Do brands really need a loyalty program to keep their customers loyal?

Trying to arrest shopping promiscuity, loyalty programs are doing their utmost to hold onto customers and squeeze out extra visits, higher spend and fundamentally drive incremental profit.

According to our latest benchmark research study for love or money 2015’ the third annual study by strategic loyalty consultancy Directivity and retention agency Citrus, 58% of loyalty program members believe that a brand needs a customer loyalty program to keep their customers loyal.

Interestingly this jumps to 71% for members under 34yo. When asked why?… comments such as these came pouring through…

Keeps customers feeling like they’re part of the company” Male 25-34 yo nominated MYER one as a program doing a very good job

These days there are always an alternative that will have a loyalty program that gives the customer more for there money then those that don’t” Female, 18-24 yo nominated flybuys as a program doing a very good job

It is encouraging to be given back something for choosing a brand over others.” Female 45 -54 yo nominated Hoyts Rewards as the program doing a very good job

I think if consumers are loyal to a brand they should be rewarded in some way and a redemption scheme is a good way of rewarding loyal consumers.” Female 18 – 24 yo nominated QFF as a program doing a very good job

 An (over the) counter argument

The 2015 study also reveals that 42% said that they do NOT believe that a brand needs a customer loyalty program to keep their customers loyal, with comments such as…

Free stuff isn’t the only reason people become loyal, ethical behaviour as well as caring for all stakeholders a company has can keep customers more loyal than economic loyalty where the customer is only loyal for their own benefit.” Female 35 – 44 yo

If the brand is good enough it should stand alone regardless of loyalty program.” Male 35 – 44yo

So the choice is yours.

If you are believer or want to be a believer in loyalty programs, then here are some more points in favour:

Point one: The 2015 study also reveals that members tend to buy more from companies whose program they are a member of. In fact 82% agreed that buy more.

Point two: 55% said they also tend to buy from a company who has a loyalty program over one that does not. So as a competitive advantage, if you do not have a loyalty program and your main competitors do, then you are potentially missing out on the revenue growth opportunies.

‘for love or money 2015’ reveals a very valuable point

Loyalty programs do have an influence on impulse purchases, with 16% of members having purchased items they did not need in order to earn or maintain program benefits . This jumps to 26% for men under 45yo.

Just do the financials: Number of members in your program x 16% x ave sale of impulse purchase = incremental revenue

But, please don’t miss the point

Commoditised and cluttered are 2 words that adequately describe the Australian loyalty program space. If we judge this clutter by the facts from ‘for love or money 2015’ that 84% of Australian consumers over the age of 18 are a member of at least one loyalty program and 8% are members of more than 10 loyalty programs, then it’s fair to say that there are 100’s of programs out there. And they are all fighting for space in wallets and purses, hanging on keyrings and as digital options as well.

The point is, to make a program profitable to a brand and meaningful to a member, there are many levers you need to orchestrate simultaneously, and I have identified 9 (download the ‘9 steps to a valuable loyalty program atwww.theloyaltypoint.com.au), here are four:

1) Ensure your objectives are clear and specific – why do you need a program?

2) Be committed to a program as a business growth strategy, not a marketing campaign

3) Understand who your members are (will be) at the same time as gaining your team’s commitment

4) Build a program that has the 3 ingredients of success – simple, personal and valuable

 In summary, there are many good points to a loyalty program. Knowing what works and why it works and also what does not, puts you in the best position to create and build a loyalty program that is profitable for your brand and meaningful to your members.

for love or money 2015 is a 70 page report and is available as a complimentary download at www.theloyaltypoint.com.au

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