Why Don’t Loyalty Programs Connect With Consumers?
A recent survey finds that retailer loyalty programs are still failing to emotionally engage customers.
The survey of 60+ retailers was part of Edgell Knowledge Network (EKN)’s State of the Industry Research Series: Customer Loyalty in Retail report. The report was sponsored by Tata Consultancy Services, NCR and SAP.
On the positive side, the report found retailers expect the revenue contribution from customers enrolled in loyalty programs to grow substantially over the next three years, from 40 percent in 2012 to 58 percent in 2015. Thirty-two percent of respondents are planning to launch a loyalty program in the next 12 months.
On the negative side:
- Customers of retailers who offer a loyalty program are no more loyal than those of retailers who do not offer one. (The average consumer is enrolled in 18 programs with many structured similarly.)
- Eighty-one percent of loyalty members don’t know the benefits of their programs, or how and when they will receive rewards.
- While the focus needs to shift to "the personal, local and emotional context" of customer engagement, most retailers rate personalized promotions, social media engagement and cross channel integration among the least-important factors supporting customer loyalty.
The report’s recommendations were:
- Shift from transactional frequency to engagement based. Programs should downplay discounts in favor of "building mutually rewarding, holistic relationships through transactional as well as emotional fulfillment." Shifts by frequent flier programs beyond miles redemption to check-in convenience, increased baggage allowance, etc. may point to the future of retail loyalty program.
- Capitalize on analytics. Engagement begins with a better understanding of the shopper through multi-dimensional customer analytics. Although measuring advocacy, strength of relationship and the value of customers’ emotional connection with the retailer "will be difficult to measure and track," measures of program effectiveness must also shift away from activity and frequency that are transactional in nature.
- Cross-channel-driven realignment. While the survey identified cross-channel integration as one of the top three strategies to build customer loyalty, ENK found that because of "internal political equations" and other reasons cross-channel isn’t being solved. Wrote ENK, "In the near future, we see the appointment of a strong role responsible for cross-channel experience. This can be a strong differentiator for retailers, especially those who move early."
- Current Loyalty Programs Are Proving to Be Ineffective Towards Retailers’ Goal of Creating More Loyal Customers, According to New Research Report From Edgell Knowledge Network – Edgell Knowledge Network/Marketwire
- EKN State of the Industry Research: Customer Loyalty in Retail – Edgell Knowledge Network (full report, registration required)
What are the largest ongoing hurdles of incorporating softer, intangible and emotional aspects into retail loyalty programs? What do think of the suggestions mentioned in the ENK study?