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Analysis

So, Ever Wondered What Customers Think about Loyalty Programs?

New data suggests modern loyalty marketers are failing to meet customer expectations when it comes to offer relevance and preferred medium. Listen and learn

Matt McAllister
July 28 2018

All good marketing demands a thorough understanding of the customer, but evidence is mounting to suggest that retail loyalty marketers haven’t been paying close enough attention.

Multiple surveys conducted by industry thought leaders point towards a fundamental disconnect between retail brands and the consumers they serve when it comes to loyalty programs. Failures of offer relevance, preferred means of delivery, and program value have made customers jaded towards brand loyalty initiatives overall, and it seems many marketers are either unaware or unwilling to acknowledge it. As a result, loyalty strategies are based on misconceptions and false assumptions rooted in antiquated best-practices.

This growing divide between retail brands and their customers has produced an opportunity for innovative loyalty marketers willing to break with convention. Marketers able to develop and deliver programs that prioritize personalization and immediacy through widely adopted technologies could affect major change in their battle for brand loyalty. First, however, they’ll need to confront the fundamental misunderstandings that have taken root between them and their customers.

Disillusioned by retailers’ offers

A 2018 survey by Martiz Motivation Solutions set out to learn how customers understand the role of modern loyalty programs in their commercial lives. When asked what they thought the purpose of loyalty marketing programs were, 60% of consumers said they felt it was to entice them to buy more rather than to foster a genuine relationship. While this might suggest a certain cynicism, the survey also found that nearly half (48%) of respondents would be willing pay for program membership if they found it valuable, debunking a conventional wisdom that asserted the opposite. Combined, the two figures suggest that while there does exist an appetite for relevant loyalty programs, consumers are disillusioned with what retailers are offering, writing off the majority as deaf to their interests. Worse still, many marketers don’t know just how far off-base they are.

In its 2018 Retailer and Consumer Perspectives report, Oracle surveyed more than 13,000 consumers and 500 businesses worldwide to compare vendors’ understandings of their loyalty strategies against corresponding consumer attitudes. When it came to offer relevance, 58% of retailers believed their loyalty offers were well suited to their audience, but 67% of consumers felt they were rarely or only sometimes relevant. Fifty-eight percent of retailers also thought customers would be willing to sign up for loyalty programs indiscriminately, but 69% of customers said they rarely joined loyalty programs, and even then, only if they were relevant. It’s a fundamental disconnect that suggests there is an opportunity for those willing to listen to their customers and make appropriate modifications to their programs. Some marketers are already asking the right questions.

In a 2017 study, rewards card platform Virtual Incentives surveyed 1,000 US consumers to find out how they’d prefer loyalty programs fit into their commercial lives. Seventy-eight percent of respondents said they’d prefer to receive rewards direct to their mobile devices over non-digital alternatives. When asked which reward mediums they’d conceivably use if given the opportunity, 72% said they’d take advantage of a mobile app to accumulate and redeem rewards, whereas only 59% said they’d make use of a physical card. Overall, the study concluded that instantaneity and cohesion with existing technologies (primarily mobile) were both crucial in gaining traction with customers and that a smaller physical footprint meant greater chance of adoption. Additional research suggests, however, that modern brand loyalty comes with new dependencies.

Risking becoming irrelevant

Research conducted as part of the 2017 Deloitte Consumer Review found that customers now consider traditional loyalty programs to be table stakes, and that personalization is the new differentiator, especially among younger audiences. Forty-two percent of all consumers surveyed said that while they liked points-based rewards programs, it wouldn’t be enough to convince them to shop with an unfamiliar brand. When it came to preferred technologies, 54% of respondents from age 18 to 24 said that the option of redeeming personalized rewards based on their purchase history would be a strong factor, the second highest of all options. It’s not surprising, given the prevalence of product personalization efforts brought on by big tech brand success stories like Netflix and Amazon. Like it or not, it’s up to loyalty marketers to keep pace or risk irrelevance in the eyes of their customers.

Between the nearly 70% of consumers that feel like the offers they’re receiving aren’t relevant, the 78% that want rewards delivered to their mobile devices, and the 54% asking for personalized reward options, the path to success should be clear. Loyalty marketers hoping to capitalize on the current market environment need to invest in mobile-friendly technologies that can adapt to individual customer preferences and enable a behavioral dialogue between marketers and their customers.

The more marketers listen, the more success they’ll glean from their loyalty programs.

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Matt McAllister

Matt McAllister is the CEO of Fluid PR, Inc. and twenty-year marketing veteran. Matt most recently ran marketing for Tapjoy, a mobile ad-tech platform. Matt also served as VP of marketing and content for High Voltage Interactive, an online ad network that was acquired by Aptimus, Inc. He started his career as an account executive for the PR agency Niehaus Ryan Wong.

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