We all know it’s easier and less expensive to keep your customers than to find new ones. Loyalty is critical for retailers to achieve sustainable growth with recent studies reporting that loyal customers drive over 70% of sales. Yet when it comes to loyalty programs, many are failing to engage the modern consumer. Today’s customers can be fickle and have lost their appetite for loyalty schemes that deliver irrelevant offers and rewards via the same-old, tired propositions and experiences. Just think of all the noise bombarding typical retailers’ customers. dunnhumby’s research has found that each month the average retailer is offering 14,000 items, 5,550 promotions, and sending eight emails to their customers without carefully vetting whether the customer is likely to be interested in any of these offers or promotions.
Although the retail industry has generally graduated to ‘Loyalty 2.0’ – more personalized and targeted communications based on data and science - the majority of loyalty programs are simply not keeping pace with the needs and expectations of today’s shopper. Consumers today are starved for time, interested in convenience, and readily able to whip out their phones to compare prices wherever they are. In this age of thinning retailer margins, with the ability to easily shop across online marketplaces and payment platforms, it just makes sense for retailers to get their customer loyalty strategy right, so they can retain their customers and even earn a greater share of wallet.
Built on an understanding of your customers, a winning loyalty strategy puts the customer first to drive business growth. Here are ten steps to create a successful loyalty strategy.
- Create winning propositions for both customers and retailers. Instead of just pushing offers and promotions to customers, retailers need to be engaged in two-way conversations that are helpful, seamless and fully integrated. Customers should be in control of choosing what personalized offers to select from retailers that reflect what the customer wants. According to Forrester’s State of Loyalty Strategies, less than half of loyalty marketers provide shoppers with experiential benefits, personalization, tailored offers, and brand interactions.
- Increase your customers’ emotional engagement. A loyalty program should be an extension and an amplifier of the brand it is supporting, as well as its’ corporate responsibilities. Retailers have a broader role to play in their customers’ lives than many current loyalty programs reflect. The goal for retailers should be to shift the relationship with customers from being solely transactional to being more emotional.
- Understand what matters most to customers at different points of the journey. Customers’ needs vary greatly depending on where they are in the customer journey – discover, shop, buy, and reflect. Retailers need to understand what customers’ needs are in context and add value at every stage. For example, in the buying stage, are you making checkout stress free? Are you saving customers time? Are you surprising customers with unexpected awards? In the discover stage, are you inspiring the customer with ideas? Are you informing them about promotions? And are you making it easy for them to budget for these items they are considering?
- Be transparent with customers regarding their personal data. Customers today are willing to share their data if they believe they are receiving a fair value exchange for their gift of this data. The Data and Marketing Association reports 58% of consumers are happy to share their data for the right benefits. But retailers need to be open and honest about how customer data is used. In the near future, customers will have greater control of their data as a result of blockchain technology and the retailers that have been transparent about how customer data has been used are more likely to be rewarded with customer loyalty then those who have not.
- Develop loyalty programs around what your customers want. Cards and points are no longer required. At its heart, a loyalty program is a way to link customers to transactions and then to reward customers for shopping. There are many ways to identify customers shopping across channels, different ways to listen to customers, and different ways to reward customers. Retailers now need to think much more about how to activate insights from the data collected so they have a richer customer understanding and engagement.
- Make sure your program is flexible for the future. Loyalty programs need to be “living and breathing” and constantly assessed and optimized. Retailers need to be willing to change the relationship between earning and rewarding, be able to integrate new channels into the loyalty program and be able to shift from “one size fits all” to personalized benefits.
- Create a loyalty program that is unique to your business. Don’t just match your competitors. The key to developing a successful program is to make sure it meets your business objectives while also meeting your customers’ needs.
- Choose the right success metrics. Retailers often prioritize the wrong key performance indicators (KPIs) such as enrollment, retention, visits and participation. Instead, the two most important KPIs they should be focusing on are 1) Are you growing the number of strategic customers, and 2) Are you growing the spend of those strategic customers.
- Adopt a company-wide responsibility for loyalty. Loyalty programs need to be seen as the engine of growth and not as an auxiliary function of the marketing department. The entire company needs to be responsible for the success of the program, starting with a senior cross-functional team leading the charge.
- Use customer data science to create experiences that drive loyalty. By utilizing customer data science, data and insights generated through the customer journey can be activated to continuously improve and power the customer experience as well as improve the retailers’ bottom line. For example, customer data science helps retailers with category management by pinpointing what the current gaps in each category are and helps make stores easier to shop. In addition, customer data science can help retailers to understand how loyal customers are, what customers are buying and with what mindset.
With the right loyalty strategy, you can deliver what matters most to your customers and give them a reason to keep coming back.
David Ciancio is Global Head of Grocery for dunnhumby, a customer data science leader, serving the world’s most customer-centric brands in a number of industries, including retail. David has 49 years’ experience in retail, 25 of which were in Store Management. He introduced one of the first loyalty card programs in the U.S. in 1997 for Kroger and also led growth and innovation in the Kroger Plus loyalty program.