Customer Experience
Necessary or not?
Loyalty programs are so ubiquitous that it is reasonable to question whether they are really necessary or not.
Do loyalty programmes really work?
When every business has one - from luxurious hotel chains to the independent coffee shop down the road - the promise of a ‘VIP’ or ‘exclusive’ experience starts to sound a little hollow.
And yet, if businesses don't throw their hat in the ring, are they missing out?
A saturated market
A loyalty program offers deals, discounts and insider tips. Who could object?
But they also often require personal information, and sometimes the customer has to do a fair amount of work, just to sign up. Filling in forms, for example, or requiring a subscription fee. They can become outright burdens: if an unscrupulous brand sends aggressive notifications to users for every new opportunity.
Statistics show that overall satisfaction with these programs is down among consumers. According to Canadian marketing agency, Bond Brand Loyalty, less than half of loyalty program members say they are very satisfied with the programs they participate in.
The agency also says this figure is currently decreasing year by year. A much smaller number, just 22%, say they are satisfied with the personalisation on offer with their programs.
Consumers are also becoming disenfranchised (literally), and this may be driving them to be less discriminating. The average consumer today belongs to 14.8 loyalty programs but is only active in 6.7 of them, according to figures taken from the same Bond report. Consumers who are less engaged and enthusiastic about these programs are obviously less likely to spend their money with them, and more likely to move on to competitors.
In order to rise above the competitors, businesses must target these consumers by offering them something distinct and valuable.
Take digitally-pioneering cosmetics business Sephora, for example.
The French e-commerce giant has a successful loyalty program by any metric. ‘Beauty Insider’ has around 25 million members who contribute about 80% of the company’s total sales, according to figures from the company.
It works much as many loyalty programs do. Members collect points, which are exchanged for discounts or exclusives. Perhaps it’s worth mentioning that these are redeemable on any item, not merely a cordoned-off section of the most profitable products.
But this program has been put together with the needs of Sephora in mind, and to help it expand its consumer base to people who might not otherwise interact with them. The company has built their loyalty program around market research, which consistently finds that high prices are often a deciding factor for customers shopping for high-quality cosmetics.
For example, 24% of consumers say they prioritise low prices when shopping for cosmetics, according to data from PowerReviews. Beauty Inside entices customers who might otherwise be intimidated about spending a lot of money on make-up: customers can join without having bought a single thing. Once they have purchased something at a discounted price, there’s a chance they can be convinced it's worth the money.
The sheer number of loyalty programs could be intimidating for customers, or even too much effort, leaving them unsatisfied. That is not a reason for businesses to neglect them - but to revisit what they can offer in a way that helps differentiate them from their competitors, and offers fresh value for consumers who might be on the fence.
Businesses are right to take the opportunity to reach out to customers and start to build a relationship. Just, make sure you have something to offer.
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