Another Loyalty Program? Damn right!

Hi Marketing Leaders,

I stopped by Office Depot yesterday to purchase some office supplies. While I was waiting (for an extremely long time), the representative asked if I was a member of their loyalty program called Worklife Rewards. It’s always an interesting question, and many times my answer is: “I think so.” I DO know I am a member of six frequent flyer clubs; seven hotel guest clubs; and several other retail loyalty programs.

Office Depot offered a free program with cash-back. Hey, it wasn’t another credit card – how bad could it be? I joined because I can easily see myself purchasing ink toner, paper and other supplies and getting a “kick-back” in the process – that’s future loyalty in a one-person sample of everyday life.

There are only two problems with loyalty programs as I see it:

  1. On-boarding – it takes an eternity (or three to five minutes) to sign-up, and you hold up other busy customers so you can “join the club.” Retailers need to streamline the on-boarding at POS with an integrated member sign-up in the debit / credit kiosk. That’s another blog though.
  2. George Costanza back problems – we have way too many member cards in our wallets or purses. You can throw out your back as George does in the hilarious “Seinfeld” episode where his wallet is full of junk causing him discomfort when he tries to sit. We need a single, secure card that stores all of our loyalty program info (club #, social media and digital passwords) and eliminates back pain. Social media fragmentation is leading the charge as networks are working towards a use single-user authentication across networks. Yes, many programs allow you to look up your info via your phone number, but a simple swipe of a secure card would speed it up. Loyalty clubs are getting on board with iPhone apps and through social apps like Foursquare.

After climbing those small hurdles, you set off towards loyalty bliss with points, rebates, discounts and even cash-back.

  • So, does loyalty really matter that much to your firm?
  • Are your loyalty programs working?
  • Are they profitable?

Our recent survey data from 100 global B2C marketers shows the answers to those questions are all “yes.” Marketing leaders still see substantial value in loyalty programs. We found that 77 out of 100 B2C marketing leaders stated they would increase loyalty program budgets in 2010 trailing only digital (e.g. social, online) and market research.  And of 16 choices ranging from print advertising to promotions, marketing leaders selected loyalty programs as the area they were least likely to decrease budgets.

Industry and academic research (V. Kumar, 2008) shows loyalty programs are often costly mechanisms that don’t generate incremental customer lifetime value. A loyal customer would purchase again, or more, regardless of the additional discounts or rewards given by a marketer.

Nearly 1 out of 5 marketing leaders we polled are increasing budgets on loyalty in 2010. Let's make sure those budget increases working smart. Forrester will continue a series of blogs and research on building effectively loyalty programs that drive loyalty, but more importantly, increase customer lifetime value and profitability for your firm.

Please share successes and ideas on what loyalty programs should look like in 2010 as budget dollars start to grow again.

Thanks,

Chad

Comments

What Loyalty programs should look like in 2010

As a passionate believer in loyalty marketing, program develpment, CLV and ROI I believe that not enough companies are giving serious consideration to the Customer Experience. You cannot have brand loyal customers who "stick around" and recommend your product/service without a superior customer experience. I think the focus on metrics and financial return is necessary but I have observed too many companies who are in the "CRM" mode without lookng at the customer experience from end to end. At the January Netpromoter conference I was amongst professionals who felt the same - I am hoping the word will be spread to other companies who are investing in loyalty in 2010 and beyond!

Measuring customer-centricity

Donna,
Thanks for your response to my blog. I agree. The post-purchase experience is critical to maintaining and creating brand ambassadors who evangelize the brand. Customer experience is a measure of brand health - how well firms deliver on customer-centricity. Forrester has a wealth of data (customer advocacy, customer experience, customer service) that supports your notion of loyalty correlating to a positive experience. But you must combine a host of variables including brand experience (NPS, CSAT) and CLV to develop a customer-centric strategy.
I am introducing two frameworks in upcoming research: 1) measuring how well brands deliver on customer-centricity. Customer experience is a large component of that framework, and 2) Value-based brand and customer management with a framework to drive loyalty and profitability.
I look forward to your feedback.
Chad

Thanks

Chad:

I will keep monitoring your blogs and look foward to the upcoming research.

Cheers

Simplify Loyalty - Use your Driver's License

Chad - Your comments were spot on. As a consumer and member of many loyalty programs, it is frustrating to forget your card or delay the line because I want to join another program. I know that if there are people behind me, I will pass on joining a new program because I am sure they want to get going. Usually - I am also in a rush to finish shopping. I think businesses should allow me to use my driver's license as a loyalty card. Just imagine handing over your license, having them swipe it and voila - you are now a member of the program. The process took 2 seconds and now I get points without getting anyone in line mad at me! Then next time I come in, they ask if I am a member and I give them the driver's license to swipe and now I get my points for the purchase. This solution speeds up enrollment and makes the consumer's life easier when they come in for purchases. Almost everyone is always carrying their driver's license. This also reduces costs for the business - no more cards, no data entry and no mispelled names and addressses. Our business provides this option, check out www.idloyalty.com.

Cathy Thanks for sharing.

Cathy

Thanks for sharing. Your solution makes a lot of sense. It will be interesting to see where the adoption grows among consumers. I believe that mobility will play a huge factor in this in the next two years. The iPhone, Droid, Windows and Blackberry platforms will all have improved pixel clarity enabling mobile scanning. It will move beyond check-in at airports and including integrated loyalty marketing campaigns. I see it as a race to see whether the "apps" or other "emerging" tech like your DL patent wins out. Please email me at cmitchell@forrester.com to schedule an interview. Thanks,
Chad

Loyalty Programs

I will take the ease of storing all data on loyalty programs a step further... It should not be the consumer's responsibility to store this info. - even on just one card. Each vendor should store the info. and have it associated with a number that the consumer sets (i.e., last digits of soc. security). Then, when checking you need not find any cards (I never can) - the vendor simply searches via your number and advises of your loyalty program status. If it is a self serve kiosk, a phone call, a computer, etc... again, the consumer should be able to input that single number to retrieve all customer data.