By Adrian Hoon, COO / CMO of Global Poin Indonesia
Indonesian retailers are perpetually offering discounts and cash-back to win customers by being cheaper, instead of being more personally relevant. Being cheaper means being in a continual race to the bottom against every type of price competitor and disruptor. In today’s competitive world, one has to continuously remain relevant – meaning to understand customers better than others, resulting in the ability to deliver an experience that customers personally value and being loyal to customers. Earning more loyalty means earning more sales – one more item, one more visit, one more customer, and so on.
To earn loyalty rather than to be given loyalty – thinking of loyalty as a relationship earned through ever-relevant shopping experiences, offers, and conversations – is an important and powerful distinction with significant implications for any organization in a multichannel world. One perspective places the responsibility to change on the organization itself, while the other presumes that the customer owns the change journey from less loyal to more so. Only the former approach has been proven to drive sustainable growth.
Therefore, the essential question is, which type of loyalty program – points, discounts, surprise and delight, experiences, etc. will best enable the loyalty approach? The answer depends on the business’s willingness to use data and insights to truly change their customers’ experience.
Customer Needs and Expectations
Today’s loyalty program members expect to receive more than just points when interacting with a brand. Customers want diverse ways to redeem points, deeper engagement, quicker gratification, more flexibility and relevance, and easier processes. The transactional benefits of points alone no longer lead to loyalty. Retailers have to reconsider the role of loyalty offerings in the company’s overall growth strategy and rethink what it truly means to be loyal.
In order to ensure the success of loyalty offerings, retailers have to deliver personalization and create offers and rewards that are relevant to members’ unique needs. Retailers must determine how to shift from transactional reward structures to experiential fulfillment to a delighted customer.
Knowing Your Customers
The loyalty program has to be an iterative process that constantly collects feedback along the way to foster a better relationship with your best customer base. Retailers should use the program to listen to customers and connect with them to deliver added value and help meet their needs at every touchpoint. For example, we can recognize our loyal customers and drive engagement by providing advice on wine pairings or thanking them for posting a review and surprising them with a personalized offer while they are shopping online. By tracking and rewarding interactions beyond spend, we obtain a deeper understanding of our customers, building stronger relationships. It’s about creating lasting connections through relevant rewards and experiences where and when customers want them.
Loyalty Program Design
Although loyalty programs have been around a long time, many retailers’ programs still have fundamental limitations. For some consumers, the rewards are not worth the effort to participate in the program, e.g., the requirements of participating are inconvenient, such as showing your card to earn points or reward thresholds are too high, where it may take too long to earn a reward so customers just give up.
Below are program pitfalls to avoid:
- Low relevance for customers
- Low perception of rewards
- Reward/tier thresholds that are too high
- Developing a complex proposition that is difficult to understand
- Treating the program just as a promotional tool
- Having partners that lack appeal or relevance
- Requiring too much effort for the customer to participate
Measuring Success
There are many ways to measure loyalty programs – diagnostic measures that evaluate how well the program is being executed. Do you have awareness, appeal, and participation? Is the program driving engagement and increasing loyalty among members?
Melissa Tatoris, Chief Innovation Catalyst @ Acoustic, shares some measurement tips:
It’s important to measure the right goals and metrics in your program. Making this data and the derived insights accessible to every team is critical to the program’s health and success. If the marketing team has access to the conversion rate from the program’s campaigns and doesn’t provide that to the wider organization, many decision-makers won’t have insight into what makes the program successful. Make the data accessible to every relevant team.
Define what you want your program to accomplish. Mission statements should always guide every aspect to your program and the metrics used to measure its success.
In terms of measuring your KPIs, utilize your mission statement to define what is most important to what you are looking to gain from the program. Some valuable metrics are:
- Membership growth: a better program will incentivize more sign-ups
- Incremental spend: how much more are your loyal customers spending than the average? Use this information to determine member-exclusive sales without hurting your bottom line
- Cross-channel engagement: which channels are they most likely to engage? Are your methods of cross-channel engagement?
- Customer retention rate: if they aren’t utilizing their points, there could be a problem in the program. Or is creating incentives to loyalty increasing customer value over time?
- Reward redemption rate: if your rewards are not being utilized, they may be expiring too quickly, there may be confusion on what you’re rewarding, or your offer may not be generous enough to incentivize conversion
There are plenty of other KPIs to consider, including average order value, profit by segment, repeat customer rate, cross-department buying, behavioral engagement score, loyalty margin rate, and program profitability. Determine if these are relevant to the mission of your program and then measure accordingly.
Conclusion
Loyalty is a hard thing to build with customers, and there’s increased competition in the digital age. Building the right program, promoting it efficiently, utilizing many channels, and measuring the right KPIs is instrumental to creating a profitable program. Data, the king of marketing, is the key to the success of your program.
Synthesize customer data into attributable personalities and likely actions, and create the best, most personalized experience for every customer. This will foster a profitable and beloved loyalty program.