Loyalty Has a New Number: How Brands Can Make the Top 5

Managers of retail loyalty programs have a new metric to remember. It's the number five.

The 500Friends Q1 2017 global survey of loyalty program members and loyalty program managers examined the state of loyalty in the retail and consumer packaged goods (CPG) sectors — revealing a number of surprising findings. Most consumers in North America, Europe, U.K. and Asia who belong to retail and CPG loyalty programs concentrate the majority of their attention among just five retail brand programs, a contrary finding to oft-cited Colloquy statistics showing that consumers join approximately 29 loyalty programs and are active in 12.

The global survey also found that consumers aren't hesitant to switch to new loyalty programs, especially if their needs, values and preferences aren't being met by retailers or CPG brands. Indeed, more than half of the respondents had joined a loyalty program in the last year, but at some point, 50 percent had also quit a program that didn't deliver or satisfy. One of the most common complaints was "the brand doesn't get me."

The survey also identified a phenomenon termed the "loyalty disconnect" — defined by loyalty program managers who say they have a 360-degree view of their customers, contradicting surveyed members who said that some loyalty programs and rewards are underwhelming, irrelevant, or require too much effort or spending to be valuable. Clearly there’s a disconnect between what loyalty programs think their members are wanting and what consumers are actually doing.

The Disconnect Has Deep Implications

Another key insight from the survey illustrates the power of loyalty-driven connections between consumers and their favorite retailers. If consumers like a loyalty program, 86 percent shop more with that brand. This includes 58 percent who spend 15 percent or more than a non-loyalty member; 30 percent who spend 5 percent to 15 percent more; and 11 percent who spend up to 5 percent more.

However, if consumers leave or stop engaging with a loyalty program, 63 percent will shop less or stop shopping with the retailer or brand — i.e., if customers leave a loyalty program, they're also likely to leave the retailer altogether. Now that's a key metric for loyalty program managers who are asked to prove the value of their programs with hard data.

Creating Connected Loyalty

Why are these findings so important for retailers and CPG brands? Because they challenge industry assumptions about consumers’ activity in loyalty programs.

Results from the The Great Loyalty Reset narrowed the window of loyalty activity and engagement. The data revealed the following:

• The vast majority of consumers — 80 percent in North America, 83 percent in Europe/U.K., and 67 percent in Asia — concentrate their loyalty activity within five programs.
• Forty-one percent say they're active in half of their loyalty programs.
• Only 4 percent of consumers in North America, 3 percent in Europe/U.K., and 13 percent in Asia join 10 or more loyalty programs.

The report highlights the need for retail and CPG loyalty programs to embrace "connected loyalty" — i.e., a way to orchestrate all of the organization’s capabilities to the benefit of the consumer and the brand by creating a true value exchange.

With this new consumer sentiment data, how can retailers truly stay top of mind with consumers? How can you achieve and retain your position in that select "top five" list of active loyalty programs?

1. Get to know your customers. Capture data to identify and understand a broad base of customers — the right segments and personas for your brand or business.
2. Leverage data across all channels. With consumers now simultaneously shopping online, offline and on mobile devices, programs should craft and personalize their promotions, communications and interactions based on data about customers’ activities, preferences, behaviors, locations, channels and values. Mobilize data in partnership with customer relationship management (CRM) efforts and teams.
3. Create digital harmony. Reduce friction for customers and make good behaviors seamless and satisfying for them. Include technology and digital teams in your mobile, social and commerce strategies.
4. Create an omnichannel brand experience. Create brand-centric connections within your loyalty programs based on what you know about members at every level and every touchpoint.
5. Position your brand for the future of loyalty. Stay current with consumer behaviors and shopping trends. Be ready to embrace and leverage new technologies, such as chatbots, clienteling and voice-activated "personal assistants" like Alexa and Watson, to connect with consumers and provide them with personalized, memorable connections and experiences.

Staying in the Top 5 Frame of Mind

It's no secret that the retail industry is in a state of flux. Today’s loyalty programs must evolve to capture the opportunity a digitally dominant market has created for retailing and the shopping experience.

Today’s consumers want a personalized and memorable relationship with brands, and they expect retailers to engage all that they know about them to make the most of the interaction.

This type of connection supports loyalty marketing’s evolution as a unique marketing science, and it positions programs to remain in the top five tier of consumers’ favorite programs.

Loyalty programs, in fact, can lead the way for retailers and brands as they understand, learn about, listen to, interact with, and delight their consumers across all touchpoints — brick-and-mortar, digital, mobile, social, virtual and whatever comes next.

Sara Hogan is the director of growth marketing at 500friends, a Merkle Company.