A new spin on loyalty
Photo source: iStock.com
By Michelle Thomas, director, integrated marketing, Elicit
I was recently engaged in a lively debate with my colleagues about the value of loyalty programs and how they have evolved over time. One group suggested that loyalty programs are a dying breed and argued that their original purpose has been taken over by customer experience design. The other group still considered loyalty programs as a necessary differentiator in this highly competitive world.
To put the state of loyalty in perspective, according to NASDAQ, a typical U.S. household is enrolled in 19 to 29 different loyalty programs, but only actively uses five to 12 of them. Further, active use of these programs has steadily declined since 2010 at a rate of 2 percent to 3 percent per year. These stats indicate, if nothing else, that loyalty programs are going to have to work harder to stay relevant.
It used to be a battle of the best products out there — whether that was a camera, a sweater, a filet, or a flight. Loyalty programs were built to differentiate brands from one another, largely focused on delivering functional benefits like rewards or members-only discounts. These programs were managed as another marketing channel, creating new levers that could be pulled to increase short-term revenue and profit amongst the customers that were identified as having the highest value.
As loyalty programs have expanded to include more emotional benefits, they have seen the value associated with meeting a consumer's needs. Now companies are competing for customer relationships rather than customer memberships. The winners are not the ones with the best loyalty programs, but those that are providing the best experiences. A study by Wunderman found that the majority (79 percent) of consumers said brands have to actually demonstrate that they understand and care about them before they are going to consider purchasing.
For many companies, loyalty is still a points program or a discount program, not something that is embedded in a customer's overall experience with the brand. However, customers are enticed by different incentives, according to Accenture. Unlike last year, when the promise of deals most drove loyalty, customers today find financial rewards (61 percent) and programs highly tailored to their needs (58 percent) much more enticing.
So the concept of loyalty isn’t really a program or channel at all, is it? Loyalty is simply a byproduct of providing a good experience for your customers.
Loyalty and the customer experience
When you look at the goals associated with loyalty programs, they are not that different than the goals you see associated with customer experience.
Increase revenue, profit, and customer lifetime value
Build profitable relationships with customers over time
Acquire new customers and retain best customers
Holistic management of the customer lifecycle and customer portfolio
Balance of functional and emotional program benefits
Design experiences that provide emotional and functional utility
Contrary to how loyalty has been viewed in the past, it is not something that can be built simply by putting a program or benefits in place. To meet the needs of today's dynamic consumer, brands must create synergies between data and analytics, engagement strategies, and technology to build consumer trust and loyalty.
Data and analytics: Basic customer understanding
This not only comes from analyzing behavioral patterns over time, but also understanding what the customer's need state is. Research can help you understand loyalty drivers and what matters most. Consider expanding the definition of your best customer beyond revenue to include engagement metrics.
Engagement strategies: Know me, show me
As simple as it may sound, customer loyalty and trust is gained through relevancy and the ability to personalize an experience based on knowing who they are, what they do, and why they do it. Customers appreciate when their goals are understood and valued by your brand.
Technology: Enabling a data-driven organization
Create synergies between channels and incorporate the appropriate level of customer knowledge and insight that allows your customers to interact with your program in their desired channel. Technology does not define the loyalty or the customer experience, but it does enable brands to use customer insight across marketing, product, delivery, and support touch points for a fully integrated experience.
According to Wunderman, 88 percent of U.S. consumers want to engage with brands that are setting new standards in meeting their expectations and 74 percent said brands could do so by providing a higher level of customer service. In addition, 56 percent said they feel more loyal to brands who “get me” and show a deep understanding of their priorities and preferences. Finally, 89 percent are loyal to brands that share their values.
Loyalty from a customer's perspective reflects their dedication to a brand in which they trust and advocate for. Take a step back and look at what loyalty means to your company. Are you defining loyalty by the program itself, or as a way to enhance your overall customer experience? Strive to become a loyalty brand, not a brand with a loyalty program.