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5 Steps to Applying Loyalty to New Behavioral Strategies

September 30, 2014

When we think of loyalty, particularly as it applies to business, we often think of loyalty rewards programs, those formal efforts by companies to create greater market share and brand fidelity on the part of their consumers.

Each year, more companies develop loyalty programs, resulting in exponential growth in household penetration. The 2013 COLLOQUY Loyalty Census shows the average U.S. household had enrolled in 22 loyalty programs, an increase of almost 27% over the 2011 census findings, which revealed 18.4 programs per household.

The journey to this penetration has been a storied one, starting with S&H Green Stamps back in 1896 and progressing to very sophisticated, corporate-wide models that place the customer at the center of overall enterprise loyalty strategies. As these strategies evolved, so have the insights into best practices.

Those best practices are applicable beyond traditional loyalty to other types of behavioral modification strategies, such as wellness. This is a logical evolutionary shift. At its core, loyalty can be considered a type of behavior modification. However, this modification is achieved only when marketers rely on the core rules of customer engagement that involve the beneficial use of data and mutual value.

Once the foundation is set, any organization can apply loyalty precepts to a behavioral modification strategy, from employee training to recycling to healthier living. In this article, I will provide examples of key best practices, and how to avoid the common pitfalls that may befall many well-intentioned initiatives.

Aisle-to-gym behavior modifiers

The general goal of many loyalty strategies is to create increased adherence to a brand, which can be demonstrated through improved share of wallet, increased visits and transactions, and higher customer-retention rates. Customers are encouraged to exhibit more profitable behavior through the application of various marketing strategies and tactics, ranging from outright rewards to covert one-to-one targeted experiences.

There are other types of popular behavior modification programs in today's market, from employee incentive programs to health and wellness motivators.

In employee incentive programs, for instance, companies establish formal strategies to encourage their staffs to increase sales, to adhere to performance guidelines and/or to participate in work training and education programs, all with the goal of improving overall outcomes.

On the health-and-wellness front, organizations operate a multitude of models with different sponsors and behavioral objectives, including formal employer- or insurance-sponsored wellness goals, prescription adherence, weight loss and gym visits. And in some instances, we have seen a blending of loyalty and other behavior modification programs. An example is Walgreens Steps with Balance Rewards, which not only recognizes customers for their Walgreens purchases but also rewards for healthy activities. Similarly, in employee incentive sales programs, we have seen staff members motivated by the rewards currency from their employer's customer-loyalty programs.

But as we've learned through the study of loyalty strategy, although loyalty programs are prevalent, they do not necessarily accomplish what they set out to do. As noted above, the average household is enrolled in 22 programs, but active in fewer than half. (Activity is defined as using the program one time or more per year.) Introducing a loyalty or other behavior modification program to the market doesn't guarantee positive results.

Key steps to desired behavior

So what can we learn from loyalty best practices that we can apply to other types of behavior modification programs? Here are considerations that apply, whether building a wellness program, designing an employee incentive strategy or creating any other type of behavioral modification strategy.

Top-down planning: For any behavioral modification strategy to succeed, it will require that key stakeholders agree to and align with its objectives. If executives have varying definitions of success then the strategy simply will not be successful. After all, if they can't agree on where they are going strategically, how will they figure out the best way to get there? If there is disagreement, then the team should focus on developing alignment before creating the strategy. Our experience in developing all types of behavioral modification strategies demonstrates that this area is usually given short shrift by companies, but is essential to achieving optimal outcomes.

Right blend of incentives: Multi-motivator research by COLLOQUY shows that individuals respond differently to varying promotions, events and other behavioral enticements at different life stages and in different frequencies. For this reason, a blend of both rational and emotional incentives can effectively create the behavior change, keeping in mind that people will react to different mixes in different ways. Understanding (identifying!) the target audience and knowing (learning!) what they respond to is important to ascertaining what incentives will encourage the desired changes.

Focus: We cannot be all things to all people. Marketers should understand where their greatest opportunities lie and tailor their strategies to appeal to those individuals. They should focus incentives and efforts on producing the desired behavioral shifts in the targeted group. This does not mean they must ignore everyone else, but the initiative's design and resource allocation should be created with that focus in mind.

Engaging experiences: The participant's experience is not an afterthought. Experience should be front and center while the team is crafting and executing it. This includes ensuring that the critical touchpoints are moving the strategy forward so it can engage the audience. Lastly, the strategy must be marketed effectively, persistently and relevantly to generate the desired change - marketers should not just launch a program and assume that it will stand on its own.

Ongoing planning and fine-tuning: Marketers should not assume they are finished when the strategy launches - rather, they are just getting started. They always should be planning for the future, since the process is iterative. Our experience in loyalty tells us that there are key watch outs in terms of program performance. Marketers should collect performance metrics from key customer, member or employee segments, measuring them against expectations and relevant indicators, and testing to both continually improve results and keep the program fresh.

Marketers should remember the customer, employee or patient does not exist in a vacuum. Many competing companies or services are marketing to them as well, and they are involved in many programs. Further, consumers are bombarded every day via phone, email, snail mail and face-to-face interactions with offers and opportunities.

They will not look at any one program in a vacuum. They will compare it to other initiatives for share of mind and engagement. Hence, to stand out from the clutter, marketers need to both design and execute well.

Even if not creating a formal loyalty strategy, we should take a page from its playbook and leverage some well-considered best practices.