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Loyalty programs are of particular importance on the mobile device largely because customers are unlikely to return to an app that does not offer unique value. Where for mobile games, Uber, or Instacart the service is the app, for companies like Starbucks, McDonald’s or Airbnb, establishing a value in the app itself is paramount to ensuring that users return.

Recently McDonald’s announced it would be implementing a loyalty program similar to that of Starbucks: it will track customer purchases and learn menu preferences, reward customers based on visits per month, and prompt customers to return with special promotions. This announcement comes in the wake of Starbucks’ change to their wildly successful loyalty program, in which they base points off of money spent, not visits to the store.

The McDonald’s mobile loyalty program will likely be wildly successful. Here’s why:

It offers value exclusive to the mobile device. This is the one common thread between Starbucks, CVS, BestBuy, Nordstrom, Sephora, etc. They offer exclusive value to customers who regularly use their apps. CVS, for instance, offers a “scan your refill” service that enables customers to refill their prescriptions remotely. After filling ten prescriptions, the customer gets $5 in ExtraBucks rewards. Thus, the value is twofold: a service that is exclusive to the mobile device, and a reward for using that service.

It is the combination of these two things that make retail apps successful. Why are 20% of Starbucks purchases made on mobile? It’s faster, easier, and you get rewarded for it.

In designing a loyalty program, then, it is necessary to track usage of the app’s unique value proposition, as well as reward and incentivize usage of this new feature. For example, if your app allows users to to do in-store price comparisons, like Amazon’s does, then loyalty status in the app should relate to usage of this feature. Reward your customers for using your app as it should be used; this both incentivizes them to receive higher benefits from your product, and incentivizes them to continue using it.

The key user properties that any good customer Loyalty Program should be monitoring are:

  1. Performed Event
  2. App Session Length
  3. In-app Purchases
  4. Session Frequency
  5. Recency, frequency, and total monetization per user
  6. Event in which user spends the most amount of time

However, deciding which combination of these different properties and at what level each is will vary from app to app. Let us all remember when Facebook discovered that adding 7 friends in 10 days was the leading indicator for an engaged user. You can figure out your key threshold by grouping users into behavior-based cohorts and then testing how outcomes differ between them.

Once you have a user past a certain threshold in each of these categories, you move into the loyalty program, which consists of service, then retention, then up-sell, then loyalty. Gemma Doyle, Zynga’s Director of VIP Operations, outlined these different steps at the 2016 MORE Summit for a specific users as follows:

  1. Service: starts receiving VIP service: user gets their own VIP account manager, weekly touch-base campaigns start, user contacts personal VIP account manager with any problems, user attends focus group event as VIP user.
  2. Retention: VIP step up treatment: user receives Zynga swag from her account manager, user is invited to meet the studio team to voice her opinion about the game, user attends tournament in Reno and wins real cash.
  3. Up Sell: VIP team starts to cross-sell: user is asked to test another Zynga title that her personal account manager suggests, user is offered private sales for the new game, becomes a VIP in additional game.
  4. Loyal VIP: reality check: speaks to VIP account manager weekly, advises other players and advocates the game, runs group on Facebook

While Doyle’s system is based on mobile gaming, it can be applied to retail apps as well. You encourage engaged users to reap the benefits of a loyalty program to increase word of mouth, increase engagement, and increase cross-selling. All of which ultimately increases monetization.

Having this loyalty system exist on mobile encourages users to engage with the device they always have on hand, meaning high engagement is much more likely than on any other platform. And by combining a superior loyalty program with an app that offers unique value, customer satisfaction and spending will go up.

For those of you who have experimented with loyalty programs, what key properties do you monitor, and how has the program benefited your company?

Published April 13, 2016
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