With the new year just round the corner, many brand managers and marketing managers would have finalized their plans & budgets for the coming year. Loyalty marketing & relationship marketing are long term strategic activities targeted at your best customers and need to be planned & budgeted separately.

Here is a primer on the important elements that needs to be taken care when planning for a loyalty program.

Program Design : Loyalty Marketing / Relationship marketing initiatives are not inexpensive and thus need to be planned thoroughly. A poorly designed program may result in a spectacular failure turning happy customers into unhappy members of the loyalty program. It is advised to spend some time and small portion of your budgets on a professionally developed program construct.

Points: This is the major budget requirement and normally is a percentage of total sales / margin contributed by the end consumers or the sales channel that are included as members in the loyalty program. This normally accounts for 60-90% of the program costs.

Communication: This accounts for the next largest component of the program costs. It depends upon the size of the member base, medium of communication and frequency of communication. Many companies balk at spending to communicate with their members due to cost factors, in turn defeating the entire purpose of retaining your best customers. Hence it is advisable to upfront plan for these costs basis the mix of medium of communication, frequency of communication and frequency of product purchase. Cost effective mediums such as Email & SMS should be used whenever possible with an underlying caveat that it alone may not be enough. Cost for events, such as a for launch of the program or annual felicitation events should be also planned as a part of the communication costs

Typically plan for average cost per member related to the earnings from the customer and levels of interaction.

One-time costs: It is essential to have a good and robust hardware & software infrastructure in place to manage the profile data, transaction data, points, analytics for processing and analyzing the data.

The program would also entail training costs for the training the frontline staff on various aspects of the loyalty program. Plan for annual refreshers basis the staff turnover and program changes.

Other Ongoing Costs : The loyalty program would need a team of program managers, either in-house or outsourced to manage various aspects of the loyalty program. The typical loyalty program would go through various stages such program design, program implementation, program launch and program management. It is the passion and competency of this team which would define the success of the program and hence it advisable to invest in quality resources for the same.

Data centre and Analytic teams would also be required on a ongoing basis..

The loyalty program would also need a member service desk to the address the queries / issues of the members. The size of the member service desk can be as small as 1-2 seat contact centre to a full fledged large call centre depending the numbers of members and envisaged calls.

The elements described above serve to provide a broad outline for planning a loyalty programme . There are a number of other elements that go into making a loyalty programme aspirational and best in class. Please contact us for a detailed consultancy on how to plan your loyalty program.