Making Loyalty Matter in the Age of the Fickle Consumer

Consumers are in control.  Empowered by mobile and digital freedom, they can product hunt and price shop without barriers.

With the swipe of a thumb they can leave your online store and buy from a competitor. Forrester calls this new era the “Age of the Consumer” and urges companies to become “customer-obsessed” to regain loyalty.

But loyalty itself has become a crowded competition. Consumers are inundated with requests for loyalty from airlines, credit cards, restaurants and retail brands.  Consumers have bandwidth for only so many loyalty programs. The American household holds an average of 29 memberships to loyalty programs, but only actively use 12 of them, according to Colloquy.

So how do you become one of the 12 loyalty programs that are used by the average consumer, and not the 17 that are discarded and forgotten?

Loyalty is a Digital Experience

Brand Keys, which publishes a list of Loyalty Leaders each year from an assessment of over 42,000 customers, says that unlocking digital engagement is key to dominating the loyalty race.

For the first year last year they saw all hotel brands drop out of the leader list, while Airbnb rose dramatically in the rankings. Digital giants like Google, Amazon, Apple and Netflix performed highest in the rankings.

Not all brands are digital businesses, but they do need to engage with customers in the digital and mobile space to compete in loyalty. Digital engagement leads to in-depth knowledge of your customer base and increased personalization.

“It’s getting more difficult for non-digital brands to create the kind of emotional engagement consumers desire – for connection and distinction, tailored to ever-increasing consumer expectations regarding customization of products, services, and experiences,” said Brank Keys.

The digital space is an enormously powerful tool for even traditional businesses to connect with customers in a way that powers product development, customization and experience-based engagement. If you are focused on loyalty, you need to be focused on digital loyalty.

Beware of Loyalty Fatigue

Colloquy’s LoyaltyOne census found some interesting trends that are worth noting for business across industries. Loyalty stalwarts like airlines and credit cards dropped in popularity while drug store and restaurant programs flourished.

These trends could signal loyalty fatigue in programs that have made rewards more difficult to navigate and less rewarding. But they could also signal a consumer shift toward consumer staples like food and everyday household needs, shifting toward brands that reward them for more frequent purchases.

Don’t burn your customers out with constant low-value offers or continuously diminishing rewards. Give them value in exchange for their loyalty or your competitor will. Remember, like offensive or interruptive advertising, poorly executed loyalty programs can have a negative impact on customers by burning them out if you are not careful.

The money you spend on a world-class loyalty program will be more than made up by the customer insights, lifetime value and customer satisfaction you gain.

Choose Carefully Between  Proprietary or Coalition

Loyalty programs come in two major categories — proprietary or coalition. Depending on your goals, you will want to focus on one or the other.

Proprietary programs offer your branded rewards alone and grow the connection with your brand among existing customers. Coalition programs expose you to new customers in partnership with other brands, but can dilute your brand message if you are the least notable brand in the group.

Choose wisely depending on your goals as a business — are you focused on customer retention or customer acquisition?

Are you launching a loyalty program but not sure how to employ your treasure trove of consumer data to personalize the program for each customer? Action IQ can help. Learn more about our powerful data platform by watching our CX Webinar Series: A Modern Smart Hub Approach to Connect With Your Customer to drive brand loyalty.