The love affair between retailers and loyalty programs is in serious distress. Several major retailers have cut or reduced their loyalty programs and more are considering a trial separation. Customers seem to be shrugging off the change for now. As long as they’re getting the discounts, it’s easier for them to not have to carry and swipe their cards or give their phone numbers at checkout.
So, how did we go from the road to “happily ever after” and end up at “apathy at best?”
Like any healthy marriage, loyalty programs are all about the relationship. Birthed to foster deeper relationship with customers, loyalty programs have faded in some circles as data is crunched, munched and — in too many cases — overanalyzed the wrong way. According to a 2012 SAS Loyalty 360 study, “Only 24% of [retailers] believe their efforts are very effective in delivering desired results” proving that these programs have been “neutral in their impact” or even worse — completely ineffective.
From my conversations with retailers about their loyalty programs, it seems this data has been swirled and debated so many times; it’s like a good book that is now being read upside-down. The story is going nowhere and eyes of experienced marketers are getting tired of trying to make it out.
And for customers, loyalty programs have lost some luster. Customers know they are being watched — the long list of coupons attached to the checkout receipt attests to that. Yet, do they actually feel more loyal because of the rewards they’ve received — or perceived — to date? Discounts are expected and customers will swipe their loyalty program cards to get them, but it doesn’t mean they’ll drive past a competitor, who also has a loyalty program, to shop at your store.
Still, loyalty programs have their believers and they have stories of success. Programs that reach a higher level of personal relevance and build a relationship beyond discounts have achieved a genuine sense of loyalty and even transparency. Proper analysis of the data is at the core of loyalty program success. Here are some steps that can help you get your loyalty program back on track.
Commit to changing the way you’re reading the data
Loyalty programs are delivering loads of data. Sometimes the current big data obsession can pile up information and obstruct the view on why you started the program in the first place. Now is a good time for a reset. Clear your vision path and focus on what you really want for your loyalty program. Are you focusing on the most important data to achieve that objective? Is your organization distracted by other data points that have emerged? Remind everyone of what really counts.
Refocus and retrain
Since you launched your loyalty program, you’ve likely made a lot of new discoveries and gained new insights from a massive amount of new data. Has the training for your team evolved with your loyalty program? Analyzing and acting on data and insights requires a constant evaluation of team training and skills to maximize return — especially when the investment is as large as a loyalty program. Your data view reset requires a retraining, too.
Interpreting data from the wrong angles is a lot like using Google Translate to prepare a proposal written in English for your colleagues in Japan. It just won’t make sense. Yet, we see it happen often, particularly with loyalty programs. There are a lot of ways and debates to interpret data, but those options narrow considerably when a clear objective is in focus. Again, it’s about what really counts. Here’s where your renewed focus and training will really matter. This is where you can pivot toward stronger return if your team is trained to do so.
Shape the customer experience
Some of the most successful loyalty programs feel like a dialogue from the customer perspective. Your customers already know you’re monitoring what they buy so how about taking that interaction deeper?
According to a recent PWC study, which measured the experiences of about 6,000 U.S. consumers across 11 industries, consumer loyalty is “strengthened by shopping experiences that forge powerful psychological connections, and not by points or rewards programs alone.” Therefore, customers must feel that you care to personalize versus sell experience. If a retailer is going to collect information, they should at least do something meaningful with it. Direct mailers and store layout shouldn’t reflect products that retailers want customers to buy, but products that customers want to buy. Are you carrying the brands they love among the products they buy regularly? Are you considering other ways to engage them such as social media platforms? Is anyone bringing the loyalty program to life inside of the store during the shopping experience? These are all engagement points you can develop with a new approach to data — and these new interactions may serve as new data feeders as well.
Sometimes an outside perspective makes the difference
Let’s face it — like a couple that’s been together for several years, retailers can get stuck in their ways with loyalty programs and data. Making the most meaningful change can mean tapping an outside data counselor who can bring an expert perspective.
Although the decision to axe a loyalty program may be beneficial in the short term by eliminating costs for operating card database efforts, retailers should revamp their approach and evaluate the long-term effects on their brands down the line.
Data from these programs is vital for driving key business decisions and profitability for the retailer. SAS Loyalty 360 notes that the cost of acquiring a new customer is “estimated at 5 to 10 times what it costs to maintain a current one,” proving that “the nurturing of loyal customers is not only becoming a high priority” but also a strategic imperative. Data has to be used in a way that is going to matter most for consumers. For retailers that realize the opportunity, the marriage and ROI is significant.
Dr. Matthew Green is the managing director for emnos U.S., where he spearheads expansion of the company’s retail partnerships, support services and financial growth within the region. Based in the firm’s Chicago office, he has more than 15 years of expertise in client leadership consultancy and analytical data insights.