Brand loyalty programs have been in use since 1929, when Betty Crocker launched the first ever purchase-based loyalty scheme, rewarding customers who bought the brand's flour with a coupon for Oneida cutlery. This incentive was popular with consumers, and marketing executives latched onto the concept. Now, more than 80 years later, the principles behind most loyalty programs remain the same -- reward buyers with discounts or special offers on exclusive products and services.
At Forrester, we recently surveyed more than 50 senior marketers to discover how loyalty programs fit into their marketing mix. We found that loyalty marketing often remains a means to an end, rather than a strategy. Marketers are primarily focused on customer acquisition (65 percent of the respondents), brand awareness (40 percent), and marketing ROI (39 percent), with customer loyalty ranking lower on their priority list. Marketers are also focusing too much on the financials behind points and rewards. While defining the mechanics is an important step, it can also results in tunnel vision, as marketers create financially driven schemes that ignore customer perspective of value, neglecting to consider overall brand perception.
Since the format has been around for decades, you would expect marketers to have fully mastered loyalty marketing initiatives; however, this is simply not the case. Almost half admit their loyalty programs result in erratic or immeasurable results, with most programs becoming merely short-term retention tactics. So why are loyalty programs not delivering the goods? When probed, these senior marketers say lack of differentiation and promotional clutter are the main culprits. For more than half of respondents, loyalty marketing initiatives are not aligned with the brand they are promoting.
As today's empowered consumers are increasingly demanding more personal relationships with brands, the time is now for senior marketers to elevate their view of loyalty marketing from a retention tactic to a key component of their brand strategies. If marketing organizations aspire to stay relevant and deliver consistently compelling brand experiences, they must develop a well-designed and holistic loyalty marketing initiative in order to optimize communication and promotion at all touch points.
However, brand loyalty cannot be created overnight. It is the result of a series of compelling brand experiences that, over time, lead to sustainable differentiation and customer preference. In order to achieve loyalty in today's connected world, senior marketers must develop a brand loyalty strategy. This strategy should aim to engage with customers to develop a mutual exchange of information, enabling the brand to develop actionable insights for more targeted communication, promotions, products, and service offerings that deliver higher customer value, brand preference, and ultimately brand loyalty.
The key components of this strategy start and end with the brand experience, encompassing customer engagement, interaction data, and actionable insights, allowing marketers to continually improve, refine, and customize compelling brand experiences. This approach will give marketing leaders the data and insight necessary to create a more relevant and compelling brand experience. Specifically, marketing leaders will be able to do the following.
Define service and product features that adjust to evolving customer behavior
Loyalty programs provide an important source of data, and by turning this data into actionable insights, CMOs can improve and redefine the brand's core value proposition and deliver new brand experiences that better match customer needs. Tesco in the U.K. is a pioneer in using its loyalty card data to redefine the product assortment on the shelves, redesign the store layout, and even decide to launch new store formats like its Tesco Metro mini mart, targeting its customers during their workday in large urban centers.
Deliver higher customer value across categories and channels
A strategic view of loyalty marketing will help organizations look beyond the immediate contribution that promotion and offers can generate and calculate the value of the acquired customer over time and across channels. A national electronics retailer has developed metrics that track how much a new TV customer is buying from other departments, rewarding the TV category manager for acquiring solid cross-department buyers.
