Loyalty marketing in the digital age

Loyalty marketing programs seem to be a crucial crossroads. While the effectiveness of current loyalty marketing programs continues to be scrutinized, very little has changed in achieving the endgame: Namely, boosting and cementing customer loyalty.

One can reasonably argue that the true holy grail of retailer loyalty programs is offering customers relevant, impactful rewards that drive true brand loyalty and not just periodic incremental purchase. Yet, the vast majority of current loyalty reward programs fall short in the former regard. You can point to a number of reasons for the overall lack of effectiveness of loyalty marketing, but two main causes standout.

First, most loyalty programs have conditioned consumers to search among competing retailers for the best weekly deals, sales and savings. While shoppers benefit from this, at the end of the day it is more-or-less a promotional tactic (advanced couponing—paperless as it may be) that really only driving sales, not true consumer loyalty. Chasing deals does not engender brand loyalty.

Second, the majority of current programs offer very small rewards—in many cases a mere percentage point or two of total purchase—the “deals” don’t effectively give consumers anything special, and they aren’t impactful in terms of driving brand loyalty—personalized as some may be. Rewards, not unlike a good deal, do not necessarily produce brand loyalty.

Whether these programs are executed in-store or digitally, seems to be of little consequence. Even with the coming-of-age of the Millennial generation, who clearly favor all things digital, and rising relevance of mobile marketing, digital rewards programs aren’t—at least not currently—anymore successful then their card or key tag-based counterparts.

Further, research suggests that while mobile loyalty program adoption is in the rise, consumers are not yet ready to abandon card-based programs. For now, both pure card and digital programs will coexist and many retailers will likely introduce hybrid programs that offer both components.

Currently it would seem that loyalty marketing’s lack of success is rooted in one central enigma: How do retailers go about capturing true, long-term customer loyalty?

Retailers are either going to have to figure out a “next-gen” loyalty marketing model based on the current, albeit broken model, or go back to the white board and re-invent their loyalty play.

And therein may lay the biggest hurdle to creating, executing and driving the loyalty most brands seek since loyalty at its core may not have a price tag. Hence, the big question now becomes: How do retailers go about capturing true, long-term customer loyalty if not through deals and rewards? Which in turn, begs this question: What is brand loyalty?

Brand loyalty is having an army of enthusiastic customers marching in lock-step to your store—bricks or clicks—while proudly, even gladly, purchasing your product sans discounts, deals or rewards and often at a premium price point.

True loyalty may only really be achieved as an extension of a unique brand experience your customers have with your products. It’s within that relationship that loyalty evolves. It stems from offering a superior product that is well worth the asking price and fosters customer advocates who sing your praises and share their experience across their personal and social media networks.

At the end of the day, there may not be enough key tags or hashtags to buy or create that kind of brand bond.

For retailers, capturing that unique consumer experience—on their terms—through personal content and then integrating that user-generated content into brand campaigns reaching across all channels may very well be the future of loyalty marketing.

Today, brands operate in an omni-channel world, which is populated by tech-savvy, educated consumers, who are increasingly declaring brand loyalty based on brand interaction and experience (both traditional and digital) over price and reward.

It is here brands must forge true human connections with their consumers—connections that foster an enduring, lifelong relationship between the consumer and their preferred brands. Simply put, that is the stuff of true loyalty.

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For over 20 years, Imaginuity has been combining imaginative thinking and innovative technology to create transformative results for our clients, their customers, and our people. Our services and platforms manage complexity to improve marketing outcomes.