enrollment rates, repeat purchases, or in-cart conversions. Once those metrics are determined, the entire organization can be armed with that information—and it can then drive focused efforts to support a positive outcome. If enrollment is a key driver for success, efforts can be focused on achieving a high enrollment rate.

This final step is a very critical one. When you address risks prior to launching any program, those risks can be mitigated and hopefully avoided. Of course, this also allows for the whole organization to buy into the strategic execution of your loyalty program.

What else have we considered on our road to loyalty marketing nirvana? Well, we organized stakeholders, established value drivers, ideated and validated, gathered a baseline of existing performances, built consensus on improvements, calculated the costs of the program, calculated true ROI, and recognized the sensitivities and risks.

Thank you for joining us on this journey, and we hope your loyalty program initiatives lead to a successful year!

Have more questions about calculating loyalty program ROI? Tweet us @TIBCO with the hashtag #LoyaltyLab.

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>