• November 1, 2015
  • By Leonard Klie, Editor, CRM magazine and SmartCustomerService.com

Brands Must Be Loyal to Loyalty Members

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When it comes to customer loyalty, companies often expect a lot from their most valued customers: Enrolling in loyalty programs takes effort, and then once they are enrolled, members are expected to remember PINs, passwords, account numbers, and other information or to carry around special cards or keychain tags.

Despite the hoops that customers must jump through to participate, these loyalty programs appear to be paying off for retailers, as recent research from Boston Retail Partners (BRP) found that 62 percent of retailers increased their budgets to enhance their loyalty programs in 2015. Much of the added funding went toward evolving loyalty programs to satisfy tech-savvy consumers with mobile offerings and unified commerce experiences.

Modern loyalty programs need to go past traditional earn-points-and-receive-rewards structures, according to Brian Brunk, principal at BRP. He recommends adding exclusive perks, relevant incentives, and personalized rewards as a way to further reward loyal customers.

"It's all about engagement," Brunk says. "Successful loyalty programs focus on immersive customer engagement and meaningful rewards that are sticky.

"Personalized offers based on personal preferences and past purchases are more meaningful as rewards and encourage participation in the loyalty program," he adds.

"You need to take your rewards to the next level," says Emily Collins, a Forrester Research analyst focused on customer loyalty programs. "You need to offer experiential benefits that draw customers in."

One way companies can do this, Collins points out, is by tying their loyalty programs into their CRM systems so that when a customer calls in, the system can alert the agent that a loyalty program member is on the line. "A simple recognition, acknowledging them for their loyalty, can go a long way," she says.

Today, only 12 percent of the retailers in BRP’s 2015 CRM/Unified Commerce Benchmark Survey reward loyal customers with personalized offers. The need for more personal and customized rewards is especially evident in the retail banking sector, where Collinson Group recently found that two-thirds of American consumers expect greater rewards, such as more personalized communications and offerings tailored to their specific needs, in return for their loyalty program memberships.

"Not being rewarded for loyalty is the biggest frustration for [bank] consumers, as cited by more than one-third of U.S. respondents, ahead of poor interest rates and unnecessary fees," said Chris Evans, director of the Collinson Group, in a statement. "Many banks offer basic, transactional loyalty programs that rely on traditional points-based rewards with limited value and appeal, which may explain why middle-class consumers are more likely to be members of supermarket, airline, credit card, and hotel loyalty programs."

According to the firm's research, 56 percent of middle-class Americans are members of bank loyalty programs, compared to 80 percent for airlines, 76 percent for hotels, 71 percent for grocery stores, and 68 percent for credit cards.

Gamification is another tool companies have at their disposal. So far, nearly a third (31 percent) of BRP’s survey respondents have implemented gamification, and another 56 percent will do so within five years. "With coupons and specials now status quo, and most shoppers able to find a good deal on anything they are interested in online, retailers need to work harder to earn and keep the attention of their customers. Engaging customers by utilizing game dynamics helps stimulate brand engagement and foster long-term loyalty," Brunk says.

Social amplification, taking positive actions and experiences and sharing them across social media, is another good idea, according to Brunk. "This extends the reach of organic content and creates a community to engage customers and encourage brand loyalty," he says.

Already, more than half (51 percent) of the retailers in BRP's survey use paid organic social amplification.

For companies, taking better care of their loyalty program members has its rewards as well. As part of its latest Customer Experience Index, Forrester Research found that loyalty program members are 20 percent more likely to recommend those brands, 20 percent more likely to use those brands in the future, and 23 percent more likely to buy additional products and services from those brands.

Collins says loyalty programs are also a great way to gain valuable data about customers. "Loyalty programs that offer customers a basic 'give-and-get' are table stakes for companies. The real value comes from the insight you can collect about your best customers, which you can then use to acquire new customers," she says.

Richard Shapiro, president of the Center for Client Retention, recommends that companies with loyalty programs should consider assigning "a specific company representative or a small team of associates to an individual customer to help create a human relationship."

"These individuals or specialized teams can be their primary contact when they have any questions or issues," he says. "This combination of a loyalty program coupled with a personalized service encounter creates a perfect match."

This might work for high-value customers, but companies shouldn’t focus on loyalty program members to the detriment of other customers, says Megan Burns, Forrester vice president and principal analyst. "It's the customer experience team's job to take note and be mindful of the experiences for all customers, not just the best ones," she says.

Collins agrees. "A loyalty program allows you to treat some customers better than others, but you always want to improve customer service for everyone. After all, not every customer is a loyalty program member." 

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