Are customers truly engaged in loyalty programmes?

The question of whether loyalty programme operators are actively seeking redemption is nothing to do with a moral or ethical quest for inner peace, but more to do with whether or not they are encouraging programme members to redeem the points or currency they’ve earned, according to Mike Atkin of MJA Associates.

Loyalty experts tell us that programme members are not fully engaged with a loyalty scheme until they have redeemed their points or miles and, therefore, operators should encourage ‘burn’ in the same way that they encourage ‘earn’.

Of course, some cynics say that many operators would prefer to enjoy the ‘breakage’ rather than endure the redemption. Indeed, we are seeing lots of creative ideas and offers that encourage participants to earn more points and miles (with double or triple points promotions and other bonus offers abounding), so why aren’t we seeing similar campaigns to encourage redemptions?

Typically, Tesco is enabling its Clubcard members to increase the value of their points by redeeming them for higher margin products, or with programme partners (thus reducing liability, increasing the perceived value of the points, and driving business for the partners).

This not only improves the value proposition for the customer but, of critical importance, it also means that customers don’t use their points to buy things they would have bought anyway. In other words, it avoids discounting the shopping basket.

We see offers from airlines, hotels and other travel loyalty schemes that are designed to get consumers to book flights and accommodation, and to earn bonus points. So why can’t consumers have offers that encourage them to burn their points? There have been a very small number of these campaigns recently, but why shouldn’t every programme offer “points are worth double” offers for the right kinds of reward redemptions?

Technology has improved significantly in respect of bonussing capabilities, and it is time to see some more creative bonussing efforts to help reduce funding liability and increase customer satisfaction.

This article is an extract from the 30 chapters of detailed coverage in ‘The Loyalty Guide 4’, which is The Wise Marketer’s latest global guide to customer loyalty and engagement techniques, best practices, models, metrics, practical advice, market data and research. The report provides hundreds of detailed case studies, forecasts, trends, tables and visual materials to support new initiatives, presentations and proposals. See how customer data can increase profits, reduce churn, and increase frequency, spending, and share of wallet, and find out where your competitors are succeeding or failing, and why.

Airline industry facing up to death of Airmiles

New research we commissioned, in conjunction with Airline Information, shows that 90% of airlines are being forced to find new, more profitable ways for customers to redeem their frequent flier currency.

These include partner offers such as hotels and insurance, with less than 50% of Airmiles programmes reported to be profitable.

Respondents cited accounting pressures, such as the need to record loyalty currency on balance sheets as a taxable liability, rising operational costs and shrinking seat capacity as a combination of factors causing the majority of airline brands to lose money on every seat they give away.

This shift to airlines seeking a broader range of redemption platforms is reflective of a wider trend in Airlines’ ancillary revenue and loyalty activities.

Consumers today demand more choice of how they redeem loyalty currency, and airlines are increasingly able to offer additional products and services from partner brands, seamlessly and securely, via their own sites. This allows airline brands to both enhance the customer value proposition and deliver enough revenue for redemption programmes to be, at the very least, self-funding.

Airline brands are clearly being forced to continually adapt their loyalty programmes in what is still an incredibly tough business environment. New models demand high levels of customer engagement, with tailored reward and recognition content that drives loyalty from a wider customer base.

Whilst broadening their redemption offering to consumers, it will be crucial for Airlines to add value by using their customer data, developing genuine insight and applying it to offer customers more relevant benefits, products and services. Airlines are uniquely placed to leverage their customer data, as they not only have a large volume of data collected about their customers but more importantly they have permission to use it.

Offering memberships via unique bundling of, for example, travel insurance or wi-fi and airport lounge access provides a platform for airline brands to build a relationship with customers. It’s by focusing on the relationship instead of the revenue, that the airline industry will be able to develop additional sustainable streams of income.

 

Real-time location based marketing – a new opportunity for loyalty?

There has been an increasing level of interest and debate in the topic of real-time location based marketing and this will only increase as Google and Facebook enter the space in a serious way. That said I have been surprised at how little of the conversation has focused on the opportunities this new technology creates for brands with established customer loyalty and reward programmes.  

For example, the mobile social network/game Foursquare was widely in the news after signing up its first national UK brands – Debenhams and Domino’s Pizza. The app detects player’s whereabouts, and when they visit the store or restaurant they gain points for ‘checking-in’.

Brands get involved by offering deals to users based on, for example, the number of times someone ‘checks in’ to their local branch. Businesses get increased footfall, and ideally, a network of brand ambassadors who will pass on recommendations. The consumer gets great deals that are relevant not only to who they are, but where they are. – E.g. Debenhams giving Foursquare members a free cup of coffee in the restaurant when they check in

So it’s no secret that smartphones and branded applications are an incredibly cost effective way of targeting and engaging consumers. By creating tools which engage and add value that your customer base can download and use on a regular basis, you can integrate with their lives in a way that advertising never has.

