Take a quick look in your wallet. How many loyalty cards do you have in there? Most likely a Fly Buys card, probably something from at least one supermarket, maybe Airpoints, almost certainly an alarming number of half-stamped coffee cards.
When it comes to customer loyalty, it’s a familiar image: a stash of cards squirrelled away on the off-chance they might come in handy. And here’s the thing - they mostly won’t.
There are approximately 3.8 billion loyalty program memberships in the USA (around 30 per household), on which companies spend around $2billion annually. Less than half of those memberships are actively used: 28% of members never redeem a single point. If that’s not compelling enough, Bond Brand Loyalty estimates over $100billion in points are left unredeemed by loyalty members in the US.
We can probably do better.
Loyalty needs to deliver Immediate value, better information
We all appreciate a good loyalty programme: 84% of New Zealanders participate in loyalty programmes, and 57% will buy from a retailer with a loyalty programme over one without, all things being equal. But participation isn’t guaranteed: 10% of restaurant customers actively engage with all the programs they’re members of, and the majority engage with under half. Given that they were compelled to join in the first place, why the low engagement in the long term?
Part of it may be down to consumers not having much insight into a programme’s value. For a loyalty programme to be actively used it has to have an obvious benefit, yet the majority of consumers lack basic insight into their rewards, and would be more engaged in a programme if they had mobile access to that information.
Part of the problem is paper. In New Zealand scanning loyalty cards is still the most common method of programme participation: a startling 85% vs 10% for retailer apps. But is this a case of what consumers actually want, or what’s available? Not too many NZ retailers have sophisticated loyalty apps available; certainly nothing on the level of US loyalty wunderkind Starbucks. This despite over half of all loyalty club members wanting to engage via mobile, and 43% of consumers saying physical cards are the biggest obstacle to reward redemption.
So consumers want mobile loyalty, and personalised rewards, and real-time insights and immediate points redemption, but we’re still asking them to carry and scan a physical card? There’s something not quite right there.
The importance of location intelligence and personalized offers
Given that loyalty cards aren’t delivering the experience consumers want, the whole approach needs a rethink. Loyalty programme engagement depends on whether customer needs are met, how quickly rewards are earned, the discounts offered, the effort required to redeem points or claim a reward, the range of rewards available, how ‘fun’ the experience is… and one size does not fit all. Customer experience may be king in the age of Amazon, but saving money is the most important driver for almost half of restaurant loyalty members, and convenience is also a concern. Consumers who receive rewards straight away spend up to 25% more compared to traditional redemption models, and 55% more compared to no loyalty scheme at all.
Using mobile intelligently for loyalty generates a wealth of data to use in creating a personalised experience for each customer, something surprisingly few loyalty programmes currently do. The first step is knowing what individual customers respond to: in New Zealand the preference is for monetary rewards, with product discounts leading the way at 58%. The next step is using that information to deliver rewards and experiences that encourage more customers to come back more often.
Sure, mobile loyalty requires investment, but there’s a definite ROI. Loyal customers value their relationship with a company: spending 60% more in each transaction, purchasing 90% more often and contributing 3 times the annual value of less engaged customers. You don’t get that kind of value from stamping coffee cards. To increase share of wallet from loyalty programs, Foursquare recommends using location intelligence, consumer preferences and targeted messaging that focuses less on making sales. Anecdotally, we’ve found this approach results in significantly increased visit frequency, average check and impulse visits for our customers.
If a loyalty programme is easy to use, if rewards are relevant and earned quickly, and if the privacy-reward equation passes the eye test, a programme is more likely to find traction. Removing friction and delivering value is key to loyalty’s continued success. Brands need to design loyalty for the customer, not the sale, and they need to use data to create personalized experiences for ROI. The best way to both capture and use customer data for loyalty programme success? Spoiler: it’s not coffee cards.