Originally posted on IBM’s Smarter Commerce blog:
Loyalty marketing is more and more prominent in today’s retail landscape. It is becoming common knowledge that customer acquisition costs are increasingly rising, and data-driven customer retention is a key area filled with untapped growth potential. But loyalty marketing is evolving and is more intricate than just offering discounts to existing customers. As many marketers realize, there are three common problems that they run into when trying to implement an effective loyalty program:
They often feel stuck offering dollars-off discounts and are losing their margins without sustainably changing their customer behavior.
Personalization is not going further than using much more than a first and last name, and is not connecting to the customer and building customer relationships.
Their loyalty members are not actively participating and being engaged, and consequently not influencing long term results.
It is a buyers market as they would say in the real-estate business. Customers have the ability to buy from a multitude of companies with fairly frictionless transactions. Years ago, a customer would be limited to their location to buy many of the items they can now purchase online, which makes loyalty marketing a much harder task today. If the customer does not like an experience they have with your company, the friction to switch providers is much easier than in the past.
This has led to a race to the bottom with most companies. Instead of competing on differentiation, companies rely on sales and discounting to compete in this new world. Relying on discounts is not differentiated at all. Any competitor can match a price or beat the price if they are willing to decrease their margins for the business. As I wrote in Busy is Not a Strategy, many of your competitors will look at metrics like volume as their key metric which will force them to decrease margins and hurt your business.
Increasing Self-Identification
Loyalty incentivizes customers to provide more information about themselves and engage across channels, which leads to a richer understanding of your customers and how they interact with your brand. You may be surprised how many of them are open to providing information about themselves in order to receive more relevant communications and offers.
Spending most of my time in the casino industry has shown me that consumers willingly give away information in return for a richer experience. In the case of the casinos this comes in the form of comps, but in other industries this does not have to be a giveaway. This could be access to sales, in the case of grocery stores. Find out what your version of the comp is to increase customer self-identification. It may start off as a giveaway, but don't let it drive the future customer experiences with that customer.
Taking Personalization to the Next Level
In addition to increasing customer self-identification, you should track and analyze metrics such as order frequency, average order value, and from which channels customers are purchasing. Modern loyalty programs gather this customer data and provide a centralized hub which is used to personalize meaningful incentives and rewards for higher customer redemption and satisfaction, and also to send personalized messages. These messages can be targeted towards specific actions and customer segments, and are used to maintain relevance and build upon customer-brand relationships by making customers feel like you are paying attention to what they want.
If you aren't tracking the purchases of your customers then you aren't going to be successful in loyalty marketing. Creating meaningful customer experiences relies on gaining insight to the behavior of the customer. By getting the customer to opt-in, it allows the business to create the true value from the loyalty program as I wrote here. Targeted content will create meaningful customer experiences and this rich data is at the core.
Cohesive Omni-Channel Capabilities
With today’s consumer having the ability to interact with your brand across all channels, it is essential to have cohesive communication, connectivity of data, and customer access to your program and rewards at all touch points. Different consumers like to interact with brands through different channels – whether in-store, social media, or email – and your program should be available in their preferred channel.
Providing the same experience for the customer, no matter what channel they are using, is the key to creating meaningful customer experiences. This is the hard part of the new customer experience paradigm. Keeping the content and messaging across channels in an online and offline world can be complex, but is very rewarding. Customers don't care that different divisions in the company have different responsibilities and the online team doesn't communicate effectively with the operations team. Customers expect their experience to be seamless across channels and it is imperative that businesses adjust to create this seamless customer experience.