How to Fix an Outdated Loyalty Program

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man pulling loyalty program card from his wallet

Consumers expect offers that appeal to their individual likes and preferences. If your loyalty program is still one-size-fits-all, here are five steps to fix it.

When it comes to customer loyalty, many companies are stuck in an outdated paradigm. Most spend a lot of time and money propelling potential customers through the classic marketing funnel—awareness, consideration, purchase. Then they tack on loyalty as an afterthought.

This is puzzling, considering the well established evidence that just 20% of customers account for 80% of profits. In other words, keeping existing customers engaged is much more efficient—and profitable—than trying to attract new ones. Yet many  marketing strategies and tactics still don’t reflect this.

But the real problem is that most loyalty programs are still simple earn-and-burn models. The more you spend, the more you get. That’s simply not the way today’s consumer thinks about loyalty. To them, loyalty is predicated on a connection with a brand, product or service. It’s about engagement.  The best programs attract customers with experiences and offers that appeal to their individual likes and preferences. It’s about surprising people with something they like each time they visit a website, whether or not they buy something. When we talk about loyalty, we’re talking about that repeat experience. We’re talking about a relationship.

If your organization isn’t taking this approach, here are five things you need to do to get there.

1. Shift your Strategy from Mass to Dynamic

Effective personalization is a strategic advantage, and it should be treated as one. But it often requires an organizational shift. Many retailers currently spend more than 50% of their shopper marketing on mass promotions, but research from BCG shows that personalized offers drive greater ROI. Making that shift from discounts to personalized engagements is more than just a technology change though, you’ll need to re-align the entire organization and shift the strategy of your loyalty program.

2. Establish Loyalty as a Cross-Functional Platform

This is a fundamental key to success. In our modern world, loyalty does not just sit within one small subsection of a marketing organization. Loyalty is a company-wide mandate, and a loyalty program needs inputs and participation from business units across the organization. This requires cross-department collaboration on process, technologies, resources, and data.

3. Understand your Buyer at a Deeper Level

Every modern loyalty program is going to have nuances based on what the brand is selling. Most brands are sitting on huge piles of data in POS, CDP and other systems, about what customers have purchased, how, and when. You’d be surprised by what insights can be pulled from this info, but it often sits in silos. To create a seamless loyalty program, you need to take a step back and analyze what you already know about your customer base, and then create a program that reinforces the most valuable engagement behaviors. 

4. Invest in Advanced Tech Solutions

As you scale your program, you need a tech platform that can keep up. That means investing in AI and machine learning solutions and automation that will accelerate the scale of how you personalize your loyalty programs.If you don’t have one in place, spend time getting it right. You will need to be data-driven to move your program forward, so pick a platform that will enable your loyalty program to constantly iterate based on new data inputs, without additional overhead for your team members.

5. Test and Learn

Embrace data-driven experimentation to achieve scalable results. One-to-one personalization supported by AI and ML and automation can increase engagement by 2x and net incremental revenue by 3x, but the greatest impact comes from optimizing programs based on previous learnings, to constantly improve the ROI of offer programs. So it’s critical to continue testing campaigns to increase the efficiency of your reward spend.

Regardless of your company size, this level of engagement and personalization isn’t out of reach. You just need to get your team aligned to the shift from mass to personal, establish the cross-functional processes, understand your customers, invest in technology, and above all, iterate on your campaigns. These five steps will help you build a better understanding of your customers and engage with them over time.

Loyalty isn’t monolithic. You must engage customers in different ways. Engage your customers at multiple points in the customer journey with relevance and value — give them easy and valuable reasons  to engage, and create long-term relationships between your brand and its loyal customers.

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