5 Reasons Why Marketers Need to Rethink Their Loyalty Strategies

March 06, 2017

Nearly 60% of Fortune 500 brands are increasing their focus on building loyalty this year, and U.S. businesses will spend around $90 billion on non-cash rewards, such as points, gift cards, merchandise or incentive travel, to do so.

Yet for customers, loyalty is easily forgotten.

Almost 80% of all consumers claim they retract their loyalty more quickly today than three years ago, and over 60% have switched their business from one brand to another in the past year.

Clearly, current loyalty strategies just aren’t cutting it. Even a brand’s loyal customers are quick to cut the cord.

It’s time marketers rethink their loyalty strategies. Here are five facts marketers should keep in mind when it comes to building brand champions.

1. Traditional loyalty programs are missing the point.

Over 70% of U.S. customers claim loyalty programs do not engender loyalty. Loyalty programs have long been characterized by points, punch cards, generic discounts and rewards based on spend. But think about it: How does a punch card really make a difference in people’s lives? Sure, after 10 visits, they may enjoy a free sandwich. But what about the nine interactions they had with that brand before then? Or the next nine to follow?

Consumers no longer want just transactional rewards; they want rewarding experiences. People consider every brand interaction – from marketing messages to in-store interactions to customer service – as part of their overall relationship with a brand. They expect a brand to know who they are, anticipate their needs and relate the right way at every point of engagement. Brands should think beyond loyalty programs and strategize customer-centric programs that align marketing, product and service to create immersive end-to-end customer experiences.

2. But loyalty programs are not obsolete.

On average, U.S. consumers belong to around 13 loyalty programs. Yet they only actively participate in half of them. Why? Because less than a quarter actually love their program: Only 22% are very satisfied with the level of personalization they feel and only 23% are satisfied with the way benefits are earned.

And that’s too bad, because program members are 73% more likely to recommend brands with good loyalty programs.

According to these same consumers, what defines a good loyalty program today is the extent to which it fulfills the brand’s promise to its customers, meets their needs and is, quite simply, enjoyable. None of these attributes are monetary in nature. Nor is there any mention of reward. But they all add up to an exceptional customer experience.

3. Consumers have turned the concept of loyalty upside down.

Marketers need to look at loyalty through a new lens. Perhaps, even, view the concept the other way around. Loyalty is now about how brands show loyalty to their customers. More than half of U.S. consumers feel more loyal to brands that show a deep understanding of their priorities and preferences, and almost 80% only consider brands that show they understand and care about them personally.

Brands like Nike, Amazon, Apple and McDonald’s that strategically use their customer data to create useful, convenient, intimate experiences consistently draw people back, turning repeat customers into lifelong loyalists. CRM and point-of-sale data, desktop and mobile activity, and chatbox queries all contain different perspectives. To compete, marketers must have a system in place that allows them to integrate and sync their online and offline data, so they may recognize and relate to individuals with thoughtful and personal brand engagements that convey their commitment to the customer. 

4. Investing in improving the customer experience is worth it.

Each year, $41 billion is lost by U.S. companies due to bad customer experiences. And the majority of marketers have taken note: Nearly 60% of CMOs say that developing richer, deeper customer-focused experiences is their top marketing priority this year.

For every dollar invested in improving the customer experience, businesses see a threefold return, some industries even more. Companies who prioritize customer-centric experiences have seen a 58% increase in customer satisfaction and a 45% increase in loyalty over the past 12 months and expect a 60% increase in satisfaction and 70% increase over the next two years. Highly engaged consumers make 90% more frequent purchases, spend 60% more in each transaction and are five times more likely to choose the brand in the future. And repeat buyers spend 33% more than new ones, which helps explain why just 20% of existing customers account for 80% of a company’s future profits.

Outcomes like these are driving top brands to shift marketing dollars from customer acquisition to customer retention and loyalty. They are investing in new marketing technologies like identity resolution that help them leverage their customer data and power genuine, 1:1 brand engagements that make customers feel more valued and, as a result, bring more value to the brand.

5. Showing your customers the love is about quality interactions – not quantity.

As much as consumers expect companies to be there when they need them, they want them to lay off when they don’t: According to eMarketer 80% of U.S customers want brands to respect their time and contact them only minimally.

Too much attention isn’t just annoying, it’s a deal-breaker for many. In a recent survey, 44% of U.S Facebook users “unliked” a brand because it posted too often, and 43% “unliked” a brand because their walls became so overcrowded with marketing posts that they needed to cut down the number of brands they follow. Ads and promotions, themselves, don’t build relationships. But making customer lives easier with relevant, well-timed and meaningful interactions goes a long way toward winning their hearts. Right time, right person, right message has never been more important.

Let’s face it, at the end of the day, not all of your customers are going to be brand loyalists. And your most profitable customers will not be retained by program membership alone. Marketers need to master the use of data and identity to understand the behaviors, interests and needs of their most valuable customers, so they may interact with more relevance at every touchpoint and add more value to their lives.Loyalty E-book

Neil Joyce

Neil leads Signal’s global sales and business development efforts. Based in Chicago, Joyce has 15 years of experience spanning the digital marketing ecosystem in Europe and the Asia/Pacific region. Neil has held key management positions at IBM, Acxiom and BrightEdge.

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