[Video] Why Brand Loyalty Programmes Are Falling Flat…
Jessica Hubbard, Deputy Editor; 29 February 16
Although many brands trumpet the rollout of various loyalty programmes designed to boost customer engagement, most of these initiatives are having little to no effect. This is according to a recent study conducted by Truth, a loyalty and CRM consultancy and WhyFive, an online research company. The 2016 Truth Loyalty Whitepaper revealed that 26% of economically active South Africans are using customer loyalty programmes, with more than 100 programmes on offer. However, as Amanda Cromhout, CEO of Truth, points out, the majority of these programmes lack focus in ‘execution, communication and differentiation’ – resulting in non-engagement. Interestingly, one-third of the economically active respondents surveyed do not use loyalty programmes at all.
“Marketers need to take into account how factors such as age, income and gender influence how they should be building their loyalty strategies,” notes Cromhout.
With regards to gender, she says that men usually dismiss loyalty programmes while women actively seek ways to leverage them.
“Females really look for the benefits, and want to know that they’re being recognised [by brands],” explains Cromhout. “Whereas the male is looking for status…for example, the ‘gold status’ tier in a frequent flyer programme, which allows him to walk around with the gold tag on his bag.”
Where brands are going wrong, she says, is that they’re often simply ‘taking customer details’ – and hence the permission to market to them – and not really doing anything helpful or beneficial with this information.
“So the trust factor is broken,” she adds. “Brands don’t send anything relevant or personal to you, or anything that will reward your behaviour…they tend to just spam you with their marketing messages.”
To get around this, marketers need to carefully explore customer wants and needs.
“Only then will they capture their customers’ attention and build a long-lasting relationship with them beyond a once-off marketing campaign.”
Cromhout points out that the Discovery Vitality programme has gotten the formula right, because it really rewards behaviour, on a weekly basis.
She adds that loyalty programmes also need to be simple and straightforward – and easy for customers to understand and use.
The Income Factor
According to a US study conducted in 2014 by Blackhawk Engagement Solutions Inc., income is the biggest influencer of customer loyalty – even more than age, gender or geography. Cromhout says that this trend is mirrored in SA.
Local research revealed that the highest users of programmes are customers who earn between R50,000 and R100,000 per month at 78%, indicating they use loyalty programmes the same or more compared to the previous year. Interestingly, as the salary increases the loyalty “non-usage” goes up from 14% (in the R50,000 – R100,000 bracket) to 21% (in the R100,000 + bracket) and reversely for the lower income groups, “non-usage” increases from 24% (in the R20,000 – R50,000 bracket) to 39% (in the under R20,000 bracket).
“The research shows that as salaries increase to over R100,000 per month, customers potentially don't see any more value from loyalty programmes. Reversely, the lower income groups may not see enough benefit in participating in programmes as most of those offered in SA are based on a “spend and get” principle. With retail rewards as little as 1% of spend, your lower income customers simply won’t see any material benefits quickly enough.”
She adds that this kind of data is ‘vital to tailoring programmes that count’.
“For top-earners, brands have an ideal opportunity to create “money-can’t-buy” experiential rewards; meanwhile for lower income earners, brands should be looking for ways to enable faster points accumulation through activity that rewards customer activity beyond just transactional behaviour.”
Beyond the Spend
Critically, Cromhout insists that success should not just be about spend.
“South Africa appears to be slow in adopting strategies that reward non-transactional behaviour within loyalty programmes,” she says. “With a need for differentiation within many SA programmes, rewarding for activities other than spend could be the answer for brands looking to innovate and potentially engage new customers. SA brands need to give customers the chance to earn points in different ways by going beyond just earning for transactional behaviour.”
For example, brands can reward customers for social media engagement, for updating their details, referring a friend or even making bond repayments on time…