Why loyalty still matters in a digital world

Simon Morgan, general manager of ICLP
 

Loyalty initiatives have a large role to play in how brands will connect with customers going forward. But if brands want the increased profit that loyalty programs can deliver, they’ll have to get serious about sharing real value with customers.

New research from ICLP shows Australians exhibit the highest level of connection with brands, ‘devotion’, at a rate 3 times lower than other markets, 3% versus a global average of around 9%. This means there’s a huge, dormant opportunity in the Australian market for brands to deliver more meaningful customer connections to achieve growth.

While these figures initially stack stack up to be a hefty challenge for most brands, I believe they also represent a big opportunity for brands looking to get closer to their customers.

Based on ICLP stats below, we know consumers are willing to form a relationship with brands who make an effort to get to know them, and reward them properly:

  • 73% of Australians would spend more if they were rewarded better.
  • 59% would spend more if brands/retailers understood their individual needs
  • 49% would spend more if brands/retailers communicated better
  • 73% would spend more if brands/retailers had a loyalty programme
  • 53% would be happy to share their data if they knew it going to be used to enrich their brand experience

With sentiment like this in the market it begs the question, why is Australian brand devotion down at 3%? And what can be done to correct it?

Overall, the most common mistake brands are making is to take a short-sighted, ‘instant payoff’ approach to loyalty programmes.

Below are five causes and measures I believe can be taken to drive customer loyalty, and perhaps even brand devotion.

1. Companies ‘nickel-and-dime’ their customers with poorly conceived and low value initiatives that simply attract customer segments that are highly sensitive to price and value motivators. The answer here is quite simple: be a bit less stingy with rewards.

2. Using customer data to recognise and reward customer value is generally done quite poorly, or superficially. Using the customer’s name on an EDM doesn’t count. The use of customer data to provide relevant value might seem like a heavy task, but introducing tenure-based rewards and birthday gifts into a brands loyalty programs are a great way to start.

3. Recognition initiatives, often the most powerful aspect of strong programmes, are generally put into the ‘too hard’ or ‘too expensive’ basket, resulting in weak propositions that focus on transactional rewards. Brands who can come up with ways to reward customer loyalty beyond simple cash or price incentives, will be building affinity. Examples of starting points include exclusive access events and ‘money-can’t-buy’ experiences. Brands looking for inspiration in this space should consider the rewards and experiences offered in frequent flyer programs.

4. Senior management and boards don’t necessarily understand or support the notion of loyalty and lifetime value, undervaluing the contribution that a strong programme can make, while gladly pointing out the upfront cost. To get around this issue, make sure all the crucial stakeholders understand the benefits of getting a loyalty program right, and work to get them on-board from the outset.

5. Not many brands invest in CSR, and if they do initiatives generally are not core. They are bolted on afterthoughts that often reek of corporate favouritism and don’t necessarily resonate with customers. While integrating CSR elements into the heart of your business is tricky, a start can be made by creating a set a values you wish to invite your customers into. All else can be built from that starting point.

Australian brands may do well to contemplate the value of customer loyalty and devotion in the years to come. Do we forever want to be stuck in a cycle of slashing prices to grab eyeballs? Or is there a more effective, longer-term method of attracting and retaining customers?

The opportunity to do something special with customer loyalty programmes is there for the taking, and Australian brands have the unique advantage of low attacking the market from a lower baseline. There’s plenty of room to grow a loyal customer base in this market, and better yet, our research indicates it’s something punters are crying out for.

By Simon Morgan, general manager of loyalty marketing agency ICLP

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