Today we are witnessing an increasingly steep divide between loyalty haves and have-nots. As programs proliferate, customers have become harder targets – forming strong allegiances with dominant programs while abandoning participation in others.

In considering how to respond, it is helpful to consider that loyalty is really about delivering an enhanced customer experience. In today’s age of choice, information and access, brands that fail to use customer information to create superior customer experiences are always at risk of losing out to competitors who do. Here are seven critical habits we have discovered are always present in the most effective loyalty programs:

  1. The program is a critical part of business strategy and is fully integrated across the organization.
    To be highly effective, loyalty has to play a central role in a companywide commitment to superior customer experience. The most effective programs we see always include a substantial commitment from cross-functional teams, with representatives from stores, finance, merchandising, strategy and marketing involved – all with oversight by an engaged C-suite. We believe this level of commitment is essential for a program to be highly effective. “Good enough” doesn’t cut it; competition today is fierce, and whether a company believes it or not, customers always consider the loyalty program when assessing their overall experience.
  2. The program shows a clear financial benefit to the business.
    Loyalty programs that fail to report clear business benefits are always at risk. We frequently are brought in to help “fix” broken programs, and they are usually broken because they never were able to show a clear benefit, and thus suffer from neglect.
  3. The program is designed to drive behavior change across the entire customer portfolio.
    Sometimes programs are not well suited to do this, which limits the business value they can create. While it sometimes is more effective to bias benefits to the best customers, bigger and clearer benefits can at times be gained by targeting lower-value segments and moving them toward better recency, frequency, and/or monetary outcomes. This is typically done by identifying salient characteristics of the most profitable customers, then moving other customers to behave in similar ways through incentives and enticements identified as most likely to be effective based on individual customer data.
  4. The program has a clear value proposition, impressive benefits and relevant offers. Lack of these are the top reasons why consumers don’t join loyalty rewards programs, and are key factors in reduced program effectiveness and member abandonment[1]. By contrast, the most effective loyalty programs drive true behavior change through a clear value proposition paired with personalized, relevant, timely and contextual messaging and offers, and informed by customer preferences, purchase history and digital behaviors.
  5. The program makes sure its communications are actually working.
    81% of loyalty program members don't know the benefits of their programs, or how and when they will receive rewards[2]. Research cites this as a top reason why consumers are not loyal to brands. Effective programs ensure not only that the value proposition is easy to understand, but also that the value proposition is communicated diligently and demonstrably understood by a majority of customers.
  6. The program ensures rewards accumulation and time to redemption is fast.
    The majority of consumers abandon loyalty rewards programs because they grow tired of waiting for their points to accumulate[3]. It is critical to ensure rewards are structured such that rewards of sufficient significance are within reach of all customers targeted by the program and can be redeemed within a reasonable timeframe.
  7. The program delivers a consistent experience across channels.
    A unified, cross-channel loyalty program requires a central customer system of record with real-time integration or synchronization to related applications. If different channels deliver different experiences, customers lose faith in the retailer and/or try to game the system. To avoid this, effective programs ensure internal departments (such as stores and e-commerce) are never set up to compete with each other.

Highly effective loyalty programs always act on customer insights to improve the customer experience, which in turn drives true customer loyalty. Companies that lag in customer experience are always at some degree of long-term risk. To avoid future disappointment, the time to build a highly effective loyalty program is most definitely now.  n

How is your program doing? If you would like help in assessing an existing program – or in designing a new one – Aimia’s world-class strategy team is ready to help. Please contact us at [email protected] or www.aimia.com.

 

[1] Capgemini, Fixing the Cracks: Reinventing Loyalty Programs for the Digital Age. March 26, 2015

[2] Source: Edgell Knowledge Network, titled "State of the Industry Research Series: Customer Loyalty in Retail“

[3] THE 2013 MARITZ LOYALTY REPORT US EDITION, May, 2013

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