Loyalty Terminology

There is a lot of terminology flying about to describe every aspect of the loyalty market. We could go on and on here, but we have tried to stick to the most important terms. 

TERM

DESCRIPTION

FURTHER READING

Admin Console
The admin console is the entry point for the programme administrators to manage all the loyalty programme activities and monitor the results
How Many People Does It Take To Run A Loyalty Programme
Anchoring Bias
Anchoring bias occurs when people subconsciously take in information and use this as a way to determine the value of something. Think about two items of clothing made out of exactly the same material. The item with a designer label and the higher price tag will be perceived by the majority of users to be of better quality because that is how we are conditioned to think.
Behavioural Economics and the Loyalty Market
Attrition Rate
" Also known as Churn this is the rate at which members leave the loyalty programme or stop being engaged

Auto Enrolment, Registration & Opt In
Customers are automatically enrolled in a loyalty programme or campaign without having to opt in. Whilst this reduces friction in the registration process it may not be the best thing for your programme if members haven't not fully understood what they are signing up for.
How to improve your registration process and ensure the best registration uptake
Behaviour
Loyalty programmes are designed to change the way in which someone responses to a requirement, stimuli or situation rather than just reward actions that the customer may or may not have done anyway.
Behavioural Economics and the Loyalty Market
Benefits
Benefits are a key part of a loyalty programme and are normally an added value that the customer can take advantage of. These could be in the form of member discounts off products or services.

Breakage
This is the number of points that aren't redeemed within a defined period e.g. the number of points that expire without the member seeing the value of them. A breakage rate is normally calculated into the financials of a loyalty programme but you want to aim to keep this low.
Loyalty Programme Breakage - It Isn't a Good Thing
C.R.M. (Customer Relationship Management)
This stands for Customer Relationship Management and most companies will have their own CRM software to manage to customers however loyalty software should also come with an element of this installed. This is vital to managing the relationship with customers.
The VIP effect
Call to Action
This is an action that the loyalty programme is inviting the customer to take. This could be in the form of a button on a website asking a member to sign up or redeem their rewards.
Loyalty Back to Basics
Choice Architecture
People make decisions based on the layout, sequence and way that choices are presented to them. Your environment shapes your choice. Good user experience is as important as the content. If the signposting, messaging and layout isn’t right then the user may never understand the value of your programme.
Behavioural Economics and the Loyalty Market
Churn
Also known as attrition rate, this is the rate at which members leave the loyalty programme or stop being engaged.
Loyalty Back to Basics
Coalition Programme
This is where more than one partner has a stake in the loyalty programme. This is most often seen where members are able to spend or earn points with more than one partner. This works particularly well where you have complimentary brands that you could partner with to give the customer a more holistic experience.

