BrainTrust Query: Lack of Loyalty Program Engagement = Opportunity

Discussion
Apr 03, 2013
Bill Hanifin

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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?

Please practice The RetailWire Golden Rule when submitting your comments.

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13 Comments on "BrainTrust Query: Lack of Loyalty Program Engagement = Opportunity"


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Ian Percy
Guest
7 years 9 months ago

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!

Liz Crawford
Guest
7 years 9 months ago

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.

Ben Ball
Guest
7 years 9 months ago

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.

Roger Saunders
Guest
7 years 9 months ago
Consumer Rewards programs should borrow from long-practiced incentive rewards that companies use for sales and associates’ bonus programs. Successful programs should and do include: 1. They are consistent with company goals and objectives2. They are easy to understand3. They are easy to administer4. They get recipient emotionally excited5. They reward recipient in a timely fashion Use the grocery category as examples. 1. Kroger knows they capture greater revenue and profitability from loyal shoppers, who visit the stores more frequently, fill a larger basket, and offer greater share of wallet to them. A reward program aimed at these consumers is consistent with company objectives. 2. Shopping Kroger with the loyalty card permits me to buy strawberries at $2.00 per carton vs. $3.99 without the card. I understand that concept. 3. Kroger scans my card, and then has a list of items that the Saunders’ family has purchased—easy for Kroger, easy for me. 4. My wife receives a receipt that thanks her, and lets her know that she saved $8.50 on her shopping trip for using her… Read more »
Ralph Jacobson
Guest
7 years 9 months ago

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.

Gene Detroyer
Guest
7 years 9 months ago
There is no “Loyalty” in loyalty programs. The numbers above confirm that. Loyalty programs are no more than a meet competition tool. Unfortunately, what many companies think when they introduce or change them is that it is going to be some type of competitive advantage. It doesn’t exist. Even if you design a creative nuance, it will be immediately copied or topped if it is effective. Here are a couple of hints regarding the value of loyalty programs. D’Agostinos is 1/2 a block away from my apartment. Their loyalty program is a typical supermarket program. If you belong, you qualify for certain specials. If you accumulated a certain number of points you get some very serious deals (50% to 100% off). Whole Foods is 2 blocks away. They have no loyalty program. Whole Foods is the store of choice. It suggests that everything else is more important than the “loyalty” program. I love the American Airlines program because I have qualified for the top level of benefits for the rest of my life. But, I… Read more »
Gordon Arnold
Guest
7 years 9 months ago
Loyalty programs were predicated on the belief that loyal customers are in fact the backbone of retail success. Following that it became the goal of every modern retail executive to enroll all of the company’s patrons into the ranks of loyal customers deserving merit and reward for their support. This goal has evolved into a frenzy for success in spite of market trends that stand tall in the path of succeeding in the enrollment of new membership. Previous discussions have claimed that price is the goal of this market depression and many feel that not much else matters to the common consumer. Another obstacle facing consumer loyalty programs has been identified as e-commerce media marketing. I am of the opinion that these attempts to gain direct access to consumer dollars are in parallel and do not conflict or dissuade attraction from one another. It seems to me that the only obstacle in the way of success for any of these marketing methods is the age-old condition of apathy. Apathy is identified in measurable terms as… Read more »
Dave Wendland
Guest
7 years 9 months ago

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.

Bill Hanifin
Guest
7 years 9 months ago

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?

Lee Kent
Guest
7 years 9 months ago

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.

Richard J. George, Ph.D.
Guest
7 years 9 months ago

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.

Bryan Pearson
Guest
7 years 9 months ago
In order to work, a rewards program has to achieve emotional loyalty with the customer. This requires providing communications and services that are meaningful and specific to that consumer’s needs, on a timely basis, without being abusive. When a customer is emotionally loyal, she will stay with a brand even when a worthy alternative is easily available. It is a matter of gaining trust, which is hard won but worth it. My advice: Assure you are relevant to your customers: You need to resonate with your customers through a differentiated experience, by knowing the consumer’s stage in life, physical location and personal and cultural interests—at any given time. Only then can you really understand your customers’ core interests, assign value to them. Use data responsibly: Think of data collection as a transaction—if you expect the customer to share personal information with you, then you need to provide something of equal or greater value in return. Along the way, you are accountable for that data and how it is used. Be transparent about what you collect… Read more »
Chandan Agarwala
Guest
Chandan Agarwala
7 years 9 months ago

Customized offerings integrated with mobile devices, using location-based services can become a competitive advantage.

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