BrainTrust Query: Lack of Loyalty Program Engagement = Opportunity

Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.
"While the average U.S. household has enrolled in more than 18 programs, they are active in only 8.4."
I’ve been hearing that statistic from the 2011 Colloquy Loyalty Census from presenters at quite a few conferences I’ve attended over the last few years. I’ve even used it.
But an informal survey of a close group of colleagues in the business tells me that the average business person probably belongs to about 40 loyalty programs while the average citizen who lives and shops mostly locally belongs to a figure closer to the Colloquy number. Our group counted membership on average in 11 airline programs, seven national retailers, six hotels, three rental cars, two credit or debit cards, two in pharmacy, two in gaming, and at least seven more composed of movie theaters, local restaurants and local merchants. We didn’t count Groupon Rewards, registered card programs, Plink, Shopkick, LevelUp, Belly, Perka, etc.
Of those upwards of 40 programs, our survey group came up with a total of no more than 10 that we remembered enough to acknowledge membership and even less that we felt influenced our next purchase decision. True engagement is probably closer to 25 percent than the 40 percent reported by Colloquy.
Give marketers the nod for driving membership totals through the roof. Unfortunately, the tougher task of engaging members for steady visit and purchase, increasing lifetime customer value, is where we fall down.
Here are a few "Loyalty Truths" that you can take away from this exercise:
- Realize that launching your loyalty program might be the easiest thing you ever do. Make sure you do the work needed to ensure that your program will make a difference in the minds of your customers and keep them coming back, even helping them overcome service failures.
- You’ve got to create your own definitions of an "active customer," "redemption rate" and "churn" that fit to your business. The right formulas are influenced by sales cycles, accounting practice, and regulatory concerns, not to mention competition.
- Realize that customer engagement is not just one step in the loyalty value chain towards increased profitability. Engaging the customer (now your program member) has to be a sought after goal at all points along a lifecycle of interaction. Regardless of new customer or old, low value or high, online or offline, engagement is the first step in triggering the next purchase.
- Remember that customer experience is not something you isolate and polish like a new car. Every interaction between your brand and the customer contributes to an overall "customer experience," over time accruing to create positive or negative brand impressions.
- Your loyalty program should be integral to your customer experience and you should never skimp budget on analytical support that unlocks a clear view towards program effectiveness.
What rewards approaches are required to stand out amid the clutter of loyalty programs? What do you think most programs are still missing?
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13 Comments on "BrainTrust Query: Lack of Loyalty Program Engagement = Opportunity"
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Let me understand this. People are “loyal” to less than half of their “loyalty” affiliations. And “loyalty” is defined by an “activity” which means a person must have bought something or used the membership in some way however minor like renting a car from a company when the one they usually use didn’t have any available.
As has been said far too many times in this forum, we are so desperate for ‘customer love’ that we insist on calling these connections “loyalty.”
“Loyalty” like “engagement” is typically though wrongly defined as “getting someone to do what YOU want them to do.” I’m wondering if somehow we’re getting this loyalty thing backwards. What about letting the customer issue loyalty cards to vendors? Let them be loyal to us.
Work with me here…
Cities will have citizen engagement when people start telling the city what THEY want to do, what THEIR dreams and ambitions are. If customers start making offers to vendors then maybe we’ll have something that really is loyalty. Look…someone’s got to come up with something different!
The rewards need to be perceived to be greater than the effort required to get them.
This subconscious shopper value equation is based on the amount of effort expended to earn and redeem value.
The perceived value of the reward can increase in a few ways. First, shoppers “overvalue” a reward depending on its context, e.g. gas points are perceived to be worth more than the actual $ value. Likewise, in-game rewards are perceived to be of greater worth than their actual dollar value.
Another way to increase the perception of value is to expand the number of channels, goods and services, which may be obtained via rewards points. In this way, points are more like cash.
Consumers—and especially frequent traveler business types—join “loyalty programs” everywhere they go because we don’t want to miss out on possible points/rewards if the provider becomes one of our frequent uses. I’m sure I belong to every hotel, car rental and airline program out there. But I am an American/Marriott/Hertz kind a guy.
The reward program very seldom determines the service used. It is a result of a) fitting the need—I fly from O’Hare so its AA or United…and b) the customer experience.
The only time I “switch” providers is when one of equally preferable providers offer a better deal. For example, my Costco Amex card at 3% cash back on gas gets my business—until Discover runs gas at 5% cash back on their “90 day special.” Then it’s back to Amex for gas—but I may switch to Discover if they have 5% on restaurants.
The loyalty companies earn does not come from their “loyalty” programs. That is, I would argue, almost always a secondary consideration among equals.
I still believe that most “loyalty” programs are merely mass discount, frequent-shopper programs. If you look at the hospitality and airline industries, you see compelling reasons to engage with the brand…often to an exclusive degree.
We need to transfer the appropriate aspects of those programs to retail and CPG brands to capture true loyalty.
I think the crux of a loyalty program is to make it MATTER:
M = Meaningful
A = Appealing
T = Trustworthy
T = Targeted
E = Easy-to-participate
R = Reward-focused
Delivering on these six elements, combined with user engagement, are keys to making any program stand out among the sea of loyalty options.
Interesting discussion and comments from our experts and I offer my appreciation.
As a whole, our discussions become easier when we cease to battle over the “L” word. We all know that “loyalty” indicates a more significant relationship than might ever be created in commerce. It’s also the one that the industry has coined and probably won’t change any time soon.
My way of easing the distracting debate over “loyalty” has been to speak in terms of building Customer Strategies, and to make clear that the essence of what we do is to create data-driven marketing strategies that influence consumer behavior.
Can we agree on that point?
Since I just shared my sentiments about loyalty (last week was it?), I decided to stop and think about the places I shop the most frequently and why. Hmmm. First off, I don’t shop at these brands because of anything they do for me besides being convenient to my home and/or have what I want.
Everybody has a loyalty program, so that has little to do with it. I shop at Chicos, for example, because I like their clothes and accessories and the fit is just right for me. I shop at Kroger because it is right around the corner and usually on my way home from anywhere.
I hold loyalty cards for everywhere and it’s not because of any great marketing effort. If they have one and I shop there and it’s free, I’m on it!
I think, once again, Ian hit this nail on the head.
First, let’s stop calling them “loyalty programs.” People can be loyal to their spouse, family, country, church, alma mater, etc. However, loyalty to a retailer or service provider makes no sense. A more descriptive term is a “continuity of purchase or discount” card.
Second, how can we engender so called customer loyalty? By understanding the customer’s needs and solving her problems better than anyone else. If we are able to solve problems, beyond mere discounts for merchandise, we go a long way to insuring the customer returns routinely as well as more frequently.
Customized offerings integrated with mobile devices, using location-based services can become a competitive advantage.