Four Signs Your Loyalty Program Needs an Overhaul (Part 1)
Blog: Capgemini CTO Blog
In my recently published Apparel Magazine article “Building Loyalty Beyond Point of Sale; Enter Loyalty 3.0” that I wrote with my colleague Melissa Tischler, I argued that retail loyalty programs must move beyond the point of sale to put human-centered exchanges at the center, supported by mobile and digital solutions.
A misguided focus on point of sale is just one trap that constrains retailers’ thinking about loyalty. I’ll cover two others in this post, and check back for a follow-up article with the last two signs that your loyalty program needs an overhaul.
Your Metrics are Meh
If the average share of wallet or lifetime value of your long-term members is flat or declining, if the percent contribution from loyalty members is not growing, if the time between purchases of your loyalty program members is lengthening, or if most of the loyalty program-influenced revenues are from initial sign-up purchases, your loyalty program needs an overhaul.
There are 1.6 billion members of retail loyalty programs in the U.S., making retail the largest slice of the loyalty pie, a Colloquy study found. While the majority of customers in the U.S. belong to multiple retail loyalty programs, with the average household belonging to two dozen or more, most acknowledge that having a loyalty card doesn’t in any way signify their personal loyalty to a brand.
Customers used to perceive that belonging to a loyalty program was the best way to ensure they were getting exclusive rewards and access. Too often, from a shopper’s point of view, retail loyalty programs feel like e-mail spam with irrelevant offers, coupons that come with complex rules and unreasonable expiry dates, rewards thresholds they’ll never reach, and reward values that are too miniscule to really matter. It’s no wonder that email opens are down and unsubscribes are up.
One-size (Reward) Fits All
If your loyalty program isn’t very customizable, and all your loyalty and reward experiences are mass-marketed offers, your program needs a massive refresh.
Customers have proven themselves willing to share information about their preferences (e.g. sizes, styles, brands, etc.) in exchange for value. Many of today’s customers feel like they are sharing information, but retailers are failing to use that data to make the shopping experience better.
Only 22 percent of loyalty program members surveyed by Colloquy said they receive better treatment than customers who are not enrolled in the loyalty program. Within this 22 percent, overall program satisfaction is 3.4 times higher than the 78 percent who do not feel they are treated any better as program members.
Customers in the U.S. report leaving loyalty programs when it takes them too long to earn points for rewards (57 percent) or when the rewards offered are not of interest (53 percent). In the same report, 38 percent of loyalty program participants left a program because it sent too many communications, and 36 percent left because the communications they received felt irrelevant.
With so much valuable information being shared, it behooves retailers to be more deliberate about their offers and about how often they communicate.
Leading programs have long since implemented tiers or levels within their loyalty programs to further customize the program for their best customers.
Tiers are useful because they give you the flexibility of rewarding, recognizing and sorting your customers into levels based on your most desired customer behaviors, be it recency or number of purchases, total amount spent, percent of purchases made at full price, number of products reviewed, customers referred, social shares and more. According to our research, only 25 percent of loyalty programs currently reward customers for some form of engagement, such as taking surveys, rating and reviewing their experience or referring friends to the program.
It is still useful to provide discounts, special sales and free shipping to loyalty program members. After all, many joined initially for 15 percent off at checkout. But it is necessary to take your program beyond the transactional to ensure a lasting and fruitful relationship. VIP events, preview parties, styling contests and meet-the-designer virtual seminars are just a few examples of how to create unique and positive associations for your best customers that will keep them engaged and feeling special when they shop and promote your brand.
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