Most Consumers Focus Loyalty Program Attention on Five Retail Brands

Merkle Loyalty Solutions Group (formerly 500friends) recently released a comprehensive report titled, “The Great Loyalty Reset: Defining the Future of Loyalty for Retail and CPG brands,” which was based on a global survey of loyalty program managers and consumers.

Sara Hogan, director, growth marketing, for Merkle Loyalty Solutions Group, talked to Loyalty360 about this eye-opening report.

What was the biggest takeaway (s) from “The Great Loyalty Reset” report?
Hogan: Most consumers in North America, Europe, U.K., and Asia who belong to retail and CPG loyalty programs concentrate the majority of their attention among just five retail brand programs, a contrary finding to oft-cited Colloquy statistics showing that consumers join approximately 29 loyalty programs and are active in 12.

The impact of loyalty programs extends far beyond net membership growth, satisfaction surveys, and Facebook likes. Loyalty has a deep impact on overall business performance and retailer health – positively and negatively. Nearly 90 percent of members on average say they shop far more with brands they enjoy and value, but nearly two-thirds shop far less with brands if loyalty programs fall short. Consumers who abandon unsatisfactory loyalty programs are also more likely to abandon the retailer or brand altogether.

Loyalty professionals find it increasingly complex and challenging to design, manage and implement loyalty programs. Obstacles include dramatic, ongoing changes and pressures on the retail market, driven by the influence of social, digital and mobile capabilities, and changing consumer behaviors and expectations. Program managers often struggle to measure the impact and financial value of their programs, and they struggle to find colleagues and employees who are well versed in loyalty marketing strategy and tactics. Loyalty marketing, strategy, and operations are now critical enough to a company’s financial health that loyalty should be recognized as its own marketing science, on equal footing with other marketing disciplines. As Forrester Senior Analyst Emily Collins has noted: “Loyalty is mission-critical for the future of business success.”

What are the longstanding misconceptions related to consumer engagement with loyalty programs?
Hogan: At 500friends, soon to be Merkle Loyalty Solutions Group, we talk every day with CPG and retail leaders about customer loyalty – and we believe it’s time for a reset. Companies and customers alike are overwhelmed by choices and underinvested in a mutually valuable and long-term relationship with one another. We think companies should focus around strategy pillars of Personalization, Participation, Value Prop, Brand-Centric Positioning, and Corporate Significance.

Delivering omnichannel interaction and personalization requires that brand loyalty leaders refocus efforts on identifying and getting to know a broad base of customers. What is the issue or opportunity:  Even though loyalty programs are designed to identify and learn about customers, we find that actualizing a single view of the customer, enabling predictive analytics, and implementing personalization of offer and experience remain significant challenges for those operating programs and those considering them. This results in missed opportunities with CURRENT customers and missed opportunities in using data about them to find more like them in the vast pool of unknown customers. Why is it happening:  Organizational fragmentation of customer systems, too many vendors, and likely a simple need to go back to the roots where CRM and loyalty were inherently connected.  What should brands do about it:  Evaluate, prioritize and plan data mobilization activities in partnership with CRM teams aligned to segments or personas.

Engaging members and reaching “top of mindshare” status with them requires creating a differentiated value proposition that delivers utility, context, and connection. What is the issue or opportunity: Customers are overwhelmed by the number of loyalty programs much less the number of apps they have enrolled and as a result are not participating in nearly as many as they join or download.  Why is it happening:  Many programs are hyper-focused on program size, credit card or promotional adoption, and overall revenue more so than member value and usefulness to a wide number of members.  What should brands do about it: Evaluate program strategy and communications for differentiation, value to members, and utility.

Optimizing technology means reducing friction and making good behaviors more seamless.  What is the issue or opportunity: The speed of technology innovation creates great opportunity to provide new features or access to members.  We believe that mobile, social, and commerce are the highest priority for loyalty programs. as these will impact the broadest base of members and have the highest impact. Other technologies like streaming, chatbots, wearables, gamification, and beacons are coming fast on the horizon. Why is it happening: Brands are focused on too many innovations and need first to build a solid and active digital base. What should brands do about it: Design a mobile, social and commerce strategy for your loyalty program in partnership with your team to engage wherever possible at the lowest cost of entry.

