LOYALTY MARKETING
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What Are the Cornerstones of Loyalty Marketing?
Marketers who are looking at new technologies to reinvigorate their loyalty marketing initiatives need to keep in mind the cornerstones of effective programs.
“The most successful loyalty programs take place against a background of operational excellence,” says Michael Schiff, managing partner of Partners in Loyalty Marketing in Chicago. “This happens when loyalty building dimensions are measured at the individual store level and communicated to the store manager and staff. In the end, it is the individual store that builds customer loyalty, not cards, points, or POS technology.”
To build loyalty at retail, customers must still find all of the following: the right merchandise, quality merchandise, front-end efficiency, in-store excitement, and price and value.
Technology and other innovations have their place, and can impact one of the five, “in-store excitement,” Schiff notes. “We have to make sure that the technology itself doesn’t become its own tenet, and it is done to support what we consider the foundations of a good loyalty program.”
He lists these cornerstones:
Winning Programs Engage the Consumer
Until recently, the majority of loyalty programs have been passive in nature. Manufacturers and retailers would push offers to a select group of consumers. The consumer would then have to notice the offer, save it for use at a later date, and remember it at the appropriate time.
Points programs were among the first types to engage with the consumer. Consumers would earn points by purchasing a product and cutting out UPC or proof-of-purchase codes. Now they have the option of entering the codes online. At the stores, shoppers might earn points by buying a product. The points could then remain linked to them via their loyalty card.
While initially successful, consumers eventually tired of the work involved in collecting points. In many instances, many simply forgot, as the number of points needed to get a worthwhile prize could take a long time.
Mobile technology has added another way for the consumer to engage with their favorite brands. By using their smart phones, consumers can either use a text message, or scan QR tags with the phone’s camera to connect online. They can do this at the moment of their choosing, and the technology directs them to specific sites that are related to where they are — both geographically and within a store — as well as the time and date.
The more savvy brands use these features to offer content that is specific to the needs of the consumer at that moment in time. One example is Kellogg’s “It’s Morning Somewhere” QR promotion for breakfast products. Not only are marketers allowing the consumer to engage with them, they are offering relevant information and offers at their exact moment of need. Make sure there is a reason for adding a digital component and don’t just leap into it because it is a hot new trend.
Winning Programs Combine Recognition with Reward
Winning programs strike the right balance between rewarding customers for the desired behavior and recognizing their loyalty, tenure, frequency, or other appropriate behavior. One of the biggest differentiators between programs that work and those that do not is that good programs begin with the end in mind. No matter the technology, most vehicles lead the consumer to that old workhouse — the coupon. Before enacting any loyalty tactic, a decision needs to be made as to what type of program the marketer is trying to build:
- Promotional Program Short-term campaign focused on specific products or services, such as gift cards.
- Continuity Program Points or similar program with clearly defined reward structure, such as airline miles.
- Relationship Program Continuous dialog aimed at anticipating and addressing customer-specific needs, like higher status levels, such as Premier or Elite.
Loyalty programs that focus solely on monetary rewards will end up appealing primarily to customers you may not want.
Best Programs Meet a True Customer Need
The first step in developing a loyalty program is identifying what we call “the basis for a relationship.” The basis for a relationship should be defined in the customer’s terms. Generally, it’s a consumer need, not a business need or a new technology.
Why would a consumer want to hear from you? What is it you will say to them that is unique to your brand or store? How will you deepen their commitment to the brand or store? Most of the recent technological advances focus on how to deliver the message — what we say to them is what will truly build loyalty.
Crawl, Walk, Run
We are very much a results-oriented society and managers act no differently when it comes to their loyalty programs. Just because we can target consumers and execute programs against them faster than ever does not mean that their response to these programs, or mindset about our brand or store, can be changed faster than it did years ago.
Loyalty has, and continues to be, an extended learning process. This may be one of the few instances where you don’t want to think big. Start small and ramp up as you obtain learnings and demonstrate results. It is not unusual for a multi-tiered loyalty program to take years to hit peak performance. It is imperative to get your management on board and keep them there while staying focused on driving ROI (Return on Investment) and LTV (Lifetime Value).
One of the best programs PILM ever evaluated resulted in part from the mindset of the market research manager. She refused to allow any evaluation of the program to leave her office until the program had been running for 12 months. She realized that it took time to build momentum on these types of programs and did not want it killed during the early phase where results may be lackluster. She knew that the devil is in the details, and that part of the early phase was not just connecting with the consumer, but in fine-tuning the process to a point where execution was flawless.
For more information, visit www.partnersilm.com or contact Michael Schiff at michaels@partnersilm.comor 312-932-0285.
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