Reprinted from TrustedPeer
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TrustedPeer Expert, TrustedPeer, Inc.
- 30 years in senior positions in marketing services & direct marketing agencies around the globe.
- Special focus on digital & loyalty marketing, particularly within the tech, airline & hospitality sectors.
- Recent brands include: HP; Intel; Virgin America; Omni Hotels & Resorts & Joie de Vivre Hotels.
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Customer Loyalty Programs and Retention Marketing
TrustedPeer Expert, TrustedPeer, Inc.
- The loyalty program is assumed to be underperforming, when really the underlying problems are with the brand.
- Sometimes when a company with an existing loyalty program is experiencing stagnation or returns are diminishing, the internal assumption made is that the loyalty program is the problem. However, when you look under the hood, at the data, the financial model, and how the market situation has changed, it becomes clear: the brand, not the loyalty program, is the issue.
Lackluster performance of the loyalty program can often be an early indicator that there are deeper problems with the brand itself. Perhaps the brand hasn't evolved to address market changes or there are problems with product quality or customer service levels have deteriorated. Rather than blaming the program and believing cutting that will solve the issue, smart companies delve deeper to understand what is contributing to the program not meeting expectations.
- Companies don't stop to think through why exactly they need or want a loyalty program before launching one.
- Often companies devise loyalty programs based on a pre-conceived structure of what they think a loyalty program should look like based on what they've seen other companies and their competitors do going to market.
But when you look closely at a company's business model and what you really want the program to achieve, it could be the case that what they really need doesn't look at all like a traditional loyalty program, or that they don't really need a loyalty program at all. They might, for example, not need membership cards, even if their competitors have them.
Too often companies jump on the bandwagon with a "me too" approach without having first thought through the fundamental reasons for a loyalty initiative, and whether or not one really makes sense for their brand. It really is crucial to step back and assess what makes the most sense for your company.
- Data is collected in different systems, affecting the ability to create an overarching picture of customer behavior and determine how to affect that behavior.
- Data confusion could be the result of inconsistency in how services or rewards are delivered, which from the member's point of view could mean that there is inconsistency with respect to how they are treated, depending on where they interact with the brand. Sometimes it's the case that back end infrastructure and technology are not enabling all of the outlets and touch-points to recognize an existing customer.
- Staff don't fully understand importance of the loyalty program and as a result are failing to deliver on the promise.
- Delivering a consistent experience that, at the very least, meets the customer's expectations and ideally exceeds it, is at the heart of any loyalty program's success.
Customer facing staff, in particular, need to really understand what the program is about, why it's important, and why it's imperative they deliver the promise of the program. They need to understand that the program is not a separate entity but that it is an integral part of the brand experience, so delivering on the promises of the program is also an integral part of their role. Explaining to staff how the loyalty program can help them goes a long way to gain their support and buy-in.
For example, you can illustrate to staff how a loyalty program can help them proactively meet customer's needs, rather than waiting for the customer to ask, or you can show how it can be used to rebuild relationships with dissatisfied customers, enabling them to 'win back' a customer.
- The loyalty program fails to constantly evolve.
- Sometimes companies launch loyalty programs into the market place and think that they can sit back and relax, when really they need to constantly monitor and refine their program.
Loyalty programs have to evolve and be responsive to the information garnered by them. It's also important to maintain dynamism because members can get complacent if they keep receiving the same old things. The program needs to evolve to keep up with not just the brand, but how your customers' behavior path and the market changes. It doesn't take much for a program to suddenly be "behind the times."
A good example of this is in the airline industry. Seeking to differentiate themselves from the large U.S. carriers and to address their more limited route networks, programs from some international airlines now base the amount of the miles or points offered on the price of the ticket, not miles flown. In the past year, one large U.S. airline – Delta – relaunched its SkyMiles program and shifted to this model of miles per dollars spent.
- Programs can be too focused on the reward element.
- Understanding the economics underpinning the rewards element of any loyalty program are fundamentally important. What is the real value of a point or a mile? What is the true cost to you when a customer redeems a reward? How does this differ between rewards that represent a 'discount' on your own products compared to redeeming a reward delivered by a partner? You have to make sure that you are not overly diluting your margins. That can lead to customers becoming more rather than less price sensitive.
Loyalty can't be bought; it is earned based on the respect that a customer has for a brand and a product. If you're focusing too much on the reward benefits you're failing to understand that.
When you go above and beyond the basics – for example, by offering a member-only shopping night that allows customers to be the first to buy the new season's products and shop in a less frenzied environment, or automatically upgrade\ing guests when they check in, or leaving their dog's favorite treats in their room on the last night of their stay so Fido is even more pleased to see them when they get home – those recognition benefits go a long way. They will help customers build respect and trust in your brand, creating a more emotional bond that is more difficult for a competitor to break.
- There isn't buy-in to the loyalty program across the entire organization.
- A loyalty program isn't only about marketing. To be successful a loyalty program needs to be understood and supported across the organization. From the boardroom to the customer-facing staff earning minimum wage, the loyalty program needs to be reflected in all aspects of the organization. So at every customer touch-point – be it visiting your website, purchasing your product or reading a marketing communication from you – there is a level of recognition and consistency of experience that ensures the customer continues to value their brand choice.
Customer Loyalty Programs and Retention Marketing: Common Problems