BrainTrust Query: What Does It Take to Become a Loyalty Marketing One-Percenter?
Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.
It’s safe to say that the lifestyles of true one-percenters would be unfamiliar to most of us, even if for markedly contrasting reasons.
That said, are you surprised to learn that almost all of us are living the one percent loyalty lifestyle? Our entire industry, until recently, has been built on rewarding points that are accumulated and then redeemed at a future time for prizes, rebates and other freebies. The benchmark for this deferred discount has been one percent for a very long time.
This legacy loyalty model is changing based on the demands of Millennials and other digitally connected consumers. Soon you’ll see fewer of the traditional models that have been lovingly built by Boomers for Boomers.
Looking at one-percenters from a different angle, I probed two different wine and spirit merchants in the past month — one offering a two percent rebate for every $100 spent, the other three percent for the same threshold. No other perks came.
My reaction: Why spend money at either store for an expensive, high-margin product only to earn enough to put in the parking meter out front?
The offer was evidence of why retailers should not even bother to create a loyalty or rewards program if they aren’t going to put some effort into the design. It’s also a heads-up that programs based only on reward without recognition miss the mark.
An unusual perception of the underlying math of traditionally structured loyalty programs is held by many retailers and adds urgency to the need to change. While those 20-40 percent off sales are taken at time of purchase and don’t show as an expense item on an income statement, every penny of marketing expense related to a points based loyalty program is targeted like a bad guy in the cross-hairs of an assault rifle.
The comparison doesn’t seem fair, but no one said life would be fair. Perceptions are hard to change and therefore it is the job of loyalty marketers to use what they know best (data) and to put that knowledge to use to create new value propositions that will engage and delight the customers we serve.
If we do that, we can claim to be part of the loyalty marketing one-percenters.
What’s the shortcoming of the deferred discount rebate in most loyalty programs at stores and how does it reconcile with larger “sale” discounts? Is the promise of a “one-percent rebate” (or two or three percent, etc.) not going to be enough to drive loyalty programs in the future for retailers?