Last updated on June 14th, 2016
Guest post by our friends and partners at Bronto
There’s a scene from a Seinfeld episode in which Jerry admonishes the woman at the rental car counter because the car he had reserved is not available.
“You know how to take the reservation,” Seinfeld says. “You just don’t know how to hold the reservation.”
It’s a line that has its parallels with loyalty programs these days, and it would be funny if it didn’t have the sting of truth to it.
In recent years retailers have shown they can bring in customers to their loyalty programs. But they haven’t shown they can keep them engaged in that program.
In its 2013 Loyalty Census, Colloquy noted that growth in loyalty programs is booming. According to the study, loyalty program membership grew by 26.7% from 2010 to 2012, to the lofty number of 2.65 billion. That’s double the number of memberships held back in 2006.
Looking specifically at retail, the industries loyalty program numbers increased by 24%, with department stores (70% increase), drug stores (45%) and specialty retail (26%) leading the way.
Then came the catch. Although membership rolls are growing at a steady clip, active memberships have not. In fact, the percentage of active loyalty program memberships dropped from 46 to 44% from 2010 to 2012. The average U.S. household belongs to 21.9 loyalty programs, but only actively participates in 9.5 of them.
Part of the issue lies in how good retailers have gotten in “taking the reservation,” to borrow from Seinfeld again. They’ve made it easy to sign up for loyalty programs at the point of sale, and they’ve excelled at drawing a customer into their loyalty program by emailing enticing initial offers.
As a result, the loyalty program landscape has gotten crowded, and confusing. If everyone seems to have a loyalty program, then how do you tell one from the other? With so many programs taking a cookie-cutter approach (buy x, get 1 free; build up points, get a reward), it’s hard for the customer to feel very special. And if customers don’t feel like the retailer thinks they’re special, engagement will inevitably suffer.
Fortunately this breakdown in the customer-retailer relationship is fixable. Retailers are getting more creative in the value propositions they create for loyalty programs, going beyond the mere “the more you purchase the more you get” model.
For instance, Walgreen’s Balance Rewards program doles out points to its members not just for purchases, but for making healthy choices as well. Members can now connect various fitness apps and devices to their Balance Rewards account and increase their point totals as they work toward a healthier lifestyle.Exclusive offers are an effective way to let loyalty program know you care.
Retailers are also realizing that the key to building loyalty is personalization. The tools are out there, just waiting to be connected. E-Commerce platforms are collecting a treasure trove of customer data, while marketing automation software is becoming more and more sophisticated in its ability to deliver targeted, timely messages. Integrating those platforms opens up a whole new realm of possibilities.
As a retailer, you can now move beyond a one-size-fits-all approach to your loyalty program. With an effective integration, you can import that customer data and then use segmentation to take a more customer-specific approach to your loyalty member relationships.
You can send offers on particular products to portions of your membership that have shown a past history of purchasing them. A customer who has built up loyalty points with you by previously purchasing jeans is likely to respond well to an opportunity of double points on their next jeans purchase.
This Ulta loyalty program statement comes with a personal touch – a product recommendation specific to the customer.
You can time particular offers based on where members are in the purchase lifecycle. If you know from purchase data that a particular group of customers are likely to buy a particular product every six months, you can send them an email, reminding them that it’s time to buy again and that, as a loyalty program member, they’re entitled to a discount.
If a certain group of customers are very close to reaching a points benchmark, you can alert them to their status and urge them across the finish line with a well-timed offer.
You can keep it simple – segmenting by RFM (Recency, Frequency, Monetary Value), for example – or you can drill down as deep as you want. Whatever approach you use with the data you’ve sifted through, you’re showing your loyalty program members that you’re paying attention to them and that, by extension, they matter to you. You’ve personalized the relationship by giving them offers and information that are relevant to them. In return, those loyalty members will be just that – loyal.
Study after study shows that it’s much more cost-effective to retain and nurture a current customer than it is to acquire a new one. Now, thanks to the ability to share customer data between your e-commerce platform and your marketing automation software, you have the ability to make customer loyalty a reality.
Jim Young is a content writer and editor with marketing platform provider, Bronto Software.