When I read all the articles and expert comments on why loyalty programmes are not working I often think that many are missing the point! (Excuse the pun!)
Many so-calledLoyalty Programmes are not working I.e. not engaging the member, creating high liability rates and not delivering incremental growth etc., because the CVP is weak and irrelevant! I have never understood why practitioners think that by giving a member a 1% discount (more or less) in the form of points that this will influence their behaviour let alone create loyalty.
In practice many retail programmes are just giving members an additional discount in the form of points to enable them to come back to their store to buy things that they would have bought anyway! Isn’t that just a convoluted way of just giving a discount? Supermarkets are often the worst offenders and actually want their members to use their points in-store as they think it creates loyalty ! I disagree, as an accountant friend of mine often says, ‘buy 100 and get 1 free, is not a very good offer! In other words, I spend £500 and get £5! Hardly an attractive proposition? I either use the £5 to reduce the cost of my weekly shop or deduct it off my credit card balance or, more often, ignore the value and just add to the outstanding liability of the practitioner!
We hear about new and exciting technologies, Bitcoin and similar ideas and clever Gamification but whilst this may improve the customer experience and communications to the member, if the CVP is still weak, it will not improve the programme by increasing redemption rates ! It may reduce your liability but without a strong CVP and communications strategy to engage or re-engage the member it will not improve the programme in the medium to long term!
In my opinion that by getting the Value Proposition right by engaging the member with relevant and attractive earn and burn offers, you will create real equity in your currency, build strong and mutually beneficial relationships and, therefore, establish loyalty and advocacy!
One of the best examples of ‘how to do it’ is the strategy of Tesco (UK No. 1 Supermarket.
They have created real equity in Clubcard Points by developing and constantly enhancing the Customer Value Proposition. Members earn bonus points based on their lifestyle and preferences including special offers on the products they buy regularly! Bonus points are awarded when Members use their own bags when shopping and, for online orders if they accept home delivery in reusable containers.
Whilst this strategy increases Member engagement and incentivises them to ‘shop the store’ the Rewards Options are the real point of difference! The funding rate is 1% but the perceived value is increased by offering 3rd Party reward options from restaurants and experiential services including theme parks and family days out. In practice this means that a £5 Voucher is worth up to £20 when redeemed with a 3rd Party Partner. There are no complicated conditions, the Member converts their vouchers online and are automatically sent an electronic voucher or QR code and they use it as cash at the partner. Simple, valuable, relevant and, for the Member, worth the effort! An additional benefit to the programme operator is that Members are often more active and increase their spend after redeeming!
Practitioners should look closely at their loyalty CVP and ask themselves……’if I were a customer would I invest in this offer and does this company really value my loyalty?’ There are always many opportunities for improved reward options but, as with most things, you need to work at it!
Imagine the power you, as a programme operator, could use to leverage a great deal with a 3rd Party Reward Partner if you could say……’ I have 10m Loyalty Programme Members that I can send into your restaurant if you are prepared to accept my currency as payment and increase the face value? ‘ These outlets have strong margins, perishable inventory and are always looking to increase footfall and it would be a brave CEO who was not interested in working with an effective loyalty programme.
Mike Atkin – Customer Loyalty Marketing Professional
Chairman – Customer Strategy Network