The “Loyal” In Loyalty Programs

BRITTON

Published in

Lifestyle + Living

7 min readApr 22, 2015

How to make your brand a “loyalty brand”

By Meghan Britton-Gross

Open your wallet. Look at your key ring. Other than the typical credit and debit cards, you probably have a number of loyalty cards. This one gets you discounts; that one gives you a free cup of coffee; the other one gives you points. Now look at your phone. That, my friend, is an endless space for retailer apps, all created to draw you in and give you “perks.”

“Become a loyalty brand, not just a brand with a loyalty program.”

There are a few companies that keep track of loyalty programs. Two such companies, Colloquy and Loyalty 360, have recently released reports on 2014 loyalty programs and usage. Both reports seem to say the same things:

Numbers are up. Engagement is down.
If you aren’t using a mobile platform, you’re missing a huge opportunity. Almost half of loyalty program members would like to engage with mobile programs.
Consider each customer, not just your profits. The more a program looks at the needs of the customer, the more successful it will be.
Stay on top of the analytics. Be strategic in your review of the program’s health to ensure that customer expectations are met and that there is real value to them.
Think about the user experience.
Be innovative. Think outside of the box.

In 2014, the average household belonged to 29 loyalty programs. And of those programs, only about a dozen, on average, were active. This engagement level has been dropping since 2010, even though more and more consumers are signing up.

So, what does that mean for retailers? Loyalty programs can be really great founts of data for companies, but savvy consumers are more aware of this now than they were in the beginning. They know that their purchases are being tracked through loyalty programs and credit card numbers. They know that when they go to the grocery store and use their debit card, and coupons pour out that are specific to their shopping needs, they are being tracked. Considering the current retail climate, let’s look at what makes a good loyalty program.

Be Authentic

Both Colloquy and Loyalty 360 say that consumers are seeking authentic connections with brands, just as they do in social media. Consumers see through simple marketing ploys and want companies to invest in them the same way they are investing in companies. Program perks have to have genuine benefits, not just points and discounts. Having consumers believe in the brand (aka brand loyalty) is the most important goal.

A report from Bond Brand Loyalty found that for brands that have strong loyalty but no official program, consumers rely on the value exchange of that brand, and it increases loyalty. For example, Nike+ has a huge loyal following but no program. Nike has taken elements of a loyalty program and embedded them into its business model. This has given consumers an enhanced sense of value. But the report cautions against using just this model. It says, “Become a loyalty brand, not just a brand with a loyalty program.”

My Starbucks Rewards Is a Winner — Or Is It?

As mentioned in our Starbucks case study, Starbucks appears to be leading the way with its My Starbucks Rewards program. In fact, according to CEO Howard Schultz, Starbucks has over 9 million members, and 5.5 million of those are gold members. According to Loyalty 360, he said, “Today in the U.S. alone, over 13 million customers are actively using our mobile apps, and we’re now averaging over 7 million mobile transactions in our stores each week, representing roughly 60% of total tender, more than any other brick-and-mortar retailer in the marketplace.”

Consumers see through simple marketing ploys and want companies to invest in them the same way they are investing in companies.

Starbucks has seen a direct correlation between increased store visits and participation in the My Starbucks Rewards program. As far as the program’s success, though, there appears to be some confusion. Loyalty 360 found in the Bond Brand Loyalty report cited above that, even though marketers and consumers have been using My Starbucks Rewards as a benchmark, the percentage of current members who are satisfied is only 37 percent, dropping 7 percent in 2014. Starbucks has one of the biggest groups of brand loyalists, which, in my opinion, may be swaying the opinion when the real facts are a little different.

Earn Your Stripes

TGI Fridays also has a really successful program called “Give Me More Stripes.” In fact, the Bond report just called this program the “top program in the casual dining category.” Michelle Malish, senior director at CRM & Loyalty was quoted as saying that the TGI Fridays program is “based on building a trusting relationship with members and treating them like good friends.” She went on to say, “Today’s customers know they are being advertised to and why they are being rewarded. We try to keep it real by engaging our guests with relevant exchanges and content.”

From A to Z to Prime

Amazon is another company that has made great strides with its loyalty program. I will admit that even though I am a member, I didn’t really think of it as a loyalty program. I have since seen the error in my ways.

Both Colloquy and Loyalty 360 say that consumers are seeking authentic connections with brands, just as they do in social media.

Ladies and gentlemen, I give you Amazon Prime. According to the Bond report, Amazon Prime boasts overall satisfaction rates of 71 percent, and membership is up 53 percent. Its members spend $1,500 a year, which is more than twice what the average nonmember spends. (That free two-day shipping is such an enabler!) Due to this high level of satisfaction, the Bond report named Amazon Prime one of its best in class. (You can read more about Amazon on our blog.)

Barriers to a Successful Program

So we know of three outstanding brand loyalty programs. But everything isn’t wine and roses, is it? No, far from it. As mentioned earlier, loyalty-program engagement is down. People have more cards but are using them less. So, what are some of the barriers?

I was at a grocery store the other day. The woman in front of me was trying to use a coupon she’d received from her loyalty card. Apparently the discount she was trying to redeem wasn’t available until after she made the purchase she was trying to make. Confused yet? So was she.

My Best Buy Isn’t the Best

Where loyalty programs tend to fail is in the access to points, the clarity of program rules and the value to the customer. For example, Best Buy has a program called “My Best Buy.” There are over 40 million members, but satisfaction in the program dropped 27 percent in 2014 and is now 30 percent below its category average. Why is this program struggling? Twitter user @MarkMonaco is cited in the Bond report as saying, “The @BestBuy rewards program has a lot of bs. They’re one of the few stores I know that makes it difficult to earn due to restrictions.”

It looks like the program actually got a revamp in 2013, according to Twin Cities Business Magazine. Best Buy spokesman Jeremy Baier said the retailer decided to revamp its rewards program in an effort to offer new incentives and provide a better experience for its existing customer base. According to the Bond report though, Best Buy may want to try a little harder, given that satisfaction is 15 percent lower than the category average and down 27 percent from 2014’s numbers.

Tips for a Kick-Butt Loyalty Program

So for brands considering loyalty programs, we’ll say this: They are still a great way to partner with your customers if you do it right. Our tips? Be authentic. Think of what the benefits are to your customers first, to the company second. Be creative. Be mobile. And I have to think there’s a little bit of luck tossed in there.