Control Group
A control group is used to measure the effectiveness of the loyalty campaign. The control group would be of a similar demographic to the members invited to take part in the programme but would not be a part of it so that you could measure the difference the programme makes to those members that are in the programme and those that are not.
Loyalty Back to Basics
Cross-sell
Cross-sell is the act of encouraging customers to buy from more than one product range, category or brand. This is a key part of our GROW loyalty campaigns.
GROW Campaign Guide
Currency
This is the value that a member earns in your loyalty programme, it could be points, cash, credits or any other currency you wish to create.
Loyalty - a greater asset than you think
Customer Segmentation
This is the split of customers into different loyalty groups which could be by location, purchasing history, length of relationship, value to the company. Customers could be in more than one segment.
Customer Profiling in Loyalty
Customer Value
This is the value of a customer to the business. Loyalty programmes aim to determine the lifetime value of a customer so that they can identify the potential value of new customers.
Loyalty Back to Basics
Dashboard
This visual display of data that are available to the loyalty programme administrators to monitor and measure the performance
Loyalty Measurement Tips
Decoy Principle
When you present a list of options with a(n) asymmetrical decoy(s) to drive the person to select the option you would prefer. This moves away from the personalised experience as this is driving your preferences over that of the user however in some instances that may be the best option for the users and the programme.
Behavioural Economics and the Loyalty Market
Direct Marketing
This is normally referred to as any physical marketing or advertising collateral that is sent directly to the customer, often via post.
Loyalty Back to Basics
Earn Rate / Accrual Rate
The rate that loyalty programme members earn their currency at e.g. 1 point for every referral or 1 point for every £1 spent.
Loyalty - a greater asset than you think
Enrolment, Registration or Opt In
The act of becoming an active member in a loyalty programme or campaign. There are different methods for getting customers to enrol in a programme such as to complete a registration form, create an account or click an acceptance link. Registration on a loyalty programme should be made as simple as possible but the customer must be clear about what they are registering for.
How to improve your registration process and ensure the best registration uptake
Exit Strategy
This is the plan for how your business is going to cease the delivery and running of a loyalty programme. We would recommend considering this at an early stage in the programme so that the business understands when, why and how it would end the programme.
Loyalty Back to Basics
Expiry Dates
The date at which the loyalty currency expires. This could be X years after engaging with the brand or X years after the currency was earned.
Loyalty - a greater asset than you think
Frequency
Frequency is the measurement of how often the customers purchases with the business or earns points via the loyalty programme. Our GROW campaigns are designed to encourage frequency of purchases.
GROW Campaign Guide
Front end
We often talk about the front end and we refer to it as being the customer facing part of the loyalty programme, normally a website or app.
Loyalty Back to Basics
Gamification
The act of using gaming rules and delivery methods to engage members more deeply in a loyalty programme or campaign.
Top Tips to Supercharge Loyalty with Gamification
Goal Gradient Theory
As users get closer to the end target, their behaviour changes. The closer they get, the quicker they act. Think about how often in a race you see runners pushing themselves, sprinting the last mile to achieve their goal. However long the race is, once you get closer to the finish line the drive and desire to achieve overtakes other feelings.
Behavioural Economics and the Loyalty Market
Hard Benefit
A hard benefit is a tangible reward, normally a physical product that the loyalty programme member must redeem their loyalty currency for.
Planning Your Next Reward Campaign
Idiosyncratic Fit
When people perceive that a programme is tailored to them, they are more engaged, more motivated and more satisfied. Personalisation is more than just a buzz word, think about the brands or programmes that you feel an affinity to. The likelihood is that they have similar values to you, they present a lifestyle you feel is similar to your own or you aspire to. You feel a personal connection to the brand.
Behavioural Economics and the Loyalty Market
Illusionary Goal Progress
Building upon goal gradient theory, illusionary goal progress gives people an illusionary head start which motivates them to act quicker as they are already on their way to the goal. A coffee store that gave users a bonus 2 stamps on a 12-stamp card for their first coffee versus a coffee store that didn’t but only had a 10-stamp card was significantly more successful. The number of coffees required was the same for both stores, but users felt they were closer to the goal for the first store because they already had stamps.
Behavioural Economics and the Loyalty Market
KPI
Key performance indicators are vital for monitoring the results of the loyalty programme against its objectives
Loyalty Measurement Tips
LaaS
Loyalty as a Service, a service normally offered by Loyalty Consultancy or Loyalty Software agencies to enhance their offering and create an added value proposition.
Loyalty Back to Basics
Liability
Liability is the total currency value, e.g. points that have been earned within the programme and not yet spent, that the company is be liable for. This could also take into account the estimated breakage rate.
Loyalty - a greater asset than you think
Loyalty Currency Accrual
This is the rate at which a member earns loyalty currency in your programme.
Loyalty Back to Basics
Loyalty Marketing
Loyalty marketing is effectively just the term that refers to a form of marketing that is delivered via a loyalty programme or strategy.
Loyalty Back to Basics
Loyalty Tier
A group/level or tier that a member can be placed in based on their activity, volume of purchases, engagement or other contributing factor. Loyalty tiers can be used to provide different earning rates to different members as well as identifying higher value customers, lapsed or declining customers.
Loyalty Back to Basics
Market Penetration or Market Share
Market penetration refers to the total revenue a business has in comparison to the total revenue available across the market. This is also referred to as market share.
Loyalty - a greater asset than you think
NPS
Net promoter score (NPS) is a way of measuring customer satisfaction and loyalty. There is one questions, how likely are you to recommend the product or service to someone else, and there is a rating of 0 - 10. 'Promoters' are customers who score 9 or 10, 'Detractors' are customers who score between 0 and 6 and 'Passives' are customers who score 7 or 8. You can then calculate your score by subtracting the detractors from the promoters.
Loyalty Measurement Tips
Open Enrolment
A programmes opt in status can be set to open enrolment meaning anyone can register to become a member.
How to improve your registration process and ensure the best registration uptake
Opt In
The process by which a member opts in to a campaign or a programme. Getting members to specifically request to be a part of a programme ensures they are more likely to engage.
Loyalty Back to Basics
Partner
A complimentary, external partner can be involved in any part of a loyalty programme, whether that is by allowing members to redeem their loyalty currency with them, providing additional benefits to members or by providing extra earning opportunities.

