Customer relationships are critical to attaining true customer loyalty, according to Rudy Hernandez, Market Impact Consultant for Forrester Consulting.
During Tuesday’s Loyalty360 webinar, Elevate Engagement to Unlock the Potential of Your Loyalty Program, which was hosted by Deluxe Rewards, Hernandez elaborated on this premise.
“In the age of the customer, relationships determine success,” Hernandez explained. “The world we do business in has drastically changed. We are in the age of the customer where relationships determine success. Gone are the days when mass manufacturing, global connections, or information technology are sources of dominance. The relationships you have with your customers, and the loyalty they demonstrate to your company, are the only remaining sources of competitive advantage. And customer obsession is what helps companies rise above the rest.”
Loyalty programs offer a particularly compelling way to build and reinforce the customer relationship. Yet, according to a commissioned study conducted by Forrester Consulting on behalf of Deluxe Rewards, only 16% of loyalty program decision-makers are completely satisfied with their results.
“I’m going to start off this session on a bit of a serious note,” Hernandez said. “Loyalty is dead. Your customers are less loyal than ever before and have fewer reasons to be loyal than ever before. This is because empowered customers are in control and they are “always on”. This is because empowered customers are now in control. They demand more control over the interactions they have with brands. They’re getting impatient with traditional marketing and advertising. They have a voice that’s loud and far-reaching. And they have heightened expectations for how brands communicate with and serve them. They can switch on demand with little or no consequence.”
As a result of this constant connectedness, customers have more choice, Hernandez noted
“Think about something as simple as a tabbed browsing experience,” he explained. “Your customers know more about your products, competitors, and pricing than you do! Consumers can easily find the cheapest prices from suppliers anywhere in the world. And you only need to look as far as the airline industry and the status match campaigns that airlines like Virgin Atlantic offers to poach customers from their competitors. Those golden handcuffs don’t grip as tightly as they used to.”
Loyalty is mission critical, Hernandez stated.
“So, while your customers may not need to be loyal to you, YOU need them to be loyal,” he said.
Forrester’s study evaluated the current state of loyalty and 150 U.S. loyalty program decision-makers were surveyed.
Here are some takeaways from the study:
Marketers are bullish on loyalty programs as 72% of respondents agree that their loyalty program is a Top Three strategic priority for their organization.
Loyalty spending is on the rise as 75% said they will invest in customer experience improvements in 2015, implement innovative engagement strategies; advance analytics capabilities, and enhance mobile loyalty capabilities.
The reality, however, is that few loyalty programs are helping companies accomplish their goals, Hernandez said.
“Only 16% of respondents are completely SATISFIED with the levels of their loyalty programs’ performance,” he said. “They face challenges with customer understanding, managing data, and influencing behavior.”
What are the greatest challenges facing loyalty programs today?
Understanding customer interaction across all touch points; managing data from a variety of sources; measuring ROI of customer loyalty program; maintaining customer data quality; and intentionally influencing customer behavior.
“Programs struggle to deliver on desired behavioral change resulting in a disconnect with business objectives,” Hernandez noted. “Loyalty programs need an elevated approach. Put the customer back in customer loyalty program. What makes our customers loyal? What will motivate them and make them feel valued? What are their expectations? What types of benefits and offers will they value?
Satisfied marketers use more channels to communicate the value of their programs, and deliver through more touch points, which increases the ability to drive behaviors.
Hernandez offered the following recommendations for marketers that want to improve their loyalty programs:
Incorporate a balanced mix of benefits to drive behavioral and emotional impact
Incent behavior with tangible rewards
Engagement mechanisms should be used to attain deeper engagement (such as members-only events and exclusive content)
Deepen relationships through engagement
Recognize customer value
Mobile is a customer loyalty imperative!
Ron Bergamesca, CMO, Deluxe Rewards, told attendees that marketers should reward both hard and soft behaviors, with the latter focusing on building emotional connections with customers.
“We need to raise the bar and realize that a truly engaged customer does more than enroll and occasionally redeem some points,” Bergamesca said. “Why have we set the bar so low? Because driving purchases and spend and building advocacy in an affordable way has traditionally been quite difficult.”
Bergamesca shared one of Deluxe Rewards’ shining examples of an exceptional loyalty program. The program is Smart Rewards from Verizon.
“Our Verizon program is one of our latest successes,” Bergamesca said. “Verizon continues to differentiate in a highly competitive industry and shows how to support premium pricing. Verizon is using the Deluxe Rewards platform to the fullest. They have done a great job on the gamification side.”
Bergamesca said Verizon offers a diverse set of rewards to various segments.
“What they’ve seen from the program is that it has significantly moved the needle on its customer engagement as well as the metrics they wanted to drive,” he said. “They burned 1 billion points in the first four months of the program in 2014.”
Bergamesca said Verizon wanted to create more emotional loyalty through the program.
“This is why they agreed to work with Deluxe Rewards,” he said. “Their goals were to increase revenue, decrease acquisition costs, and increase customer retention. To illustrate the level of engagement, Verizon customers are redeeming 260 points per second on products and gift cards, but also in bidding on every NFL game last season. When we launched Smart Rewards in 2014, there were no loyalty programs among the top wireless companies in the U.S., but the success of the program has forced the hand of the other providers and most of them are rolling out programs in 2015.”
Bergamesca also offered some tips to loyalty marketers:
Reward anything you can measure
Flexibility to properly weight and prioritize behaviors
Engagement from Day 1
Rewards for every type of customer
Innovative thinking (stay ahead of the curve)
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