“So, why do so many loyalty programs fail?” This is the question I receive regularly while accompanying our business development team in board rooms across the country. The answer is not easy, and often involves a response that begins, “it depends…” However, one universal truth has emerged in recent years - loyalty programs that underutilize below the line tactics are destined to underdeliver.
The loyalty program is just the beginning
Broadly speaking, successful loyalty programs are implemented as a means to an end, versus an end in and of themselves. Organizations offer these programs to their customers like a bar placing a sandwich board with alluring happy hour specials on the sidewalk. While loyalty programs are the hook to drive optimal, sustained customer engagement and data collection, the subsequent below the line personalization and offer strategy is the bartender taking the customer relationship deeper, recommending the profitable round of drinks and menu item up-sell that follow.
Just as Subway learned prior to shelving their Sub Club, a “punch card” approach often fails to deliver any incremental lift in customer behavior - but rather, rewards customers for something they would likely have done anyway. Below the line methods that drive incremental sales are only limited by imagination and technology: personalized product recommendations, tailored offers, rewarding purchase challenges, etc. So why don’t more organizations embrace essential below the line tactics? It depends.
Success starts with loyalty philosophy
The first answer can often be found at the top, the loyalty philosophy of management. At SessionM we believe that loyalty is the outcome of knowing who your customers are across all channels at all times, being able to meet and anticipate their needs, and recognizing them for their attention and spend as individuals. What this means is that simply offering points and tiers is rarely enough to deliver meaningful success over time. Rather, winning organizations realize that loyalty programs encourage the sustained customer engagement that produces a sea of customer data from which deeper and more meaningful marketing initiatives drive deeper and more profitable customer relationships.
Active management leads to active membership
A sound loyalty philosophy tends to set the stage for active program management. Proper loyalty design is a thorough and laborious process - while the temptation after implementation might be "set it and forget it,” programs that excel are those that institute and maintain a test and learn mentality from the outset. Below the line tactics require constant planning, monitoring and reconfiguring. Well-executed, these elements can yield tremendous results - micro-segmentation can lead to a customer feeling like their interests and needs are anticipated and satisfied by a brand, while data-driven product recommendations can lead to category cross-sell that grows share of wallet and encourages customer referral by brand advocates. Whether sourced internally of through a partner, a skilled team dedicated to these initiatives can turn a basic loyalty program into a formidable engine of brand relevance and profitability.
Good results begin with good tools
Of course, program philosophy and management mean little if the organization lacks loyalty technology to make their vision reality at scale. It needs to be said that not all loyalty technology is created equal. While many marketing platforms offer the ability to issue points for transactions, segment members into tiers and issue basic rewards, this is only the start of what’s needed to develop deeper, lasting customer relationships. More advanced platforms “listen” to every point of customer interaction: POS, e-commerce, social media, DMP, ESP, customer service, etc. Ingesting customer insights from this myriad of sources allows the enrichment of the individual customer profile, feeding the AI and machine learning that generate output through these respective channels that is all the more genuine, engaging and compelling.
In short, a well-crafted loyalty program is just the beginning. A truly successful program is one that matches sound above the line design with compelling below the line thinking, tactics and tools. Loyalty program “failure” is often less an indictment of the mechanism as it is the failure of an organization to understand what a loyalty program truly is and what must be done to make it most productive. The brands that will outpace their peers will continue to be those that recognize this fact and only put out the "happy hour sign” sparingly.