Perceived Value
Perceived value is the value a loyalty programme member believes the reward to be rather than the actual value. With gift vouchers, rebates or cash values the perceived value is the same as the value whereas the value of soft benefits such as services and own brand products can have a much higher perceived value.
Behavioural Economics and the Loyalty Market
Points
Loyalty programmes often use points as a currency that the member earns to be redeemed against a catalogue of rewards. Points are the simplest form of currency for a member to understand quickly, however a programme could use any form of currency that the business determines.
Loyalty Back to Basics
POS
POS or Point of Sale refers to a terminal at which the customer completes a purchase. In the retail world this is the till.
Loyalty Back to Basics
Real Time
Real time data, data that is delivered to the loyalty programmes immediately on completion of the action, is the holy grail of all loyalty programmes as it means so that behaviours can start to be managed in real time rather than after the purchase. Real time data is often achieved via the use of API's.

Recency
Recency is the measurement of when the customer last interacted with the business or programme. Our GROW Campaigns are designed to encourage frequency of purchases.
GROW Campaign Guide
Recognition
Recognition is a key part of both internal and customer loyalty programmes. In customer loyalty it is the act of recognising the value of the member to the business and thanking them. In internal (employee) loyalty programmes it is the act of recognising employees that have delivered outstanding service or gone above and beyond. This could be delivered viua peer to peer recognition metrics or manager to member. The aim is to make all members feel special and valued.

Redemption
This is the point at which a member exchanges their loyalty currency (often points) for a reward, which could be a tangible hard benefit such as a technology product or it could be in exchange for value-added services or gift vouchers. Redemption is the point at which the customers 'realises' the value in the loyalty programme so a key moment to engage the customer.
Loyalty Back to Basics
Reporting
Reports that are available to the loyalty programme administrators to monitor and measure the performance.
Loyalty Measurement Tips
Retention
Retention is about keeping your customers purchasing with you or keeping employees with the business for a longer period. Our KEEP campaigns are designed to drive retention within customer or employee programmes.
Using Loyalty To Motivate Customer Retention
Reward
Any item or service that is available for a member to redeem as part of the loyalty programme.
Loyalty Back to Basics
Reward Partner
A complimentary brand that provides rewards for customers to redeem their loyalty currency on.
Planning Your Next Reward Campaign
Reward Tier
The ability to tier the rewards so that they can be made available to certain members or for certain actions or campaigns.
Behavioural Economics and the Loyalty Market
Rewards Earning Ratio
Before launching any loyalty programme it is vital to understand how quickly your customers could earn a reward. We would recommend that all customers should be able to earn a reward within the first 3 months in order to keep them engaged.
Loyalty Back to Basics
Share of Wallet
Share of wallet refers to the level of business a customer is bringing to your brand in comparison to their total estimated value.
Loyalty Back to Basics
Soft Benefit
Soft benefits are the intangible rewards that members can receive for being part of your loyalty programme. These could include faster delivery times, free delivery, discounts on services and personal account managers.
The VIP Effect
Surprise and Delight
Rewards that are provided to loyalty programme members as a surprise with the benefit of making the member feel good rather than the member having to complete an action to earn it.

The Fairness Principles
People are influenced by a sense of fairness. If something is perceived as unfair or unequal in regards to reward, people won’t want to take part in earning it. This is most important in employee or team programmes. Your team are much more likely to feel they are being treated unfairly in comparison to other members of the business so you need to ensure the messaging is clear and that the metrics work for everyone in the business.
Behavioural Economics and the Loyalty Market
The Loss Principle
People are motivated by the fear of potentially missing out. Think about how well this can be used in retail environments where you can see the number of people who have an item in their shopping baskets or the messaging saying that tickets are selling out fast. Scarcity breeds desire.
Behavioural Economics and the Loyalty Market
The Say-Do Principle
What someone says motivates them vs what actually does motive them is very different. Users will often say cash is the most motivational reward but research into this shows that experiences and merchandise are the best rewards for producing long lasting brand association. Unless a cash sum is life changing the joy of receiving it is short lived whereas the memories from an experience last forever.
Behavioural Economics and the Loyalty Market
Time Principle
Immediacy and the value of time play an important part in how engaged a person is going to be. There are two aspects to this principle. The first is that an immediate reward is more desirable than a reward that is attainable in the future. The second is that the user needs to perceive the reward and the activity required to be worthwhile of their time.
Behavioural Economics and the Loyalty Market
Value Add
Creating a value add proposition for members to enhance the relationship and the loyalty programme offering.
Loyalty Back to Basics

LoyaltyStream Key Features

  • 21 loyalty campaign types to suit every business
  • Options to deploy gamification campaigns such as Spin-To-Win and Prize Draws as well as Badges
  • Ability to track and reward all behaviours from transactions to actions
  • In-depth visual analytics and insights on Campaigns, Members, actions and transactions
  • Customisable CRM and segmentation options to suit your Member profile
  • Scalable modular SaaS platform that can grow with your business

 

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