Marketers have concerns about the impact their retention programs are having on customer loyalty, according to the top-line findings in a paper from SAS and Loyalty 360. Only 24% of them believe their efforts are very effective in delivering desired results, while 22% indicate their programs are neutral in their impact – or worse.
A deeper dive into the research that formed the paper's backbone reveals offers insight into what shapes the best of these efforts. "Customer analytics are among the top two things that help [respondents'] loyalty programs," says Pamela Prentice, chief research officer at SAS. "The first is rewards [at 42%], and the second is customer analytics [38%]."
Social media (15%) and online communities (12%) trailed the field, she adds.
When Prentice sliced and diced the data that went into the survey she noticed that respondents who reported integrating customer data with loyalty programs were significantly more likely to report much more effective programs.
"The interesting thing is how this relates to two key topics – 'Big Data' and analytics," Prentice says. "What types customer information are [marketers] collecting, how are they collecting it and how is it used in their responses?"
Top-performing organizations, at least from a retention standpoint, are those in which the chief marketing officer is, even if only unofficially, transitioning from the CMO role to a chief loyalty officer role. SAS's paper advocates "planting the seeds of loyalty earlier in the buy cycle" – and by earlier it means starting to apply analytics when prospects are still in the purchase-consideration stage.
"Think about marketing not from an acquiring new business standpoint, but [in terms of] reselling — having your customers up their lease again to stay with you," Prentice says. Thinking about acquiring loyal customers can start even before the first sale is completed.
"If the marketing person does a good job upfront, and uses the analytics and data they can gather, and can do good segmentation, and matches the company with the right customers, all that happens before the lifecycle [begins]" Prentice adds. "Companies are still struggling to determine which segments are their best. My concept is, 'When do we release the hostages?"
By this she means that not all consumers are good potential customers, and that not all customers belong in a loyalty program. It might be costing an organization more to keep them than to release them and invest in customers who are going to be a better match.
"We can use big data, and big analytics, to drill down, do segmentation and identify potential members for a loyalty club," Prentice says. This is in contrast to the scattershot mentality many marketers bring to their schemes. "Almost anyone who walks into a CVS is asked 'Are you a member of the CVS loyalty program?' They sign everybody up for their loyalty program. And what we need to do is understand which people we need to invest in."
If, in fact, the organization is offering a loyalty program at all, as opposed to a simple reward card. "We can't really exchange reward cards with loyalty," Prentice notes. Rewards cards have their place, as customers like deals and a lot of times you get special prices on things. There's a lot to be said for that. But we can't confuse offering discounts with creating brand evangelists.
"Loyal customers are those who will chose your brand because you add value in the face of higher prices," Prentice concludes. "I'm not saying you should offer a card to everyone who walks up to your counter, but don't invest in trying to make every customer a loyal customer if it is not a good match."
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