“Anyone can sell their product by dropping prices, but that does not breed loyalty.” ― Simon Senik
Loyalty. Oxford Dictionaries defines it as “a strong feeling of support or allegiance.” Companies increasingly place a premium on fostering it. Forrester Research says improving customer loyalty is likely to be a top marketing priority for 80% of decision-makers at large organizations this year; and a CMO study highlights that 61% of CMOs believe loyalty program participants represent their best and most profitable customers, thrusting customer loyalty programs into the spotlight.1
Unfortunately, the most recent loyalty census by Colloquy underscores the fact that today’s programs are ubiquitous but largely ineffective, with Americans belonging to approximately 29 loyalty programs per household but participating actively in just 12. The drop-off rate has risen steadily every year since 2012 and a whopping 67% of consumers say they don’t feel they are getting adequate value from sharing their personal information with organizations.2
Couple these disturbing findings with the unprecedented access to information and freedom of movement that digital devices provide and it is clear that loyalty programs are reaching an inflection point. Research from Accenture highlights the steadily eroding impact on loyalty caused by digital disruption, calling today’s environment the “switching economy.” 88% of the consumers Accenture surveyed use at least one online channel when prospecting, two-thirds indicated that the number of brands they consider is significantly higher today than 10 years ago, and over half rely mainly on other people’s reviews (from digital channels) to inform purchase decisions.3
Program focus and ownership pinpoint the critical issues with many programs. The most common metrics, program growth and revenue production, look only at growing membership and stimulating purchases. This effectively narrows loyalty activity to the purchase/buy phase in the customer lifecycle and causes companies to miss out on key opportunities to foster the “feelings of support or allegiance” that define real loyalty; opportunities that come later in the lifecycle, in the adopt, use, engage and recommend phases. Sole ownership of the programs by marketing exacerbates these issues by limiting participation to marketing when the customer touch points used by loyalty program participants reach across the organization.
The good news? There is hope for companies whose loyalty programs are underperforming. Focusing on a few key areas while setting or enhancing a loyalty strategy can help ensure that the program fosters engagement, advocacy and lasting customer relationships:
Evolve from loyalty to experience: Expanding loyalty from a siloed marketing program into an enterprise initiative is a critical step. This does not mean taking loyalty programs out of the hands of marketing. Instead, consider expanding participation, extending metrics and increasing the range of loyalty activities to incorporate more of the customer lifecycle. Aligning loyalty programs with existing CX initiatives can accomplish much of this. To get started, examine CX journey maps in the context of the loyalty program to find steps in the journey where applying or augmenting loyalty activity can have a positive impact.
Consider Vail Resorts, a company that runs 10 premier ski resorts encompassing many business areas, including 200 retail and rental outlets, ski schools, and lodging that incorporates hotels, condominiums and private residences. Vail’s mission is to create “the experience of a lifetime” for customers.4 Season pass holders in the Epic Pass Club are automatically enrolled in the Peaks Rewards loyalty program and receive prizes, ski and bike giveaways, lodging deals and more.
When Vail initially adopted radio frequency (RF) technology into season passes, the intent was to provide a convenient way for pass holders to board the lifts – enabling them to leave the physical pass in a jacket pocket. This in itself is a great example of extending loyalty perks past the buy phase of customer lifecycle into use/fulfillment and it clearly aligns CX with loyalty.
However, Vail did not stop there. They developed the EpicMix online and mobile application to take advantage of the vast amount of information generated by the RF passes. This application allows pass holders to seamlessly track vertical feet skied, number of runs and other appropriate statistics across all 10 resorts. Users can earn digital pins, challenge friends and family to competitions, retrieve and post slope-side photos taken by Vail photographers to social media, and even compete against professional skiers like Lindsay Vonn in virtual competitions.
Best of all? The loyalty/experience combination was a phenomenal success. In the first year, nearly 100,000 guests participated, six million digital pins were awarded, 45% of users shared accomplishments on Facebook and Twitter, and more than 35 million social impressions resulted. And this was in a year where the snowfall was abysmal.
Augment loyalty with analytics: Analytics can significantly boost both CX and loyalty programs. Research from Forbes Insights found significant benefits from data-driven CX ranging from faster decision making and increased departmental collaboration to increased engagement (loyalty), more repeat business (loyalty) and better marketing ROI.5
Information gleaned from loyalty programs can highlight” best customer” characteristics and attitudes that can be used outside the loyalty program itself. Take Sobeys, a national grocer in Canada with more than 1,300 stores in 10 provinces. Sobeys has made customer insight and intimacy one of its strategic pillars. Recognition that local markets across Canada differ spurred a goal of tailoring customer experience to both the store and individual customer.
Market basket analysis helps them determine preferences for merchandise and customer experience at the store level while also exploring ways to encourage less loyal customers to make Sobeys their primary grocery. Sobeys is utilizing customer purchase history and other information from its loyalty programs to develop discount coupons targeted directly to what its customers buy. As with Vail, the combination of loyalty, experience and analytics has paid off handsomely for Sobeys. Once a regional brand, they have been able to expand their presence outside of Atlantic Canada to become a CAD $15.8 billion national brand.6
What is loyalty in the digital age? A multichannel, intelligence-driven, loyalty experience. One that transcends customer-to-brand affinity, creating in its wake engaged advocates who look to your company despite the “switching economy.” This is where loyalty leaders are heading.
Lisa Loftis is a thought leader on the SAS Best Practices team. She is co-author of the book, Building the Customer Centric Enterprise, with a focus on modernizing marketing. She can be reached at Lisa.Loftis@sas.com.