Rethinking Customer Loyalty

Customer loyalty programs have long been a staple of enterprise marketing activities. The thinking has always been that rewarding repeat transactions – the behaviour most desired by the brand running the program – will drive revenue and long term brand interactions. In other words, brand loyalty can be incentivised and measured. But there is a problem, one has to assume that repeated transactions are a proxy for the more emotional concepts of brand affinity and loyalty.

According to a recent study by Edgell Knowledge Network, retail respondents expect that, by 2015, loyalty program members will make up 58% of total revenues. At the same time those retailers also reported that customers who are members of their loyalty programs don’t seem to be any more brand-loyal than those who aren’t. Additionally, 81% of those retail loyalty members don’t even know what their program benefits are, or how and when they will receive them.

So clearly there is a problem with the way that the majority of customer loyalty programs are designed. While they are effective at measuring the transactional patterns of a customer they miss the mark when it comes to the other key moments that really define a loyal customer. Simply put, they only value transactions not the entirety of the brand-customer relationship.

In today’s environment, a customer-centric strategy that rethinks the way that brands approach customer loyalty programs is becoming essential. This is especially true for those brands who are focused on retaining current customers and developing new revenue streams. One must first understand the customer relationship before new revenue streams can be identified.

So how does a business expand its loyalty program to measure and incentivise other forms of positive brand behaviours? To start with it is important to map the customer’s pre- and post-purchase behaviours. This will help identify the moments of truth for your brand. They may be how the product is used, how often the customer engages with brand promotions or if they are a brand promoter online. Each brand will have different “moments of truth” that define the customer relationship.

Fortunately many, if not all, of these activities happen online today. This means they can be identified and measured. The trick is to do it without stalking your customers. For many brands this may be the space where they can extract real value out of social media as it can be the glue that ties an expanded loyalty program together.

Of course getting a loyalty program up and running that focuses on the real brand-customer relationship takes thinking, planning and a lot of work. But consumers are now looking for much more from the brand they interact with. My team and I hear this everyday from both our clients and the feedback from their customers.

The market is speaking, and the old style loyalty programs aren’t doing the job anymore. There is a significant competitive advantage to be gained by developing a program that looks beyond the plastic card and treats every customer as the person they are.

After all, who has room in their wallet for another useless pice of plastic?

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