April 20, 2012
Brand PR: Most Loyalty Programs Mistakenly Stress Customer Spend Over Developing Brand Evangelists, New Study Finds — Many Program Members Consider Defecting Because Of Spam Bombardment and Irrelevant Offers
A new survey from SAS, a leader in business analytics and integrated marketing management, and Loyalty 360 – The Loyalty Marketer's Association, found that although companies are putting increased focus on loyalty and retention programs, only 24 percent consider the efforts very effective. The survey of more than 150 customer loyalty and retention executives in both B2B and B2C companies examined current trends in loyalty programs. Questions probed how businesses are addressing changing market and customer dynamics in order to identify the keys to effective loyalty and retention efforts. Two-thirds of survey participants have a department or functional area dedicated to customer loyalty and retention, and an additional 13 percent plan to add one — but less than one in four consider their loyalty and retention efforts "very effective," and about 44 percent deem their programs "somewhat effective." Survey data may explain the dissatisfaction — for example, the top priority of customer loyalty and retention programs was to get customers to spend more (47 percent). Reducing churn and developing customers into brand evangelists were a distant second and third. But a recent report from the CMO Council suggests that more than half of loyalty program members are considering defecting, feeling bombarded by spam and irrelevant offers. Could B2C companies be making a mistake in prioritizing customer spend over retention and brand evangelism? "Loyalty is no longer about the program, but should be focused on behavior," said Mark Johnson, CEO of Loyalty 360, in a news release. "It is the big picture idea — the destination. Brands that focus on loyalty as a way to create 'sustainable behavioral change' in their brand advocates are those who will drive the financially imperative objectives needed for 'loyalty program' success."
Effective retention and loyalty strategies aren't about keeping customers at all costs. Yet only half of respondents reported formal customer-lifecycle or voice-of-the-customer programs. Among those with a defined customer lifecycle, the biggest percentage (40 percent) believes that lifecycle begins after the sale. These companies are missing an opportunity to plant the seeds of loyalty earlier in the buy cycle, while customers are still considering purchase options.
"Businesses that define their customer lifecycles and then align loyalty and retention efforts accordingly tend to garner more success,'" said Wilson Raj, global customer intelligence director at SAS, in the release. "However, there is still more opportunity for companies to integrate loyalty data with other customer data to adopt a more holistic approach in building brand evangelists."
Social media key to listening and responding
While email remains predominant for listening (84 percent) and responding (88 percent) to customers, social media is now the second most frequent method for responding to customers. The traditional call center, though alive and well, is no longer the lifeline to the customer.
Customer loyalty data not integrated
Only 36 percent of respondents reported high or moderate integration of loyalty data with other customer data. Even fewer (30 percent) report moderate-to-high use of customer data to inform loyalty campaigns. This suggests that many loyalty programs are literally detached from the overall customer experience and lifecycle. Without a holistic view of the customer to guide loyalty programs, it's easy to see why so many are marginally effective. It also lends insight to why many members don't perceive much value from their memberships.
The online survey, entitled Facing the Challenges of Building Loyalty and Retention: The New Strategic Imperative, was conducted from November to December 2011 from a cross section of industries.