The good, bad and ugly of loyalty programs
By Geoffrey De Weaver
Why have loyalty programs such as Coles Myer Shareholder Programs and Ansett's Global Rewards scheme bitten the dust yet programs such as Hyatt's Gold Passport, American Express Membership Rewards and Qantas Frequent Flyers gone from strength to strength?
What can Australian marketers do to differentiate their reward and recognition programs from the hundreds of other ones out there?
Successful loyalty strategies must assume a more comprehensive and integrated role in the overall marketing plan, one that seeks to identify and leverage the existing relationships between a company and its clients or customers, then extends that brand equity to achieve a competitive advantage based upon that relationship.
Importantly, all successful loyalty programs also understand that promises made about the program are like crying babies in a theatre; they should be carried out at once.
There is no one suit fits all type of program in loyalty marketing. There are five basic types of loyalty programs.
1. Appreciation program: Rewarding loyal customers with more of your own product/service.
2. Rewards program: Rewar-ding loyal customers with awards unrelated to your product/service.
3.Partnership program: Marketing to another company's database and allowing loyal customers to chose their rewards from either company.
4. Rebate program: Rewarding loyal customers incre-mentally according to their purchase activity.
5.Affinity program: Building a lifetime value relationship with a customer based on mutual interests.
In July 2002, De Weaver & Partners commissioned a survey we code-named Loyalty Generator of 500 consumers nationally, aged 18-65, to find out how Australians are feeling towards loyalty programs what's good, what's bad and what's ugly.
The results provide a better understanding of the key factors in acquiring and retaining customers and how to build trust and loyalty and importantly, how to use a loyalty program to build a brand.
Key findings revealed by Loyalty Generator are:
The results clearly showed a positive endorsement for loyalty programs and clearly indicated that consumers are aware of the benefits from tracking their behavior. Consumers recognize that retailers use their shopping data to design loyalty programs that are more appealing to their individual needs.
As a result, consumers do not mind sharing information with retailers as long as they receive worthwhile, personalised benefits.
It found that 54% of Australian consumers have at least one reward or loyalty card, and 69% tried to use a loyalty card as often as possible. Importantly, both figures are trending north.
Loyalty card users are divided on why retailers swipe their loyalty card when they make a purchase: 46% think it is to credit their account with points; 44% believe it is to collect information about what they purchase; and only 12% think that it is for both of these purposes.
More than half (57%) of respondents think the information collected from their loyalty card is used to design future rewards that will be even more appealing, and 49% believe the information will be used to tailor offers and mailings to their individual needs. Four in ten (42%) believe the information is used to group products together in the store to make shopping easier.
Relationships always drive business results. Measure your results. Everything you do can be measured, should be measured and when measured, will help build better relationships. Still, the rules of customer loyalty remain simple customer retention begins by delighting the customer with a superior product or service and by providing a positive, consistent purchasing experience. After that, it's up to the marketer to provide continuously increasing value that will keep their customers coming back for more.
Drive customer knowledge out to every employee and channel partner with whom your best customers come in contact. Every point of contact between one of your customers and one of your employees is a moment of truth.
Australians who earned more that $50,000 per annum were the most likely group of loyal customers. And surprise, surpriseconsumers also almost unanimously didnt like paying card fees and reward fees like those associated with Merrill Lynch HSBC Gold Card and Diners Club International.
Never lose sight of the top 20% of your customers who generate the majority of your sales and profits. Research indicates that consumers who have a loyalty connection to a company are less likely to abandon that company during tough times.
Of consumers that were exposed to smart cards, they responded to smart card solicitations approximately three to four times as often as they did to offers for conventional magnetic-stripe cards.
The Good: Relevant partners (eg. Hotels, car rental, and so on if you travel), not having to pay rewards fees, points not expiring, low or no interest rates, personalisation, and interesting and targeted offers communicated often. Getting communication online and offline is now expected too.
The Bad: Points expiring, high interest rates, card fees (Diners Club International charging $95 per annum was cited numerous times), no communication of offers and benefits and getting stung with reward fees.
The Ugly: The 2.7 million members of Ansett's Global Rewards Program that were so highly disgruntled, they skewed our survey to a more conservative view of the world than we would have expected.
All customers are not created equal, and keeping the right customers is as important as acquiring them in the first place.
Look for value in partners, not just money PLUS build off the brand, not in place of it.
Finally, loyalty marketing programs using differentiated combinations of recognition and rewards to entice customers to become members whose permission and collaboration allow information to flow freely, continuously enriching the give and take of the relationship, will become the central marketing engines of 2002 and beyond. Can you afford not to get on board this moving train?
Implement your own Loyalty Program for $390.00 per year
Geoffrey De Weaver is chairman & CEO of brand response agency De Weaver & Partners. www.deweaver.com.au
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