The iPhone is clearly the leader with repsect to the app marketplace, mainly due to it being the easiest to develop for. Whilst some point to the iPhone’s still relatively low penetration of the overall mobile market (at around 2%) and even of the smartphone market (14%), it is quickly starting to grow in a market that will also continue to grow exponentially. It is also worth recognising that the iPhone already accounts for 50% of all mobile web traffic.  

The next generation of apps will use smartphone’s GPS capabilities in a way that enables brands to hit a moving target. The key insight here is that loyalty programmes should connect with all the different stages of the customer journey, from planning to booking, and from departure to arrival. Mobile technology can actually be viewed as a very direct way to plug in to that journey, wherever the customer may be.

What this means is that brands will already have a good idea of where the customer is going to be and when, as well as knowing how much loyalty or reward currency they have. This can be matched against the various outlets that reward programmes have affiliate marketing relationships with. Also, as the customer loyalty programme provider, you already have a huge amount of customer data, including payment information. As a result the mobile device could actually be used, even offline, to facilitate some of the purchasing processes.

Say, for example, the customer uses a mobile app to find the nearest hotel where they can spend their loyalty points, they could actually book a room and check in via their smartphone. A key principle of properly developed reward programmes is that they use as much customer insight as possible to make sure that the services and products offered are exactly what the individual wants and needs. This data should be used not just to meet customer expectations, but to exceed them.

It’s also worth noting that there is a lot of trust inherent in the relationship you have with your customer base, which retail partners can benefit from. Furthermore, because the customer’s payment details are not held on the mobile device, but rather by you as the programme provider, no sensitive financial data needs to be transmitted. This resolves a major consumer fear and barrier to location based marketing with a lot of wif-fi related communication

Another capability that mobile offers, is to actually push messages onto the customer’s device. Relevance here is absolutely crucial, it is a disruptive technique that can increase engagement with the right insight, but can easily irritate if the correct principles are ignored. There is a clear benefit however to being able to message a customer to let them know that now they’ve touched down, there is a restaurant nearby where their reward points are worth double.

Utilsing highly accurate GPS capabilities will also create new data, with new patterns emerging of how your loyalty customers behave when on the move. It is effectively an entirely new way to observe consumer behaviour, and should potentially lead to us being able to pre-empt customer needs specific to where they are.

However, just as your communications with the customer must be relevant to what the customer actually wants, so must your offerings match your brand values and what the specific objectives of your loyalty programme are. That could be looking to reward and encourage high spenders, get low users to spend more, motivate your customer base to use more of your wider service and product offerings, and so on.

Finally, I think there is a real opportunity for reward programmes to use peer based social media capabilities. So instead of the app just saying ‘here are the closest five car hire outlets where you can earn or spend loyalty points’, it could say, ‘here are the top three in your vicinity accdording to ratings provided by your fellow gold card holding members’. Providing scores, notes, suggestions, related recommendations and so on from a group of people who have similar tastes, aspirations and levels of affluence creates a great deal of trust and authority. Obviously companies like Amazon have been doing this for years, but connecting it with your reward programme via mobile technology takes the concept to an entirely new level of relevance, utility and engagement.”

Whats loyalty got to do with banking?

Hi, this is my first post, only time will tell how many more there will be, any advice will be gratefully received!

My first thought is that the theory of customer loyalty is quite straightforward; a business that retains its customers for longer usually makes more money from them at lower cost than one that is constantly paying to acquire new customers.

However actually doing this, creating loyal customers, is not so straightforward.

In a recent survey, only 16% of customers said they felt a sense of loyalty to their bank (Thunderhead 2009). Considering the importance of bank products in supporting all aspects of people’s lives this makes bleak reading. This figure has no doubt been influenced by recent events, a theory supported by the fact that 66% of people trust banks less than they did 5 years ago (ICM, Feb 2010), however it still indicates that customers do not feel engaged by their financial services organisation.

A lack of engagement is feeding a lack of loyalty, with the aforementioned Thunderhead poll suggesting that 63% of consumers would consider swapping their primary banking institution, indicating that the need to develop a stronger rapport with  customers is more important than ever.

I’ve worked for a global bank and know how closely levels of switching and engagement are tracked, so its not a problem banks are unaware of… I’m not saying don’t focus on revenue, that would be crazy, but it would be great to see banks starting with the customer in mind, not just the bottom line.