While loyalty programs can be an integral part of the retail CRM model, new research indicates that marketers are under-valuing these programs, even as customers highly rate perks, discounts, deals and additional service opportunities. Both customers and marketers agree: deeper engagement and personalized contact drives loyalty, not mass blast communications and gimmicks, according to “Loyalty Leaders: Feeling the Love From the Loyalty Club,” the latest research from the CMO Council.
The research tapped insight from over 600 marketers and surveyed the perspectives of program recipients in an audit of over 700 consumers. The study ultimately found that loyal consumers expect marketers to understand them better and deliver more relevant and valued offers. Marketers, however, do not grade themselves highly in meeting the needs of their business, and question their ability to meet consumer needs.
The Consumer Says…
Consumers see value in loyalty program membership, according to the report. 79% of consumers surveyed say they are very, or pretty, satisfied with their loyalty and rewards program experiences. But consumers still have expectations — 70% want to see more discounts and savings, and 52% more compelling personal deals and offers as reward for steering their business to loyalty program operators. In a definitive call for personalization, 58% say they want more compelling personal benefits and services, as well as more relevant offers or individualized deals.
“The value of a loyalty program is the ability to learn more and more about your customer with every transaction,” said Lisa Chalmers, CRM Manager, Talbots. “You can leverage this information to deliver the right message to the right customer at the right time. The result is more effective and efficient marketing spend versus the one-size-fits-all approach.”
Although social media also tops the list of investments for marketers, consumers report that point-of-sale information, service representative interactions, company Web sites and word-of-mouth are the primary sources for learning about loyalty clubs. Nearly 65% acquired information about the programs in retail environments compared to only 4% in social media networks, 3% in blogs and 11% in online advertising.
The Marketer Says…
Most marketers (61%) believe that loyalty program participants are the best and most profitable customers. An almost equal number of respondents (65%) view customer loyalty program investments as a very essential, or a quite valuable part of the marketing mix. On that note, only 13% of respondents believe they have been highly effective in leveraging loyalty and brand preference among club members, and nearly 20% don’t even have a strategy for this. Another 25% admit they have not mobilized brand loyalists to become active advocacy agents, either.
Talbots’ Chalmers said the 61% figure is surprisingly low, given the positive response from the Talbots Classic Awards loyalty program. “Without a doubt our Classic Awards members are our best and most profitable customers,” she said. “[The 61% figure] makes me think that a good portion of the marketers surveyed do not have a quality loyalty program in place – you cannot deny its power, especially in this economic environment.”
The study also reveals that marketers are mostly inducing loyalty with discounts or free products and premiums rather than quicker, better service or improved customer handling. 39% of respondents view discounts and savings as the key member benefits, 34% view free products and premiums as essential incentives, while 33% are committed to offering points for merchandise redemption as a further motivator.
“In researching other loyalty programs, I know that many consumers are frustrated by the time it takes to receive their reward and the short time they have to redeem it,” Chalmers noted. “Our Appreciation Dividends are issued monthly and are valid for a full 12 months.”
When asked to outline typical customer complaints about loyalty programs, nearly 30% of marketers report that some customers see little or no added value to becoming a loyalty member; 24% indicate rewards lack substance; and 21% have problems with receiving too much spam email and junk mail. Customer complaints also touch on a lack of individualized communication (23%) and issues with redeeming points and miles (18%).
“At Talbots, personalized interactions and unique benefits are the cornerstones of our Classic Awards program,” Chalmers said. “We are continuously striving to find more/better/different ways to make her feel valued.”
Action Items for Marketers:
Online channels dominate expected investments as nearly 60% of respondents said they planned to make better use of the Web and new community and networking tools to grow and develop loyalty programs. Other key actions for generating a greater ROI from club members include:
- Personalizing interactions and target messages (51%)
- Increasing frequency and relevance of communications (39%)
- Gathering more insights and intelligence for better customer handling (38%)
- Adding new benefits, incentives and inducements (36%)
- Studying industry best practices and making adjustments accordingly (19%)
Marketers appear to be missing the boat on the opportunity to aggregate customer data. 73% of respondents collect basic demographics and 68% track the location of members, but critical insights – such as advocacy rates (14%), brand loyalty and attachment (27%), personal preferences (31% satisfaction levels (33%), and product preferences (38%) – fall by the wayside.
“As a multi-channel retailer in the current environment, we are hitting her with a variety of offers through a variety of tactics,” Chalmers said. “Our challenge, like most retailers, is to measure the response to each offer and tactic “cleanly” so that we can accurately assess the ROI of our marketing programs.”