The State of the Loyalty Industry and its Digitized, Instant Future
In any industry, loyal customers are the cornerstones of successful businesses.
In consumer-centric industries, the loyal customer is one that is familiar with an offered product or service, inclined to have a positive impression of the company or brand, and represents the best opportunity for a repeat transaction. For B2B companies, the relationships established with loyal clients will often lead to more clients, and repeat business is the foundation upon which growth is built. These are commonly accepted beliefs of business and are the rationale behind loyalty programs.
Loyalty programs are generally acknowledged as necessary and useful, yet everyone seems to have a different opinion on their inherent value. Are they holdovers from a bygone era, where a more diverse marketplace and a less bargain-thirsty customer base necessitated greater effort to create and maintain loyal customers? Or are they integral business tools, still conferring considerable advantages on those companies that wield them well?
More importantly, do loyalty programs work in their current state? Is it still effective to offer pieces of main product as an enticement for repeat business?
The simple answers are “sometimes” and “somewhat.”
The solutions to the challenges faced by loyalty programs and the way forward for the loyalty industry lay in the digital realm: the adoption of digital rewards, the acknowledgement that consumers are seeking more relevant and redeemable rewards at their fingertips, and the implementation of loyalty strategies that leverage the latest technology to meet consumers’ needs and desires.
Let’s look at the numbers: some 71% of marketing decision makers said that loyalty schemes have become more vital to successful business over the last two years, according to a study by GI Insight released in early 2010*. The total loyalty market in the US remains incredibly robust, as measured by Colloquy1 at 1.807 billion individual programs in 13 different segments. Yet a survey by the Chief Marketing Officer Council found that 32% of consumers feel that program participation holds “little to no value,” while 37% believed individual rewards held even less value, all of which presents a loyalty paradox.
These findings tell us that loyalty programs are at a crossroads, and that while they seem certain of occupying a position of importance for most businesses, they will take a much different form in the future than they do today. Consumer needs have evolved, technology has evolved and so will loyalty programs, driven by forward-thinking companies in step with technology and consumers’ constantly evolving attitudes, to provide relevant, enticing digital rewards.