Three deadly sins of the modern-day loyalty programme
We all know the headline statistic when it comes to customer loyalty: it costs five times more to attract a new customer than it does to keep an existing one.
But given that a 5% increase in customer retention can increase a company’s profitability by 75%, it’s clear that the role of loyalty programmes is now greater than ever. Having loyal consumers is the key to business stability as they spend 67% more than new ones.
Brands such as Starbucks are living examples of what a successful scheme can offer – Starbucks Rewards has helped increase the revenue at the coffee chain to $2.65 billion. Moreover, since it is a prepaid card system, Starbucks has been able to accumulate more money loaded to consumers’ accounts than some banks.
The results of introducing loyalty programmes can be revolutionary, as 83% of customers agree that loyalty programmes make them more likely to continue doing business with a certain company. Yet, the market is saturated with loyalty offers and not every scheme is successful. There are 3.3 billion loyalty program memberships in the US, an average of 29 per household and of the total membership, 58% don't actively participate in those memberships. Loyalty expert Jeff Berry advises to think of the loyalty market in terms of a crowded party “where half of the party-goers are standing in the corner without mingling”.
In our experience, the most common omission from any loyalty scheme is the lack of a so-called “wow factor”. Points, discounts and coupons are not enough to make an offering, service or programme exceptional. The objective should be to provide diversity and make sure you keep customers excited and curious.
The market is saturated with loyalty offers and not every scheme is successful
A great example can be the addition of some form of gamification, helping to conjoin cutting–edge technology with psychological and sociological mechanisms and adding fun and rivalry to the brand, forming an authentic engagement and genuine connection. What needs to be kept in mind is that, according to our own research, 30% of US customers often change brand for the sake of variety and novelty; therefore having something unique can make or break success.
Nintendo is a great example of a brand that keeps its programme fresh, having discontinued the successful Nintendo Club in 2015, and replacing the previous offering with a number of physical rewards that members had to earn through gaming.
“Nowadays, customers become more demanding and aware – it is a very competitive market,” – says Łukasz Sloniewski consulting director at Comarch France & North America. “Therefore, companies should not only focus on the tangible benefits but also, and perhaps above all, they should strive to evoke positive emotions in customers, and add an element of a surprise.
“They should take into consideration a broader perspective, hence their goal should be building a long-lasting relationship with the customers. A modern company must create an interesting story around the brand and programme and use proximity marketing that brings highly relevant and personalised offers to provide content at the right place and time.”
Another problem with loyalty programmes is insufficient access. Unfortunately, marketers often overlook the potential of mobile channels and the power of the Internet of Things (IoT), which combined, can deliver tailored messages to a clearly defined audience.
Research shows that 66% of companies that saw a decrease in customer loyalty over the past year do not have a mobile app. This is crucial since 80% of shoppers would switch stores or brands when offered a compelling mobile promotion.
Increasingly, part of the mobile and IoT proposition is beacon and geolocation technology, which can help bring further relevance to mobile offers, given the capacity to bring a customer’s proximity into any particular offer or discount.
Indeed, many brands are putting geolocation at the centre of loyalty programmes. Heathrow Airport, for instance, recently relaunched its Rewards scheme to bring in geolocation technology that allowed it to bring customers rewards and offers whilst on the move around the airport’s 400+ retail outlets. The effects of this new approach were outstanding with the number of members increasing by 400% and a 60% boost in terms of the number of transactions and 20% increase in spend per visit.
“We all know that smartphones are an essential element of an everyday life,” explains Radoslaw Zep, product manager at Comarch.
“They also give us a number of new marketing possibilities (e.g. shake the phone to see your promotion for today), as well as the ability to interact with Beacons or NFC (identifying the client and/or pushing offers at the right time, when the client is in the right place). It is also a perfect way to increase the number of potential interactions with a client.”
Of course, customer care is one of the core parts of every business and a crucial element of any loyalty scheme. According to research, 62% of global consumers have stopped doing business with a brand or organisation due to a poor customer service experience.
80% of shoppers would switch stores or brands when offered a compelling mobile promotion.
However, it is not something that can be fixed by an IT solution or consulting team – It is a customer oriented mentality that is an effect of a process that translates the brand awareness to the employees. 76% of consumers say they view customer service as the true test of how much a company values them.
US airline, JetBlue has been ranked highest 12 years in a row by J.D. Power for customer satisfaction among low-cost airline carriers. Part of their success is to do with marrying reward with impeccable service. Their incredibly quick, professional and friendly interaction on social media helps cement good service (they are able to respond to customers’ complaints on Twitter within 6 minutes), as an example. However, they are also known for their spontaneous acts of member appreciation like throwing a welcome home parade for a deserving loyalty scheme member, or awarding one enthusiastic member an upgrade to their TrueBlue Badges programme as a result of a series of particularly thoughtful and amusing exchanges and gestures.
“To build up a successful loyalty programme you need a flexible loyalty system and good CRM managers who use the tool, because a loyalty system is only as good as the people who manage it,” says Sascha Höffer Consulting Director responsible for German, Austrian and Swiss markets. “Sales people say that the three key success factors are: “location, location and location”. In loyalty, we can say that it’s “communication, communication, communication”.
“It is essential to start a dialogue, to listen, to understand, to learn and to adopt new information you gain with every customer contact.”