Loyalty is a simple proposition
Marriott faces a class-action lawsuit following a data breach, one of the perils of using big data: Is it worth it?
Count Ray Clopton among those wondering. He is founder and chief executive officer of the Wilbur Rewards digital loyalty rewards platform, LocalGiftCards.com and Smart Transactions. Formerly a banker, he is a product expert and data privacy advocate.
Ignjatovic is a marketing, strategy, leadership and business consultant. She works closely with Taylor, who owns DIY Marketers, a company “committed to helping small business owners get out of overwhelm.”
Overall brand quality should be outstanding to command loyalty.
“What makes me loyal to a brand or business is often a matter of convenience, such as location,” Taylor said.
Ignjatovic pointed to “product quality, how they resolve problems, sometimes price and convenience.”
MaCorr Research has found that 86 percent of consumers who like a loyalty program will shop more. Of those, 58 percent will shop 15 percent or more with their retailer or brand of choice.
“I participate in the basic grocery programs,” Taylor said. “I also pay for Amazon Prime.”
Privacy concerns can make consumers pause before enrolling in loyalty programs.
“They always ask for too much personal information,” Ignjatovic said. “Frankly I don’t trust companies with my data.”
Clopton looked at other drawbacks for such ventures.
“If it’s not convenient and fast, customers don’t bother,” he said. “We advise merchants to keep it simple and make the rewards easy to reach, more often.
“The trust factor is exactly why we are advising merchants to adapt,” Clopton said. “All of the data breaches have changed the way consumers think about loyalty programs. We recommend ‘small data’ loyalty programs. They are just easier for merchants and less risk for all involved.”
Consumers might be surprised to know that loyalty programs don’t require full names.
“This is another area where marketers and merchants must adapt,” Clopton said. “Text-to-join is a good option. Customers text only their first name to join.
“Also, that uneasy feeling of people having to wait in line behind you is a loyalty program killer,” he said.
This includes line delays for people signing up for programs at the cash register.
“We’ve seen that played out in many loyalty programs,” Clopton said. “The sign-up cannot delay checkout more than a few seconds.”
The more convenient the loyalty program, the better.
“Have money to spend like a gift card,” Clopton said. “We tell merchant’s this exact thing. Don’t try to guess what customers want as a reward. Give them money to spend — much like a gift card.
“This can work well for merchants as long as they each have the ability to create their own rewards program,” he said. “Use one text to join with instant access to many completely independent loyalty programs.”
Lack of clarity can be a program killer.
“That was a problem with ‘Plenti,’” Clopton said. “Vague rewards and an ineffective coalition killed the program. Plenti of problems.”
When joining loyalty programs, consumers face hard choices between a brand and savings. Many opt for the savings that come with the rewards, meager though they might be.
“This is normal,” Clopton said. “Smaller, more frequent rewards beat large, complex rewards that take too long to reach.”
While Taylor said convenience plays a part for her, “It seems stupid not to grab savings when they are offered.”
Even in small amounts, money isn’t everything.
“If I were to get into loyalty program, it would be about the price, but also about the offer,” Ignjatovic said. “I’d like to get something special as a member.”
A particular rewards program irritant is when one store in a chain doesn’t know how their app works, doesn’t accept it or doesn’t even have a scanner for it.
“I’m not sure this is accurate, but it’s my perception,” Taylor said. “Too many loyalty programs spam me and send me stuff I don’t want.
“My favorite reward is when my credit card says, ‘You’ve got $600 in rewards. Do you want to apply that to your balance?’” she said. “Ummm — Yeah! — so much better than having to spend points on stupid stuff.”
Such stuff extends to unwanted offers.
“Let’s put aside the whole thing about the data safety,” Ignjatovic said. “The most annoying thing was getting info about things that I really couldn’t care less about.”
In what might be the Year of Paid Loyalty, Lululemon, CVS and Loblaw are game to find out, according to Forbes. If so, staffs should be prepared.
“If the clerk or employee is required to remember rules, that’s never good,” Clopton said. “We typically automate rewards and reward messages to the customer for consistent customer experiences.
“Who hasn’t had the experience — or learning curve — of a new app to download?” he said. “No kabuki dance equals a positive feeling for the customer.”
Businesses likely don’t want the hassle costs involved with discount programs, thinking it cuts into their profits.
“The Harvard Business Review says that acquiring new customers is anywhere from five to 25 times more expensive than retaining existing customers,” Clopton said. “We’ve got to educate merchants on where the return on investment on marketing dollars is strongest. Loyalty means longevity.”
Taylor thinks small businesses “seem to have too many other important things to worry about. Loyalty programs seem like an advanced tactic.”
A good loyalty program is not an easy thing, according to Ignjatovic, who noted that the system has to be carefully designed and maintained.
“Wilbur is an experiment on this question,” Clopton said. “What if you could participate in many different merchants’ unique loyalty programs without having to register for each one, using only your phone number? We know customers will value that.
“Only about 3 percent of loyalty program emails are read,” he said. “That’s a lot of time and money spent by the merchant chasing something that can be hard to measure.”
The more complex the loyalty program, the harder it is to understand and explain.
“That’s the challenge,” Clopton said. “We tell merchants and marketers to abide by the 30-second rule. If your employees can’t explain the entire loyalty program in 30 seconds, it will fail. The best available solution is a loyalty program that is dead simple.”
With that in mind, a good customer loyalty program has to be easy to understand and easy to use. In Taylor’s words, such programs have to be “passive” for the customer while “offering mad value.”
For those who want to create a customer loyalty program on a budget but don’t know where to start, a DIY Marketers guide sponsored by Wilbur Rewards has helpful pointers.
“I’m not sure that service or excellence play as big a role as they should overall in loyalty programs,” Taylor said.
Ignjatovic believes rewards, savings, and convenience are more important to a lot of people.
Related to that, a study by the 3Cinteractive mobile services company found that 70 percent of consumers do not sign up for a loyalty program due to the inconvenience and time required to complete the registration.
“There are so many different ways to have a loyalty program,” Taylor said. “But I don’t think all businesses benefit from the added infrastructure.”
The ecommerce company Shopify Plus has published an article about loyalty programs: “25 Strategies Backed by 36 Examples and Over 100 Results & Stats.”
“In theory, any business could benefit from a loyalty program,” Ignjatovic said. “In reality, that’s not the case, and not every biz should go for a loyalty program.”
Brands that charged for memberships in their loyalty programs might benefit.
“I’m an Amazon Prime member,” Taylor said. “For me, the benefit of having free shipping and access to video and TV entertainment is huge — as well as free books every month.”
Ignjatovic favors having special VIP access to something at a low price, or free.
Rather than complex overall customer loyalty programs, businesses might want to lower overall prices to attract more customers.
“Loyalty is proven to increase customer retention, which boosts profits dramatically,” Clopton said. “Highly engaged customers spend more, refer your biz more and come back more often.
“All the research supports loyalty as a far better return on investment,” he said. “Plus, you can offer special sales to your most loyal base. That’s a win.”
Whatever the program’s structure, it should not be haphazard.
“I wish businesses would put some more thought into what they offer as benefits,” Taylor said. “Too often the benefits are ‘Meh,’ not worth the effort.”
Ignjatovic added the security factor, harkening back to the Marriott class-action suit.
“Considering frequent data breaches, I’d wish they put an extra effort in securing my data and using it only for what I signed up for,” she said. “Also, when I end my loyalty program, I want to know that they are not keeping my data.”
About The Author
Originally published at www.datadriveninvestor.com on March 24, 2019.