Collecting and counting points in order to reach a threshold - and ultimately receive some sort of reward - these are the loyalty programs we know of today. Recently I have read a lot about how brands are looking to overhaul their loyalty programs - to reach more customers and generations and to provide more relevant rewards. All to improve the customer experience and provide more relevant and contextual offers than what consumers receive today.
The fact of the matter is this - loyalty programs are ubiquitous. According to Maritz the typical household has 21.9 loyalty program memberships, with the average person belonging to 7.4 unique programs. The question is: are organizations using them effectively, to keep customers truly loyal over time?
A recent study from the International Institute of Analytics (IIA) and SAS titled, Keeping Customers: Successful Loyalty Through Analytics, looked at the current landscape for loyalty programs in the U.S. from the perspective of loyalty managers. Disappointingly, only 16 percent reported they have a “very effective” loyalty program. This seems to echo that same research from Maritz that reports only 35 percent of members are engaged in all of the loyalty programs they belong to; on average, people are active in 4.7 of the 7.4 programs to which they belong.
So, what is going wrong? To answer that perhaps we should focus on what highly successful programs are doing right.
The study found that those with “highly effective” programs had two goals: creating strong brand affinity and improving customer satisfaction. They emphasize customer experience over inward-facing goals of customer retention, and before expecting customer loyalty.
And they’re achieving this customer experience focus with five key elements:
- A dedicated customer loyalty team
- Emphasis on customer experience
- Personalized rewards
- Social media to engage the customer
- A program underpinned by analytics
A dedicated customer loyalty team and using social media to engage with customers (not just promote your brand) shouldn’t be surprising. Having a dedicated customer loyalty team is not a new trend; large brands from retailers, to banks, to airlines, all have this function in place. And I would argue that we are almost at the point where using social media as a channel is a given, not an option, for brands—so this one doesn’t surprise me either.
The notion of personalized rewards is something I have not seen widely used. Most programs are still at the stage of “hit a threshold, get a gift or offer” versus “Joe hits a threshold and has exhibited these other purchase or engagement behaviors, then he gets a personalized gift or offer.”
This probably correlates to the last bullet point. Nearly three-quarters of organizations with highly effective loyalty programs call data analysis a core component of their loyalty initiatives; even more perceive their organizations as having a data-driven culture. In contrast, only about one-third of those with lower-performing programs said the same. This is particularly compelling evidence that analytics are a crucial element in enabling organizations to effectively target customers with better/more personalized rewards, and create a longer-term relationship with those customers throughout the customer experience.
So if your loyalty program is looking a little lackluster, perhaps you should go back and take a long, hard look at the goal of the program. Is it inward-facing or outward-facing? Meaning: it is all about your brand or is it all about your customers and their experiences? If it’s the former then perhaps it’s time to refocus.
Editor's note:
This content from Jon originally appeared on The LeanBack blog by the Economist Group as, "Stop trying to buy consumers." Details on the analytically-driven marketing solutions Jon refers to can be found at www.sas.com/customerjourney. Check it out and let us know what you think!
3 Comments
I have read a fair number of papers, blogs, and articles on this topic, and there has been very little discussion dedicated to how to use what we know about customers in the context of an actual experience or interaction, especially an in-person interaction. While relevance, generally achieved through predictive modeling, targeting, and versioning, is certainly necessary to bring a customer to the point of an actual purchase occasion, it is the content and outcome of this occasion that ultimately determines whether both the customer and the brand walk away and remain happy. This step deserves to have a more prominent and considered role in the customer journey as it relates to the 1) application of customer insights, and 2) its influence on loyalty.
Keith - absolutely agree. I think it would be an interesting discussion to follow this on with commentary or post around putting insights into action in order to improve the customer experience. One of things that has been discussed a lot lately is the fact at the end of the day, the customer owns this experience - so it is imperatively important to actually "ask" the customer how the experience is working for them - and what can be done to improve this customer experience. This asking can best be done at the point of sale or via an in person interaction. Having conversations with end consumers is something that brands need advice on - particularly around how to apply customer insight to interactions and how that those interactions can propel customer loyalty.
Is it about your brand or about your customers? This is an excellent question. Too often businesses focus on the wrong things. Not all customers are equal which means that to earn loyalty, the experience must be personalized.