Loyalty programs are in need of careful examination to the point of reshifting focus in 2016. Nearly 90 percent of consumers view loyalty programs in a negative light, according to a Capgemini Consulting analysis of close to 40,000 consumer conversations on social media. The reason? In a digital age, many retailers fall short in offering a seamless, multichannel rewards experience. The solution? Retailers need to shift focus from measuring loyalty, and double down on enhancing customer engagement.
Loyalty as a Lagging Indicator
Loyalty is an outcome of a customer experience that starts with engagement, and is measured by repeat purchases over time. Measuring customer engagement, however, is the total sum of specific, actual, real-time behaviors that can be tracked. Engagement, therefore, should be the leading indicator of customer loyalty and sales performance. Traditional loyalty measures are merely lagging indicators of past activity.
A common pitfall is applying excessive focus on loyalty measures at the expense of views into healthy, ongoing customer interactions. Keen insights into interactions hold the true potential to enhance engagement and drive brand preference. Initiatives designed to reward customers in new ways and strengthen the mobile channel, for example, are components of an overall loyalty program, and must be tied to the marketing strategy at a customer engagement level.
Recognize Engagement and Incentivize Advocacy
Surprisingly, engagement is rarely rewarded. Our analysis found that only 12 percent of retailers reward consumers for at least one form of engagement. Therein lies untapped potential to reward customers for their brand advocacy on social media, as well as for writing reviews and participating in gamification initiatives. Reward structures should be upgraded to recognize behavioral engagement, in addition to actual transactions. This presents a win-win situation. Retailers can better understand customer preferences and pain points, while consumers can accumulate valuable loyalty points more quickly and receive more relevant offers.
The report cites an example from a luxury cosmetics brand that incentivizes brand advocacy through its loyalty program. Members receive 10 points for every dollar spent on merchandise, and receive up to 25 points for sharing the brand’s product posts on their Facebook, Instagram and Twitter pages. Incentivizing brand advocacy in this manner serves two significant purposes. First, it conveys that the brand values the support of its customers. Second, it carries the brand’s message to a more receptive target audience, since consumers tend to trust word-of-mouth recommendations from people they know more than traditional advertising.
Strengthen the Mobile Channel
As mobile device use increases, retailers must strengthen this channel for their loyalty programs by focusing on ease of use and providing simple access to up-to-date information on policies, point balances and offers.
For example, leaders in seamless commerce and loyalty use mobile offers to engage customers while they’re in-store. Loyalty apps should also act as a mobile wallet so that customers can instantly redeem reward points. Although 79 percent of loyalty programs incorporate mobile, only 24 percent offer redemption through the channel. We expect this to increase significantly in the coming year.
Recently, Apple announced that users can “add participating rewards and store-issued cards to the Wallet app and seamlessly use them at checkout with Apple Pay.” This enhancement offers the potential to speed consumer adoption of mobile reward apps, and retailers must be ready to capitalize.
It’s clear that retailers aren't fully leveraging social media and mobile apps for their loyalty programs, but these recommendations are a solid jumping-off point to start using these tactics in 2016 as part of a larger marketing strategy to engage customers and spur loyalty.
Debbie Stanton-Johnson is a principal in the consumer products, retail and distribution sector at Capgemini, a global provider of consulting, technology and outsourcing services.