Customer Loyalty: More Than Just a Trojan Horse
Loyalty programs are an invaluable tool for brands. With the fourth quarter fast approaching and the holiday shopping season looming large, well-executed loyalty programs can drive consumer engagement, facilitate data collection, personalize on-site experiences, and help brands identify their most valuable customers. However, the majority of retail brands are failing to meet consumer expectations. According to a recent survey by Bond Loyalty, less than half of consumers are satisfied with their loyalty program experiences.
The Trojan Horse
L2 found that brands with loyalty programs collect 52 percent more data points during account signup and customization than other brands, which increases personalization opportunities across owned content, earned media and paid marketing initiatives.
One marketing channel ripe for this activation is email. Brands with a loyalty program send emails to smaller, more targeted segments — 15 percent of their total list vs. 20 percent for brands without loyalty programs. The increased relevancy results in increased open, click and conversion rates for email campaigns. Bloomingdales, for example, even sends their loyalty emails from a completely separate domain: loyallist.bloomingdales.com.
Loyalty programs can also collect more than just prompted data during signup. By adding users to their CRM systems, brands can effectively build their own repository of intent data across owned properties tied specifically to that user. This can be especially valuable to multibrand conglomerates, where a single loyalty program extends across several brands, and is the idea behind third-party loyalty programs like Plenti. While it’s fun to imagine the possibilities there, the leaders in recommendation engines are the Amazon’s, Netflix’s and Spotify’s of the world, not consumer and retail brands like Adidas, Calvin Klein or Macy’s.
An Equitable Value Exchange
Perhaps the most important factor is a loyalty program’s value proposition — i.e., the exchange of money, goods or services between brand and consumer as a result of engagement. Starbucks has built a successful loyalty program by leveraging its mobile app to enhance traditionally clunky experiences like rewards accumulation and in-store payments, improving the customer experience and increasing frequency of store visits.
Every loyalty investment should facilitate a mutually beneficial value exchange between the brand and the consumer. For example, operating a tiered loyalty program that offers differentiated rewards based on spend allows for greater customer segmentation and more targeted marketing while simultaneously adding interest and additional incentives for consumers.
When the value exchange is skewed towards the brand, consumers have little incentive to sign up; when it's skewed towards the consumer, brands bear the burden of expensive loyalty programs with little return on investment. Brands must balance their loyalty exchange or consider ending their programs.
Does Loyalty = Digital Competency?
A digitally integrated loyalty program is one factor, out of thousands, that impacts a brand’s L2 Digital IQ Index score. However, loyalty is intrinsically tied to digital competency: 88 percent of "Genius" and "Gifted" brands in the latest round of Digital IQ Indexes maintained a loyalty program. While a loyalty program may not be a panacea for digital or right for every brand and category, it does indicate an active investment in digital, business and consumer trends. And for brands willing to take the next step, consumers are ready to include some of their favorite brands among the list of data-savvy digital natives.
Mike Froggatt is the director of intelligence research at L2 Inc., a business intelligence firm.