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By Joe Easley, Sr. Director, Business Development & Product Strategy, Kobie Marketing
As retailers continue their quest for deepening customer engagement, they’ll often turn to a loyalty program. Yet high membership numbers are deceiving because engagement levels are actually stagnant. This poses the question, are loyalty programs right for every brand? How do brands choose the right strategy for customer engagement and the overall integration of the loyalty program within the brand?
Having loyal customers is the goal of all retailers, but that does not necessarily mean that all retailers desire loyalty programs. Oftentimes, the key decision makers can agree that they want a loyalty program, but are interested in opposing objective and definitions of success.
Many retailers engender loyalty in ways that may not be manifested in a formal program. By offering genuine connections that create optimal experience, knowledgeable staff who understand the importance of delivering great and consistent customer experience, and by using unobtrusive engagement tactics, retailers are finding that loyalty can indeed be earned in many different ways.
If a retailer does wish to engage in a loyalty program, focusing on customer and member acquisition is a great place to start. Effective loyalty programs are optimized when brands are researching and developing customer acquisition strategies with the goal of obtaining potential high value customers.
While there is value in obtaining customers and ultimately program members from varying value segments, it makes the most sense to target the very best, right from the beginning. This last aspect is absolutely critical: why spend good money going after bad? Why would a retailer continue to drive acquisition efforts that go after those who may not be or may not have the potential to ever be their best customers?
When to Implement a Loyalty Program?
For too long, retail loyalty programs have been stuck in a “me-too” mindset with most or all offering the same generic rewards, i.e., points, month-end specials, coupons or automatic discounts. This is where retailers have a great opportunity to implement something different by segmenting between tangible (points and physical rewards) and experiential, status-based rewards.
After reviewing its competition, assessing the economic and financial benefits of loyalty and making a commitment to differentiation, a retailer may believe it’s ready to develop a loyalty program. However, the retailer that chooses to include experiential types of rewards that appeal to its customer base and not only differentiate the brand and program, but the overall experience, begin to truly differentiate.
Another factor that will impact a retailer’s loyalty program implementation (and differentiation) is whether it is single-tiered, multi-tiered or integrated multi-tender. An integrated multi-tender loyalty approach can help retailers improve ROI while broadening their customer base and really increase shopper engagement and satisfaction levels. Consumers can, in one seamless experience, enroll in the loyalty program and have the option to apply for a credit product.
In contrast, retailers who choose to offer “parallel” programs (credit and non-credit) are missing the potential value to grow their card base, generate incremental behavior and optimize member satisfaction. Non-credit programs are a fit for some retailers; however they must be careful not to give away margin to already valuable members.
Applying the Five ‘Es’ Assessment to a Loyalty Program
As much as a successful loyalty program relies on quality rewards and experiences that speak to customer needs delivered on preferred channels and uses behavioral insights in a member-respecting manner, it also requires a review of what I call the “Five E’s” approach: Enterprise, Experience, Economics, Enablement and Execution.
- In terms of Enterprise, ensuring C-suite buy-in is critical. Executives must be informed about a retail brand’s loyalty culture. Ideally, they must be program knowledgeable and an inspiration for the rest of the staff.
- From an Execution perspective associates must also be trained to understand the loyalty construct, how to ask for customer enrollment and when to position the credit product.
- Regarding Economics, brands must ask themselves what they are trying to accomplish. Are they driving behaviors like bigger baskets or more trips? Or are they trying to connect emotionally with customers?
- Experience speaks to the brand-loyalty program relationship. To what extent is one an extension of the other? And how does proper loyalty manifest across all channels? Lastly, is the brand promise properly infused throughout the loyalty experience?
- Finally, Enablement means that when all the behind-the-scenes legwork is done, what is the customer experience operationally? For instance, if the business goal is to empower great experiences at the point of sale, surprise and delight or great earn and burn scenarios can't slow that experience down.
By utilizing the Five E’s approach during the evaluation stage, retailers can determine their loyalty program readiness and make informed decisions that will maximize member engagement and ROI, for the long haul.