Understanding how brands define customer loyalty emerged as the key theme of The 2015 Loyalty Landscape Report, which was discussed during Tuesday’s keynote session, “Unveiling the Loyalty Metric: A Deeper Understanding of Customer Loyalty.”
During this riveting session during the 8th annual Loyalty Expo presented by Loyalty360 – The Loyalty Marketers’ Association, which is being held April 27-29, 2015, at the Loews Royal Pacific Resort at Universal Orlando in Orlando, Florida, Loyalty360 CEO and CMO Mark Johnson told attendees that a dichotomy exists between brands that have a unique understanding of their customers and those that do not.
“Loyalty is no longer the program,” Johnson said. “It’s creating that unique, emotional connection with your customers.”
According to the report, brands that allocate 20% or more of their budgets toward customer loyalty have a better understanding of their customers.
“The promise of earning points is no longer enough to entice them to stay. Marketers know this and are expanding their loyalty strategies to include disciplines and mechanisms that happen along the entire customer journey,” the report says. “But as with most change and growth, come challenges. Loyalty is now touching multiple parts of the organization, making it more difficult to manage, monitor, and measure. More technologies and techniques available–often unproven−also create more uncertainty among senior-level decision-makers about the best strategy to take. So while marketers are approaching customer loyalty in a way that more accurately reflects how the consumer makes decisions and behaves along the entire journey, the complexity of this new and expanded approach reveals business gaps that can act as road blocks to truly building customer loyalty.”
The 2015 Loyalty Landscape report includes performance metrics, benchmarks, and challenges faced by brands today, to provide a clear view of the state of the industry. More than 300 brands participated in this year’s survey, making it the most comprehensive research to date. The online survey polled more than 300 marketers representing brands from a wide variety of industries and sizes, from Dec. 11, 2014 through March 19, 2015.
As brands expand loyalty strategies beyond programs, new challenges arise often due to gaps between the old and new ways of doing things, the report notes.
• The relationship between the marketing budget that’s allocated to loyalty and the portion of total sales/revenue that’s attributed to it is not in line. In fact, many companies are over-performing. Most companies (68%) report they are allocating less than 20% of their marketing budgets to loyalty, yet 58% of companies say that more than 20% of total sales or revenue is attributed to the program.
• Despite the notion that loyalty happens in the long-term, short-term and temporal metrics are still the most commonly used.
• Brands say they are struggling to accurately measure costs, impact and success.
• The rapidly changing landscape is causing them to be more interested in understanding competitor strategies, what’s working and what is on the road map.
Johnson said that organizational buy-in is a critical challenge for brands as it relates to their respective loyalty strategies. What Johnson deemed as a “huge opportunity” now is for brands to truly listen and understand their customers. Brands that listen to their customers effectively, gleaning insights and leveraging those insights to enhance a loyalty program, will be ahead of the game.
“The opportunity is immense,” Johnson said.
In 2015, customer loyalty is expanding beyond traditional loyalty functionality, the report notes.
• Customer experience and customer engagement are included in loyalty strategies nearly as frequently as traditional loyalty programs.
• As a result, brands are allocating slightly more of their marketing budgets to loyalty in 2015 compared to 2014.
•The winners of the 2015 Loyalty360 Awards have expanded loyalty strategies even farther than the market at-large and are investing a bigger portion of marketing dollars to loyalty. The group includes 11 different components in loyalty strategy (compared to 7.5 components for the rest of the market), including customer experience, corporate social responsibility, and gamification. Nearly all of the winners are investing more than 21% of marketing dollars to loyalty (compared to one-third of the market at-large).
“There is a call for simplicity,” Johnson explained. “Everyone wants to make things simple. Brands are rolling out loyalty programs at an increasing pace, but they’re not all working.”
While a loyalty/rewards program is the component that is most widely included in loyalty strategies (78%), customer experience (69%) and customer engagement (66%) are included almost as frequently, according to the report.
Other components commonly included in today’s loyalty strategies that fall outside of the “traditional” functionality are events (47%), employee engagement (37%) and experiential marketing (30%), among others.
“The Loyalty360 Award winners are going even farther to expand their customer loyalty strategy than the market at-large,” the report says. “All of the winning brands are including customer experience, in addition to traditional loyalty programs. Winners are including, on average, at least 11 different components in their loyalty strategies, compared to 7.5
components for the market-at large. Customer experience, corporate social responsibility and gamification are much more likely to be in included in the winning strategies.”
Johnson pointed to a key revelation in this year’s report.
“There is an elevated desire (for brands) to know what their competitors are doing,” he said. “Not necessarily from a return perspective, but what is working for them and how are they implementing those things.”
Engagement metrics are used by 60% of companies, followed closely by customer satisfaction (55%) and sales/revenue (53%), the report says. Long-term and more complex measurements, such as ROI (35%) and customer lifetime value (32%) are used by far fewer companies.
“There is a greater need for clarity in metrics, benchmarks, and understanding the level of strategic importance placed on loyalty, and an even greater need to listen, hear, and understand,” Johnson said.