Member Article

Why loyalty programmes need to move with the times

Successful customer engagement and business success go hand in hand. When you consider that it costs five times more to attract new customers compared to retaining an existing one, it’s not difficult to see why. Unfortunately, it may be more difficult to do so than ever before. In the digital age where the average consumer has more than 80 apps on their phone, competition for their attention is fierce.

Research by the CMO Council has found that 75 per cent of CMOs believe their jobs are at risk if their customer experience strategies aren’t successful. So, it’s safe to say that businesses are exploring every possible avenue available to ensure their loyalty programmes are a success, right? Wrong. Capgemini data shows a staggering 77 per cent of loyalty programmes fail within the first two years and often, customers signed up to such schemes are no more loyal than those who aren’t. When you consider what is at stake, it’s hard to believe such failure persists.

One cause may be that businesses aren’t learning from the mistakes of their contemporaries before embarking on their own plans. To ensure this doesn’t continue, below are three key reasons why traditional loyalty programmes fail.

The ‘you scratch our back’ mentality

Despite the correlation between businesses that show they care about consumers and brand loyalty, the Capgemini research shows that 97 per cent of retention programmes are transactional. Although this may seem like the sensible approach, it may alienate consumers that don’t frequently purchase from the business.

A ‘you scratch our back, we’ll scratch yours’ mentality isn’t always sustainable when it involves consumer spending. At first it may interest customers to engage with an organisation, but once it becomes apparent rewards are only available to those who regularly purchase products, the allure soon wears off.

It also tends to reward the customers who are most likely to stay loyal anyway. On the basis that, as consumers, we are most likely to seek out loyalty programmes with brands we already like, businesses can end up spending money to retain the very customers they had the least chance of losing to begin with. In essence, they’re subsidising purchases that would have been made anyway.

User experience plagued by siloes

In the digital age, multi-channel delivery is central to the success of customer-facing businesses. However, far too many organisations fail to offer a seamless link between online and offline channels.

Imagine you’ve made a purchase with a brand that runs a loyalty card scheme and at the point of purchase you’re informed you have accrued enough points to qualify for a reward. However, before taking advantage you need to present a physical copy of a downloadable voucher that expires in the next two weeks, rather than simply presenting the copy on your device. It’s this level of complexity and irrational user experience that turns many consumers off a brand.

Failing to put the customer first

A lack of personalisation is the final reason so many loyalty programmes fail, as a ‘one-size fits all’ approach simply doesn’t work anymore.

Worryingly then, is the trend towards only using tiering as segmentation and ignoring the vast amounts of consumer data available to personalise the offer even further. This harks back to the issue of transactional programmes, as typically the more money a customer spends with a brand, the better their rewards. Of course, sometimes there’s a place for this depending on the company, but it’s important to consider how detailed personalisation could be more impactful.

Customers also need to care about – and understand – the rewards they’re receiving. A study by Edgell Knowledge Network found the vast majority of customers (81 per cent) weren’t aware what their rewards entitlements consist of or how they’re redeemed. With the average consumer being a member of 18 loyalty programmes, yours need to be clear and stand out.

Our ‘Connected Customer’ research report found that a long-term relationship happens when companies become a meaningful part of a customer’s everyday life. This is only possible through a loyalty programme that adds value to the user’s life. For example, Virgin Money invested in lounges for its customers. Instead of banking services, the hotel lobby-style areas offered customers free newspapers, magazines, Wi-Fi and refreshments, as well as an area to watch TV and even play grand pianos. This resulted not only in increased brand loyalty but also a 200 per cent increase in sales at lounges located near a store.

Customer engagement is now about so much more than the loyalty programmes of old. You should now be tailoring offerings around the expectations and requirements of your client-base and add value at every possible opportunity. If your loyalty programme is based on this type of smarter engagement, it’s infinitely more likely to prove successful – driving brand advocacy and generating more business.

This was posted in Bdaily's Members' News section by Karen Wheeler .