We're still in love with loyalty: there are approximately 3.3 billion loyalty program memberships in the USA (around 29 per household – imagine the size of that wallet), on which companies spend a combined and mildly startling $2billion annually. But the reality is they're largely hit and miss when it comes to actually building loyalty. In fact about 58% of those memberships aren't actively used – fewer than in previous years, and despite the growing number of enrollments.
So if you're lucky enough to have active engaged users, there's an argument to be made for concentrating on the customers you have rather than chasing the ones you don't; after all, build a loyal customer base and they're likely to keep coming back. Unfortunately it doesn't take much to drive all but the most highly engaged into the welcoming arms of the competition – a stalkery push message here, an unconvincing promotion there – 56% of millennials have switched brands in the past year because of poor customer service.
Unpersonalized experiences can derail an existing relationship as consumers are left wondering if they're better off buying from someone who knows them a little better. And you really don't want to lose what you have: Accenture has calculated that the potential revenue involved in consumers switching brands is somewhere in order of $6 trillion. There's big bucks in building loyalty…
Highly engaged consumers spend 60% more in each transaction, purchase 90% more frequently and contribute 3 times the annual value of less engaged customers. They’re also five times more likely to stick with the brand than defect to the competition. (Rosetta – Customer Engagement from the Consumer's Perspective)
Don't stop at the sale
One of the key considerations in building high engagement is how you shape the relationship beyond the transaction. Sure, you want to make the most of loyal customers' propensity to spend more, more often, but if you're coming at them from a purely mercenary standpoint you're missing the opportunity to build something beautiful. While some people will only ever respond to discount offers, many will respond positively to just interacting with a favorite brand – which is where connected and experiential marketing can really come into their own. Really, if you're present on a customer's mobile device you have the opportunity to reach out to them at literally any time – not just when you want them to come back into store and buy some more.
Post-PoS you can poll customers on how they found the in-store experience, invite feedback or suggestions for improvements, offer no strings attached freebies (if you lean that way), send them an invitation to a VIP event, recognize them on their birthday… you know enough about them to be a constant, useful, presence, so why wouldn't you make the most of it?
Highly engaged customers are four times more likely to appreciate being reached out to by a brand, seven times more likely to 'always' respond to the brand's promotions, and six times more likely to try new products from the brand they're loyal to. (Rosetta – Customer Engagement from the Consumer's Perspective)
What we're talking here is a next generation loyalty program – the evolution of the punch card into something infinitely more flexible and way more useful for building and maintaining loyalty. It's about building a program around the customer, not the sale, and using as much of the right data as you can to create personalized experiences that deliver ROI. And naturally mobile makes it that much easier.
With a wealth of transaction and contextual data at your disposal, you can essentially create an individual loyalty program for each customer. You know if someone responds better to free coffee at a certain time of day, or if they only visit a certain part of town once a fortnight. You know which promotions they share, and what they redeem their points for – and by personalizing their program you you're already one-up on the competition: only 11% of loyalty programs currently personalize rewards based on transaction or location data.
Loyalty, reinvented: The Starbucks Effect
There’s a natural fit between mobile ordering and loyalty - you don’t really need to look much further than Starbucks for proof. Starbucks’ mobile app not only offers customers the ability to order ahead and skip queues (and presumably have their name called correctly), they can also pay with the card registered in the app. And with the massively popular My Starbucks Rewards loyalty program integrated into Mobile Order and Pay, customers can earn points and rewards not just from Starbucks itself, but from a range of partners including Spotify, The NY Times and ride-sharing up-and-comer Lyft.
While smaller brands may not have quite that much clout, there’s no doubt that mobile loyalty has the edge over a wallet full of half-punched cards when it comes to both user engagement and generating data for business decision making. Knowing what your customer likes, predicting visits, prefilling orders and randomly surprising them with personalized freebies and discounts goes a long way to creating engagement (and repeat visits).
Younger customers especially are increasingly switching on to the possibilities (and promises) of mobile loyalty: millennials are 27% more likely to stick with a loyalty program that contains gamified or social elements, 42% more likely to participate because of mobile payment, and 18% would leave a program that had no smartphone app. It's time to evolve.