Maximizing the financial performance of your loyalty program requires a long view of customer value.  What is the issue or opportunity: Many program operators we work with are focused on managing program costs and liability and at the same time proving the incremental impact of the program on the bottom line – all important to the C-suites they serve. These are not important to members, however. What is important to them is getting rewarded and appreciated for their long-term relationship.  Why is it happening: The lack of a strategic P&L for the program that is focused on member value growth.  What should brands do about it: Evaluate program performance as viewed from a customer value perspective.

Inspiring a meaningful commitment requires a brand-centric experience for your program. What is the issue or opportunity   Best customers aren’t just those that spend the most – they are those that serve as ambassadors and introduce you to other like-minded people in exchange for social currency or another benefit. Experience is a big idea and brands need to think beyond “content” and include their people (employees), partners and other brand assets, digital and physical, to create special moments that will earn true commitment. What is it happening:  Experience at scale is challenging and it’s easier to focus on a very small group of customers. What should brands do about it: Inventory all of the potential assets, content, offers, people moments, partners and other experience components and design a plan to share across as many customers as possible relative to their value. And listen to what customers say they want, via research, social listening and more!

What was the biggest surprise from the report?
Hogan: It is obvious that loyalty programs positively impact consumer activity with a retailer or brand, however, the report uncovers the point that 86 percent of consumers are shopping more if they like the program as well as the converse that nearly two-thirds (63 percent) of consumers that are leaving a loyalty program also quit shopping or shop less frequently with the brand or retailer. The impact is much more significant than previously thought.

What are loyalty marketers doing well and where do the challenges lie?
Hogan: Loyalty program managers report that loyalty programs require an ongoing juggling act involving internal limitations (staff, expertise, budgets), external vendors, complex technologies, and unpredictable and (currently) unknowable consumers.

External Challenges
Consumers are shopping less in stores, more mobile/digital
Consumers' behaviors and expectations change too quickly
Technology changes too quickly to adapt

Operational Challenges
Experienced loyalty employees and in-store loyalty training are in short supply
Comprehensive, easy-to-use loyalty solutions are difficult to find
Too many loyalty vendors, and lack of communication among vendors

Financial Challenges
Difficulty determining the right rewards, pricing structure, and ideal funding rates
Perception of loyalty as a cost center rather than as a revenue generator
Difficulty incorporating customer data and loyalty program data to influence broader business decisions

Why is there such a disconnect between loyalty program managers and consumers?
Hogan: Fundamentally, I believe that brands see loyalty programs as a revenue generator and consumers see loyalty as a way for a brand to thank them for their business. This creates a significant disconnect. While the program manager has more consumer data available than ever before, meeting consumer expectations is becoming an increasing challenge.

What are your predictions for the immediate future of customer loyalty?
Hogan: “Connected loyalty” means mobilizing connections from all possible consumer touch points, all locations, and all devices. Brands must operationalize data points to understand not only a customer’s activities, but also their individual preferences, behaviors, and values to create truly personalized brand experiences for each consumer. Brands should create personalized and memorable relationships with their consumers by engaging all that they know about them to make the most of the interaction.

Connected loyalty programs weave intuitively and seamlessly into consumers’ lives. They thrive on underlying strategies that connect consumers to data, data to the brand, and the brand directly back to consumers. Once captured, loyalty program data must permeate the entire organization to empower more enlightened business decisions from customer service, e-commerce, product design and quality, finance, digital and social, marketing, and other corporate divisions.

Connected loyalty holds promise for actualizing loyalty marketing’s evolution as a unique marketing science. Today’s winning loyalty program leads the way for retailers and brands as they follow, learn about, listen to, interact with and delight their consumers across all touch points–brick-and-mortar, digital, mobile, social, virtual and whatever comes next.

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