Study: Loyalty programs need a digital boost

Expensive, ineffective loyalty programs are in need of a makeover.



Retailers that shift to digital-centric programs that engage and promote brand advocacy will retain the loyalty of customers, according to the “Intelligence Report: Loyalty 2017.” The report, from L2, evaluates the successes and pitfalls of loyalty programs for 99 consumer brands across activewear, beauty, big box, department stores, and specialty retail.



"It's no news that in today's oversaturated market brands are struggling to retain the loyalty and attention of customers," explained Mike Froggatt, director of intelligence at L2. "Regardless, the majority of consumers are still dissatisfied with current loyalty offerings, creating an opportunity for brands to build reward structures that add value to core products and services while differentiating the brand.”



Clear communication is imperative for loyalty program success. That’s why 77% of brands mentioned loyalty in the subject of at least one email campaign during May 2017. These brands enjoyed a substantial lift in open rates (from 19% to 24%), but failed to keep the momentum going as only 6% of total brand emails advertised loyalty-related topics in their subject lines during this same period.



Another way to drive success is to automatically enroll customers at account signup (56%). Brands that require additional information to enroll (39%), or place the onus on consumers to complete the signup process deters users, especially when the majority of programs (86%) lack any rewards for completing a profile.



Meanwhile, 35% of brands reward loyalty members for non-transactional engagement, such as incentivizing referrals and reviews, and linking social media accounts. Valuing consumers beyond their wallets provides several benefits. For example, department store brands that reward non-transactional engagement also enjoy 48% more daily site visits, 13% long site visits, and a 5% lower bounce rate, data revealed.



"Properly identifying the value proposition of loyalty programs is key to their success," noted Camilla Opperman, senior associate at L2. "When the value exchange is skewed towards the brand, consumers have little incentive to sign up; when it is skewed towards the consumer, brands bear the burden of expensive loyalty programs with little return on investment."