Top Myths of Loyalty Rewards Programs

 It costs 6 to 7 times more to acquire a new customer than to retain an existing one - Bain and Company 

 

 Retail is omnichannel. 

 

For independent retail entrepreneurs there are a lot of misconceptions about what a Loyalty Rewards Program entails. While it's not my job to debunk them, I'm certainly starting to realize the loyalty sector isn't optimized for the Big Data, IoT and predictive analytics of the future.

We can't live in legacy systems forever, and more SMB independent stores are starting to adopt cloud POS systems like Lightspeed, Vend and the retail-centric Spring Board Retail . Independent retail entrepreneurs (IREs) are also starting to get on board with POS specialized printers such as Star Cloud Services.

Did you know?

On average, loyal customers are worth  up to 10 times as much as their first purchase. 

 

In this article we will explore some common myths about loyalty reward programs, such as:

 

1- A Loyalty Rewards Program will create ROI 

Without customer analytics, business intelligence insights and marketing campaigns around this data, it's entirely possible a Loyalty rewards program will have negative ROI. This is because consumers are being bombarded by loyalty offers that tarting better relationships between the stores's brand and the consumer 1:1. 

Just as well, without campaigns that target the retention weaknesses in the customer journey of your brand, and without the data insights that enable them, how will your marketing reach the full potential of your high-value customers who have opted in to your loyalty program?

Running powerful customer-centric campaigns and promotions with the data that a loyalty programs acquires, is the key to generating positive ROI from your LRP (loyalty rewards program).

Did you know?

 

Retailers with loyalty programs, on average, are 88% more profitable than competitors who do not - Deloitte Research Survey 

*So adopting the right loyalty rewards program from day one, can help you optimize your store's net margins. 

 

2- A Loyalty Rewards Program's Goal 

A lot of retailers expect a loyalty reward's program to somehow magically impact retention rates and actual loyalty, while increasing sales. But this simply isn't true, the main benefit to having a loyalty program is to trade incentives for more and better customer data. It's what you do with this data, that actually counts! 

This data can then be used by marketing or a SaaS like Thirdshelf, that does marketing automation to create transactional (triggered) messages that can get the attention of consumers who are at risk, dormant and maximize the value of customers who are already high value customers and in the top bracket of customer lifetime value customers. 

Did you know?

It takes 12 positive experiences to make up for one unresolved negative experience.

*The solution is to choose a LRP that is seamless and doesn't ask your customers to do anything. 

 

3- Coalition Network Loyalty Programs are Good for Branding

It's more than likely a brand's influence with a consumer is actually a 1:1 relationship, so why do retailers join coalition loyalty networks where there brand is diffused and lost in messages from a 3rd party! The reality is, retails don't know there are alternatives. 

On the contrary, a white label approach to loyalty would be far more effective, because to differentiate yourself to your customers and this means establishing an emotional connection of customer experience that is more personal, intimate with a focus on emotional attribution. This is a question of being salient to your audience. 

To achieve emotional differentiation is not possible with a gimmick card or a loyalty program that isn't customized and optimized to your brand and your unique customers.  High-loyalty brands identify those emotional attributes— "shared values”—they can own, and so should you! White label all the way, it's your brand, why shouldn't it be your loyalty program?

 

Branding = unique emotive attribution. Since emotional memories and more salient to consumers. 

 

6- A Loyalty Program is Static; or Not Data Centric 

If the entire world is moving to the cloud and towards Big Data, a loyalty rewards program that isn't integrating analytics into how it is configured for your brand, is out of date! You own your data, shouldn't you own the insights as well? It's optimal if these insights empower you to take creative actions (e.g. seasonal campaigns) to drive high value relationships of your brand with your high value and potentially high-value customers. 

Cloud based LRPs will be seamless, send personalized messages and for SMB retail, have advanced marketing automation capabilities. On the street, not all independent retailers have time to do marketing, so those should align with software that can do this for you. Loyalty programs are shape shifting and retail has to adapt. 

Being integrated with POS and having customer analytics and insights is the first step, BEFORE, you implement a loyalty program. For it has to scale and adapt with technology and the digital consumer reality in real-time. It cannot afford to be some legacy system dependent upon others, for you to keep up. 

 

Did you know?

5-20%
Probability of selling to a new prospect

60-70%
Probability of selling to an existing customer

*A LRP is your gateway to your customer, use it with authenticity. Don't just sell out to a third party, consumers want more personalized messages from you, whom they already trust. 

 

7- Loyalty Programs are Difficult to Manage

With a SaaS loyalty program everything is streamlined and for the most part automated. For customers it has to be seamless, for managers it has to be informative and the insights have to have value that translate into ROI.

For loyalty to impact marketing and retention is the key, but also facilitate acquisition of new customers, improve frequency of visits and average purchase of transactions. If it's a data centric, it must be able to show the ROI in $net sales and not vanity metrics. So the new breed of LRP is embedded with analytics and smart segmentation (sub sets of your customers).

 

Did you know?

 

8. Engagement is High in Loyalty Rewards Programs 

Due to a proliferation of cookie cutter loyalty programs, Americans are getting quite tired of the formula. According to loyalty.com, the odds of engagement are declining since the average household are enrolled in 29 loyalty programs and active only in 12. That's only 41%. 

Engagement with them is declining mostly due to the predictable one-dimensional nature of the models. So this field is really quite ready to be disrupted. In the future, each brand has to customize its program specifically tailed to their customers with data augmentation. 

Did you know?

80% of Americans agree that smaller companies place a greater emphasis on customer service than large businesses.Source: American Express Survey

 

9- Loyalty Members Prefer Email 

Traditionally Email has been the golden rule for loyalty marketing since that is what consumers were used to be this is quickly changing, with the emergence of GenZ and younger millennials changing the digital landscape: 

We can assume in 2016, this will go down to about 44%. That is, 2016, will be the first year Email and other (channels) may be equal according to consumer preferences. 

* SMS marketing will emerge in 2016 and 2017 as more standard, especially for retail sectors that cater to younger customers. 

 

 

10- All Loyalty Programs are the Same

The dominant loyalty programs are still network coalition based, however there are some serious ethical issues with these 3rd party brands. As a retailer you might have to ask yourself: Why should we give our customer data to a third party? What are they doing with it? Why are the fees so high? Can these coalition networks even prove ROI of their program?

More data-centric and white label loyalty solutions have more ROI generating potential because they are more customer and retail-centric, and integrate analytics, marketing with loyalty. Curious about analytics on your customers, try this free assessment. 

So before you sign on to the biggest thing around, do your research. Of the integrations with your POS solution, which solution provides the best fit for your store. 

 

References 

Aimia

Aimia on Slideshare

Dunnhumby

Duhnhumby - Loyalty 

LoyaltyOne

LoyaltyOne - Retail - Loyalty