Is your loyalty program rewarding disloyalty?

Is your loyalty program rewarding disloyalty?

Here at OgilvyOne, we think there is something wrong with loyalty programmes, or rather dis-loyalty programmes. The old adage of ‘the more loyal your customer, the less you spend on them’ has long been debunked but now, it seems, brands have given themselves a whole new issue.

B&T Magazine
Posted by B&T Magazine

Before you read any further open in your wallet or your purse. Now carefully count how many loyalty cards you find. Yes, credit cards that earn points are included. If you’re like most Australians you’ll have found at least three – usually Coles Fly Buys, Qantas Frequent Flyer, Woolworths Everyday Rewards. Often you’re carrying far more than that.

The reality is there are thousands of loyalty programs out there. And Australian consumers and Australian marketers love them. The classic loyalty card seems to be synonymous with rolling discounting (consumers win) in the hope it drives frequency of purchase (marketers win).

But in today’s competitive environment the real question is this:

Is the $40M p.a. marketers spend really creating customer loyalty?

Do we honestly believe transactional bribes are enough to drive long lasting, deep relationships? When consumers are more marketing savvy than ever before.

In reality what we’ve done is create a new normal. We have trained a loyal group of discount hunters, hooked on the next deal. Prepared to switch brands in an instant if the incentive is right. Ironically, we’re rewarding the opposite behavior from what was intended.

So what’s the new Loyalty Paradox? We believe it’s “Loyalty programs are mostly rewarding disloyalty.”

But don’t start dismantling your loyalty program yet. First, let’s go back to the beginning. Why try to make people care about your brand? Because it’s been proven to reap rewards long term – emotional bonding, relevance and a strong value exchange make high value loyal customers worth 8-20 times above the average *

We know brands that deliver better customer experiences have significantly higher loyalty and lower switching – customers become 42% more bonded to a brand if they are socially engaged with the brand*.

So if you want to change the game, you have to start thinking about re-shaping the way they define rewards and loyalty, forever. That means continually offering unique services, products, intelligence, exclusivity, real-time, try-out-first, or even experiences that only ‘your’ customers can have access to. It also means continually evaluating and updating your offering and customer experience.

Big data and analytics have finally allowed us to genuinely talk to an audience of one. Perfectly timed for the ‘me generation’. Consumers are seeking out more and more from brands than they used to – consumers are still time poor and choice saturated – but now they are more demanding.

This new sense of reality around consumer behavior means that brands have to re-think what it means to reward customers and how loyalty operates and presents itself.

Brands need to be about serving, supporting and enabling the needs of their customers – especially in the context of a loyalty program – whenever and wherever they are.

Giving the customer relevant recommendations or opportunities validated by a real understanding of them, and their digital body language. Remember it’s all about them. It’s not just a discount on sale day.

We need to develop propositions that genuinely try and reward consumers who have actually spent time and money with the brand, despite the distracted world most consumers live in.

That’s a big ask for a loyalty program to deliver, but one thing is for sure, brands need to start to evaluate where they are now and re-framing their offering to get better loyalty, love and engagement for their customer.

In the long term, that’s got to be worth the marketing dollars.

Melissa Warren, Senior Strategist, OgilvyOne

* 2014 OgilvyOne Singapore study