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To Implement or Not to Implement: Why Loyalty Programs Aren’t the Right Move for Every Brand

From an outside perspective, loyalty marketing is synonymous with a rewards program. After all, without earning points or moving closer to those coveted rewards, what’s the point of remaining loyal to a brand?
 
As research continues to show, however, loyalty programs are only one piece of the customer loyalty puzzle, and one that isn’t right for every company looking to spark customer engagement. In a new report from Maritz Motivation Solutions titled, “Insider’s Guide to Customer Loyalty,” the company looks into this very conundrum, and how organizations can determine whether a loyalty program should be included within their efforts.
 
Loyalty360 spoke to Barry Kirk, VP of customer loyalty strategy at Maritz Motivation Solutions, about the results of its research.
 
The report contains information regarding the decision-making process of whether or not a loyalty initiative would be a worthwhile investment. What would you say is the single most important consideration in deciding if a program is appropriate for a given organization?
 
Kirk: While a number of conditions are necessary to successfully launch and support a loyalty program, the most critical is executive support. Loyalty programs require significant initial investment and need time to ramp up and show a profit. The best programs also require the cooperation of your brand, direct marketing, digital marketing, IT, and Finance teams. Placing a priority on that collaboration, and ensuring the program is given time and investment needed to show results, your best allies will be active executive sponsors who “get” loyalty and support your strategy. 
 
Maritz notes that most loyalty programs should target only 40% of a brand’s consumer base. What are some of the challenges faced by a program that spreads itself too thin by trying to appease all consumer segments?
 
Kirk: The primary challenge is that of showing a strong financial return on the program investment. Your goal as a program owner should be to demonstrate incremental profitability driven by the program through increased spend, increased frequency, or longer retention. If you focus your program budget on those members who are already delivering you high value (your retention segment), and those with the highest potential to deliver more value (your growth segment), a strong financial return will follow. However, if you shift too much of that spend toward low-value and low-potential customer segments, you run a significant risk of sabotaging your program ROI for customers unlikely or unwillingly to provide your with significant financial return.

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