Stop chasing loyalty program members — you have enough already!
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.
The lure of something new is of pretty much universal appeal, whether it's a new car, a new outfit or a new friend. It's no surprise, then, that loyalty programs spend a lot of time and money trying to attract new members.
The problem is when the shiny new object (a new member) is overemphasized over the tried-and-true standby (the longtime member), and when companies fail to distinguish between the two groups. How messages should be communicated to the two groups and the probability of selling to them are all quite different.
Many marketers split their investments almost evenly between member acquisition and member retention efforts. In fact, according to a 2014 Econsultancy survey, 47 percent of respondents indicated they would spend equally on both groups; 34 percent would invest more in acquisition, while only 18 percent would spend more on retention. Some programs, in fact, spend up to 75 percent of their time and money on acquisition.
Yet existing loyalty members are far more likely to spend more money, spend more frequently, try new products, refer potential new customers and contribute to profitability than are new members. Invesp Consulting says existing customers are 50 percent more likely to try new products and spend 31 percent more compared to new customers.
As programs let the customer's life cycle guide communications (retention vs. acquisition), customer lifetime value increases as loyalty marketers take them further down the path of spend frequency, lift, redemption and loyalty.
This contrast between acquisition efforts and retention efforts is illustrated in several of the questions we asked in our COLLOQUY "Customer Loyalty in 2015 & Beyond" survey.
Source: COLLOQUY "Customer Loyalty in 2015 & Beyond"
Retention efforts should focus on emotional value, with an emphasis on topics such as the time to earn rewards, program simplicity and alignment with consumers' values and interests. Acquisition efforts should focus on transactional value, emphasizing discounts, points and sign-up bonuses, for example. Once acquisition efforts land new members, they must still be persuaded to develop new behaviors.
Loyalty program developers should seriously think about spending 75 percent of their loyalty investments on retention, vs. the 75 percent that many programs currently spend on member acquisition. Mass appeal is overrated; don't allow your thirst for appealing to everyone to dilute your attention and value for the best members.