Making Your Loyalty Programs More Effective

By: Heather Roth

There are many customer loyalty programs out there that provide some value to consumers but keeping members engaged and participation high is the challenge that brands face. 

Loyalty programs have become table stakes in the marketing conversation, and for good reason. If done well, loyalty programs drive significant value for brands. In fact, in a study by Bond Brand Loyalty & Visa, 80% of consumers said they will spend more with businesses that have loyalty programs, and 67% say they modify their spending to maximize loyalty benefits.

Despite increased excitement in these programs, consumers are also less engaged than ever, evidenced by the growing gap between loyalty program participation and active engagement. In 2017, the average consumer belonged to 14.3 programs (up from 11 in 2014), but the number of programs they are actively involved in is only 6.7 (down from 8 in 2014). Moreover, only 46% of consumers are satisfied with loyalty programs – which means that brands are investing heavily into programs that are not meeting their full return potential.

There are a few common traps that brands are falling into when developing their loyalty program, some of which may seem familiar:

  • Program incentives are not valuable to customers
  • It takes too long to be rewarded
  • Brands do not communicate rewards

Loyalty programs are not a one-size-fits-all product. Retailers who have been successful in driving customer loyalty done more than reward, they have created a series of triggers and rewards that make shopping with that brand a habit. Creating these habits requires a strategic structure and communication plan to elevate the program to me more than a passive sign up. Here are a few tips to consider with your loyalty program:

Make it easy and transparent: It might seem like a good idea to get creative with your rewards structure so you stand out to the consumer, but too much creativity can backfire if it brings complication. Make sure it is clear to customers how the program works, how they accrue rewards, and any contingencies of the program.

Think beyond the points: While points are the #1 most desired incentive by customers, it may not keep them engaged. Customers love instant gratification and experiential benefits, so adding personalized, VIP-focused benefits – like a birthday reward, exclusive access, or other VIP-experiences are a good way to deepen that customer relationship and drive repeat engagement.

Keep them on their toes: Considering variable rewards or challenges within your program keeps customers from getting complacent and encourages active use of your program. Offering free items at product launch, refer a friend bonuses, check-in challenges, etc. every once in a while, help create that craving for your brand with a drive to find out what will come next.

Communicate loyalty status through updates: According to a March 2018 report by 3Cinteractive, nearly 70% of consumers are not sure how many points they have in a rewards program at a given time, and 40% say that they would buy with a brand more often if timely updates were given. Setting up CRM triggers to send out reminders of rewards status, expiration, or purchase frequency will offer significant value in driving redemption – and the perceived value and engagement that come with it.

Make sure rewards structures make sense for the business: Ultimately, the goal is to drive increased value, so the cost/benefit of the program has to make sense - not only for the brand value perception, but also for the bottom line. It is important for marketers to work closely with financial and operational teams to model value scenarios and test these scenarios with customers. When the right mix of customer value and business value is found, this is when a loyalty program will be the most successful.

About Ideas Made Measurable!

At IMM, creating action isn’t just what we do — it’s who we are. Our agency is built to deliver full service capabilities while also delivering measurable results. Big data is the marketing buzzword everyone talks about but few understand. We are here to explain in plain English how data-driven, bottoms-up marketing strategies can help generate leads, drive sales and build your brand. We leverage the expertise of the staff at IMM, a data-driven, full-service digital advertising agency based in Boulder, Colorado.

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