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A recent article in Direct Marketing News offers an in-depth analysis of the typical obstacles that companies must overcome to build customer loyalty. If your business is not getting the most out of its customer loyalty program, it’s probably due to one of the following four reasons:
1. Difficulty in measuring and using data
Loyalty programs cannot be measured in traditional ways. In fact, three of the top five reported challenges are measurement related. Measurement needs to focus on these three metrics:
1. Specific changes in the customer value equation
2. Shifts in consumer value
3. Customer engagement and advocacy
Each metric needs a clear definition of success for now and the future. Measurement then becomes part of continuous loyalty loop, in which customer intelligence creates customer insights, which feed into the loyalty program and creates more customer data to start the loop again
2. Picking the right mix of rewards and benefits
Most loyalty rewards involve discounts, but this becomes difficult to execute as everyone has the same offerings and retailers have trained consumers to look for nothing but discounts. This is a delicate tightrope act: give rewards that are too expensive or popular and the budget gets blown. Starbucks, Virgin Airlines and National Car Rental offer just a few of the programs that earn rave reviews with customers, without breaking the bank to do it. The key to success is activating “soft benefits” that have high perceived value.
3. Programs lack true innovation
The average customer is a member of more than 10 loyalty programs. As more and more retailers launch programs, making a splash with a new program isn't easy. Before loyalty programs, customers would stay with their favorite retailers based primarily on price or location. Loyalty broke this inertia, giving customers a reason to shop at another retailer. If faced with a choice between companies, loyalty broke the tie.
But, as more companies start programs, a new inertia has formed. Nearly 60% of consumers state they only participate in a few loyalty programs. Meanwhile, customers feel they are getting less out of programs. About 30% of consumers feel that there is little or no value in joining a program.
Offering differentiated benefits gives customers a reason to engage. Assess the competition and do customer research to find these benefits. Carefully test to pick the winners.
4. Marketing and operations are not on the same page
Customers can receive years of good interaction with a brand and program only to have it all ruined by one negative experience. Executing a program happens on two levels: systems to identify the customer and present them with the right reward/recognition, and store operations to carry out the needed tactics. System issues are frustrating but easy to explain, while in-store issues cause more frustration.
Soft benefits are ideal because customer benefit outweighs cost. Failed execution means customers will not trust the company in the future; operations need to deliver on marketing promises.