Posted by: nikfromiclp on: February 8, 2010
There’s no big secret to what makes a loyalty program effective. Personalized contacts and strategies that create deeper engagement with the brand work, while gimmicks and mass-blast undifferentiated communications fall flat, according to both consumers and marketers.
There’s some disconnect in how these programs are used. While nearly two-thirds of marketers surveyed by the Chief Marketing Officer Council say loyalty program investment is important to their marketing mix, only 13% feel they’ve been highly effective in leveraging loyalty and brand preference among participants. And one in five don’t have a strategy for doing so, while 25% have not urged their most loyal customers to become brand advocates.
What channels best serve loyalty schemes? According to the marketers, 60% rely on Web sites, nearly as many use e-mail, 47% use word-of-mouth, 46% collect point-of-sale information, 42% use direct mail, and 39% rely on a sales or service representative.
Most member communication is monthly (30%), while 20% interact with members on a daily, weekly or bi-weekly basis. E-mail is the preferred mechanism for member communication among 84% of marketers, followed by printed mailings and statements (51%), corporate Web sites (45%), dedicated club sites (32%), SMS text messaging (24%), and social networks (16%).
Marketers say discounts, free products and premiums top the list of benefits, outranking quicker, better service and improved customer handling.
Online channels dominate expected investments as nearly 60% of marketers plan to better use the Web and new community and networking tools.
Here’s hoping marketers better able to leverage online metrics than they do other information. Yes, nearly three-quarters report collecting basic demographic information, and around seven in ten use geographic information. But other data such as advocacy rates (14%), brand loyalty and attachment (27%), personal preferences (31%), satisfaction levels (33%), and product preferences (38%) — are not being leveraged, according to the study.
Marketers acknowledge their programs have flaws. Asked about typical customer complaints regarding their loyalty schemes, nearly one-third said customers see little added value to becoming program members. One quarter said the rewards lack substance, and a similar amount feel they don’t get enough personalized attention. Twenty-one percent say customers complain about too much spam and unwanted mail, and 18% mention issues with redeeming points or miles.
But don’t look for these programs to end anytime soon. More than one third of marketers plan to increase investment in their programs, with another 46% maintaining their current level of spending. Only 4% expect to discontinue their programs.
Consumers are more than happy to see these programs continue, of course. Nearly eight in ten say they are very, or pretty, satisfied with their loyalty and rewards program experiences. But 70% want to see more discounts and savings, and 52% say more compelling personal deals and offers as reward steers their business to loyalty program operators. Six in ten they want more compelling personal benefits and services, as well as more relevant offers or individualized deals.
“Relevant profiling data continues to be a limiting factor in customer engagement,” said Donovan Neale-May, executive director of the CMO Council, in a statement. “Without a deeper customer insight, marketers will be limited in their ability to do meaningful predictive modeling, market segmentation and revenue forecasting. Better understanding of customer behaviors, predispositions, intentions and preferences enables more effective and relevant messaging. It is also an essential part of customer revenue optimization and lifetime value building,” Neale-May added.
According to consumers, point-of-sale information, service representative interactions, company web sites and word-of-mouth are the primary sources for learning about loyalty clubs. Nearly 65% acquired information about the programs in retail environments compared to only 4% in social media networks, 3% in blogs and 11% in online advertising.
According to the CMO Council, this finding reflects consumer desire for high-touch direct engagements, versus mass messages, regardless of channel.
Consumers are less sanguine about spam and unwanted mail, with 44% saying this was the unfavorable characteristic they most closely associated with loyalty programs. Another 38% mentioned too many conditions and restrictions, with a similar amount mentioning reswards that lack real value.
Other consumer concerns included having a hard time redeeming points or rewards, program membership lacking value, as well as communications and service not being personalized or targeted specifically for members.
Surprisingly, few attributed willingness to sign up with loyalty programs to rough economic times. Only 22% said the economic climate had raised their interest in these programs compared to 41% who indicated it had no impact at all.
More than 700 respondents participated in the survey, which was conducted during the last two quarters of 2009.
