Loyalty programs are on an ever-changing and critical journey to reach the right level of personalization for each member. Here are four universal truths and four tips from LoyaltyOne’s Josh Meyer to help programs move closer to getting it right.
Every effective loyalty program has an understood path to profits: Relevancy leads to engagement, which leads to activity, which leads to revenue. Some universal truths exist across all points-based loyalty programs and apply to retail in general, including the following four principles.
- Relevancy drives engagement. The best way to engage members is through relevancy across all program touchpoints. In fact, relevant offerings are so important that there is a high cost for missing the mark: The 2017 COLLOQUY Loyalty Census – an in-depth, biennial industry benchmarking study – found that 58 percent of North Americans have abandoned a loyalty program because it did not provide rewards or offers of interest to them. Learn which benefits members view as worthy of their time and efforts and deliver on those.
- Engagement drives activity. Program members offer far greater potential than the average consumer for building a substantial relationship with a brand. Truly engaged members will participate in a program on an ongoing basis. It is vital to reward that engagement through redemption or other benefits. Conversely, if members are not redeeming, they are not engaged or finding value in the program. The Loyalty Census found that 30 percent of members have abandoned a loyalty program before redeeming for a single reward, mile or special experience – a finding that should trouble program operators.
- Activity drives revenue. Put simply, a consumer who spends and earns rewards on a regular basis has a big impact on a retailer’s bottom line. Loyalty program members buy more often and spend more per transaction than nonloyalty shoppers. In fact, Forrester Research found in its 2017 report “How Consumers Really Feel About Loyalty Programs” that the average individual spend during the first quarter of 2017 was $184 for members, versus $141 for nonmembers.
- Personalization drives relevancy. The explosion of all things digital has offered retailers a new mix of opportunities to personalize the customer experience, and customers have responded with increased expectations for one-to-one campaigns that are more relevant than the previous one-size-fits-all approach. The Loyalty Census found that the most successful industry disruptors are making better use of technology than competitors to increase personalization and real-time earning and redeeming.
The idea that a very personalized offering is more relevant to the consumer is obvious, but going too far to create true one-to-one relationships can lead to diminishing returns. This makes it important to determine the point where an incremental increase in relevancy is not worth the complexity involved in achieving it. Gauging what gets you the most “bang for your buck” and drives value over the long term is critical.
For many programs today, a well-executed, segmented approach is sufficient. It can feel deeply personalized to the consumer without requiring the tremendous amount of extra effort and complexity needed for a true nearly one-to-one approach. Tiered-points offers are a good example. Multiple variations of an offer — spend 20 get 20 points, spend 40 and get 40 — might be included communication. The offer received (the spend lift goal) is based on the bucket into which the spend falls. This offer is attainable for the member and is ultimately relevant.
Finding the right level of personalization is complex, but there are guidelines that can help you move closer to an optimal level. Here are four you can apply to your program:
- Inject creativity. Test new segmentation methods – life stage instead of demographic, for example. Don’t be afraid to shake things up. A better segmentation increases the relevancy of the offer without adding additional layers of personalization.
- Simplify the approach. One truly personalized interaction is more powerful than many semi-personalized messages. Focus on appealing to one important consumer value and forget about covering all your bases.
- Personalize through channel optimization. Different members respond to different channels. Channel choice is another way to drive personalization. Don’t be afraid to use a different approach for each channel. A ubiquitous customer experience across multiple channels may not be the optimal one.
- Exploit the “right time.” Presenting the right message at the right time (the “moment of truth”) has long been a challenge for marketers, but the advance of technology makes driving in-the-moment engagement more possible than ever. While we are a long way from perfecting moment-of-truth messaging, experimentation can finally begin to conquer the last cusp of relevancy.
Today’s hypercompetitive retail space offers consumers a plethora of loyalty programs to choose from. As you develop and fine-tune your program, keep in mind that one of the best ways to stand out from the crowd is to amplify the relevancy of your program and offers by optimizing personalization, not maximizing it.