Conventional Wisdom
MOST RETAIL loyalty programs are alike, and many are failing in their basic mission. Consumers and retailers are feeling disillusioned, but the programs themselves are not the problem.
On the contrary, the obstacle is the conventional wisdom followed by many retailers. They can’t seem to come up with anything new. And even when they make money, few programs are differentiated based on solid customer insights.
How does a company break out of this syndrome? By making its loyalty effort an integral part of a broader customer-centric strategy that creates a sustainable advantage based on the unique needs of distinct customer segments.
Loyalty programs generate reams of transaction data, but it often ends up residing unused in the back office. Smart companies put it to work to optimize their merchandising, customer service, store layout, store locations, and a whole range of customer experiences that go beyond the program.
But let’s look at the mindset that creates these problems.
Myth #1: Build a loyalty program and your customers will become more loyal. Nonsense. Retailers have too often focused more on the administration, infrastructure, design and benefits of their programs instead of first figuring out the underlying drivers of customer behavior. As a result, they ended up creating programs that look alike when they should have emphasized distinction. And they never quite grasp what makes customers go to them instead of going to a competitor.
It is far better to understand loyalty across all customers, products and channels. Only then can a firm understand where its program fits in, and what strategic role it needs to play in the business.
To find out how your firm shapes up, ask yourself these questions:
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Do you truly know what your customers value and are willing to pay for?
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When customers come across your membership card in their wallet, is there something special they’ll remember about you?
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Will you be able to predict customer behavior and take actions that will make them think,
