Retailers are ramping up loyalty programs, advertising in prime time and sending households cards in the mail. But I feel that the concept of loyalty has lost some of its magic for consumers and retailers alike. “Would you like to join our membership program” has become the retail equivalent of “do you want fries with that?” – a phrase now so commonplace and lacklustre, that it is easily dismissed. Hardly an incentive or recognition of loyalty!
For retailers and service providers, the current approach is only delivering a fraction of the potential benefit. Far too many loyalty programs rely solely on signing up a customer to a database and handing them a membership card as part of the purchase transaction, and then, well, not much else! The customer earns a few points and may even receive the occasional (or worse, excessively frequent) email newsletter.
While there are a growing number of loyalty rewards programs, there are not a growing number of loyal customers. Retailers are seeking to attract a share of the pie that isn’t growing. The result is more customers signed up to more programs, with increasingly divided loyalty. The overall return from the investment inevitably declines.
Many retailers aim to sign up everyone who walks in their store, so there is no differentiation between those who are ‘prime’ long-term customers with a genuine affinity for a brand and those who may be making a random, one-off purchase. A single bloke who ventures into a ‘mums & bubs’ shop to buy a gift for a friend’s baby is an unlikely candidate for a loyalty program, but chances are, he’ll get invited to sign up at the counter.
So why do retailers take short cuts or even a fast-food approach to attracting and retaining their more valuable asset – loyal customers?
Mostly, the answer lies in the fact that retailers design their loyalty programs with a “what’s in it for me” attitude (more sales, higher profits), rather than considering what motivates their customer and what would drive the behaviour they are looking for. In other words, they miss a vital step – they first need to create a real reason to be loyal, to capture and hold their customer’s attention.
What is it that makes people loyal to a brand, or a store, when they are presented with a multitude of choices? The answer is ‘experience’, or more specifically a relevant, personal and memorable experience.
In his blog, Seth Godin, the author of Permission Marketing suggests loyalty satisfies a relatively simple yet fundamental human desire. “We're loyal because it makes us feel good, not because we're being bribed.”
Loyalty marketing is and should always be much more than a card, offering points or incentives. Retailers need to create experiences that are meaningful, memorable and consistent to give customers a reason to come back or even recommend the store or brand to others. Loyalty benefits, such as discounts or special offers should be a reward for repeat purchasing behaviour, not the primary reason to shop there.
It is about influencing long-term behaviour – firstly to attract, then retain, and ultimately create long-term brand advocates who, in turn, enter into a dialogue with the brand.
The Ikea Family is an example of a loyalty program that is more than owning a card and accruing points. ‘Family members’ enjoy a large number of benefits at home, in store and online – including a weekly gift card draw, exclusive discounts, special events and seminars, access to expert advice, the Ikea Family magazine, discounted meals in the Ikea restaurant plus each time they scan their card, Ikea will donate 10c to charity. For many members, visiting Ikea is less of a chore and more of an experience – it makes them feel good.
Loyalty marketing is actually engagement marketing. Loyalty is the outcome, engagement is the mechanism. You can’t have true loyalty without engagement, without connections or meaningful dialogue.
Sharp marketers are shifting focus away from capturing the customer at the point of purchase and instead using new digital channels to create a more dynamic and engaging experience. Loyalty programs based on a multichannel communication model offer the customer more ways to enjoy and reciprocate loyalty and in return the customer has a more memorable experience. A relevant or personal engagement through email or SMS, a tailored conversation via Facebook or Twitter is far more meaningful than swiping a card. This new experience offers variety, an element of surprise leading to anticipation and responsiveness, makes the customer feel valued – which is the best way to encourage loyalty.
To create this engaging experience, you must communicate through multiple and fully integrated channels – web, social media, mobile, email, in-store, via customer service and after-sales follow up.
The next critical component is to use customer data to gain knowledge, insight and enhance your brand experience so loyal customers continue to enjoy your brand and recommend it to others.
Programs that promote and drive behaviour through a variety of channels, or offer more ways to participate in loyalty schemes are significantly more effective. The old way of driving loyalty did work then, but not anymore.
Nick Spooner is CEO at Salmat Digital.
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