A Forbes report asserts that it takes five times more the investment to attract a new customer than to retain the existing ones. This data relays how failing loyalty programs could adversely impact your business. Your brand needs an integrated and focused plan to reap the wholesome benefits of customer loyalty programs. But unfortunately, most current CRM programs are poisoned with hazardous loopholes.
Before I delve into the vices of the current loyalty programs, let me kickstart our discussion from the nub.
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The term ‘customer loyalty’ refers to your customers’ willingness to persistently return to your company to engage in some form of business on account of the remarkable experiences that you have created for them.
On the other side of the spectrum, a customer loyalty program is a marketing approach that identifies and rewards those customers who do business with your brand repeatedly. These incentives could come in the form of coupons or free merchandise, or maybe some insider perks such as early access to a new product launch. When push comes to the shove, it’s all about promoting the loyalty of your customers via these rewards.
With the novel coronavirus, everything has changed, including the way you execute your CRM programs. Post-COVID times and into the year 2021, you’ve got to brainstorm innovative incentives.
From what I’ve witnessed, failing loyalty programs are the fruits of nullified advantage. For instance, people love it when you offer free shipping, vouchers, and extended return periods. But these staples could be easily replicated by your competition, thus nullifying your advantage.
Here’s where you need to leverage technological advancements to your edge. Endorse POS integration to connect your online and offline channels seamlessly. With capabilities to scan barcodes and QR codes, allow your customers to earn points.
Also, give your customers mobile wallets. These are native applications that store the various mobile passes you offer your customers. With these passes, your customers can identify themselves in-store, store their reward coupons, loyalty cards, and event passes. The catch, it makes transactions swifter and facile.
Walk the extra mile, by embracing an NFC technology. Near Field Communication is similar to beacon technology; it helps your customers interact with store-exclusive loyalty features. As a case in point, let’s say you fit a TV screen with an NFC tag. The screen can be looped with colourful animation, prompting passersby to touch their phone to the designated area. So, when they do this, your NFC tag would redirect them to your loyalty program enrollment page. A point earned!
• Starbucks' Give and Take CRM Program
Starbucks’ loyalty program was going great until it made a few changes. While in the original program, a sparing frequenter who bought $4 plain coffees could earn a free coffee by spending $48, he would now have to spend $62.50 to earn his gift.
This seemingly small change, untowardly, took a wrong turn.
• Dillard’s Lame Loyalty Program
Creating puny rewards that do not reflect the customer’s commitment to a brand is a very common mistake. For instance, according to Dillard’s failure loyalty program, the cardholders would receive two points for every dollar spent. And you cannot use the points until you hit 1500 points. This futile program demanded customers spend $750 before seeing any rewards for their loyalty.
• Vino Vidi Vinci’s Invisible CRM Program
Vinci’s offering was top-notch. Visit them 100 times, you get your name carved on one of their tables. Visit them a million times, you get a Ferrari! Only, Vinci relied on word of mouth marketing and failed to propagate their loyalty program to their clientele community.
• Chiptole’s Complicated Loyalty Program
Their flaw was a program layered with multiple complications to earn a reward. It goes something like this: “Buy 11 burritos to get 3 of ‘em free, but only if you purchase one per day within 30 days”. Come on, you are offering a perk not an obstacle course!
• Healthy Choice’s Loyalty Fraud Program
This is the worst of its kind, becoming a victim of your own loyalty program. According to Healthy Choice’s loyalty program, the number of Healthy Choice barcodes mailed at the end of the month could be translated to double the mileage, that is, 1,000 miles on 10 labels. And believe it or not, David Philips, a brilliant loyal customer earned 1,253,000 miles for 12,150 individual servings of pudding. What’s more, he even got tax deduction by donating those puddings to the Salvation Army and two other local food banks.
You need to know the lifetime value of your customer, the dollar value of your rewards, and the costs involved in acquiring a new customer to understand the ROI and cost ratio.
Let me now briefly put across the formulae to calculate each of these values.
Lifetime value = Average customer lifetime x Average monthly spend x % Gross margin
Reward dollar value = % Reward discount x Original price
New customer acquisition cost = Dollars spent to acquire new customers in a time frame / No. of new customers acquired within the same time frame
Once, you quantify these values, use the formula below to compute your ROI.
ROI = (Lifetime value – New customer acquisition cost) / New customer acquisition cost
While retailers are sweating blood to transform their loyal customers into loyal evangelists through their CRM programs, often, the programs fail within a few years of their launch. Through my vast experience in this domain, I've curated the top five reasons behind failing loyalty programs. Let’s probe.
• Too Much Focus on Points Earn/Burn Mechanism
Sadly, retailers channel their time and energy on the earn/burn mechanism of their loyalty programs. While it's a core aspect of the program, it's not all. This structure paves the way for a lopsided program that offers nil prospect in personalized communications or offers to the customers.
• Lack of DIY Capabilities
In loyalty programs, the ineptness of DIY features creates a dependency on the CRM providers. This creates unnecessary roadblocks and causes a massive gap between expectations and deliveries. It significantly hampers your productivity, too. If I were in your place, I would go for DIY integrations and forfeit this at all cost.
• Very Little to No Analytics Capabilities in the Loyalty System
Successful loyalty programs are those that leverage data and analytics. Since traditional loyalty systems focus only on points disbursal and accrual, it won't help in the hyper-competitive market. To be more personal and meaningful in clientele interactions, the data-first platform should be deployed.
• No Clear Linkage with Business Impact
Any CRM initiative must marry its objectives with its business goals. Worse luck, they are obsessed with points. This is why programs are initiated within a few years of launch.
• Lacking Omnichannel Opportunities
Delegating an omnichannel experience is not just an ethos; it's a norm. It helps CRM programs not merely to survive but thrive in today's changing business landscape.
Do your best to avoid these five mistakes I’ve narrated above. Territory retention using rewards program is a great marketing campaign if done right. Fix the loopholes and be creative in your offerings. Put yourself in the shoes of your customers as you formulate the rewards. Then evaluate your ROI. If it strikes the chord of balance, you're good to reap the benefits of customer loyalty programs in retail!