3 Loyalty Investments All Marketers Should Be Making

For many companies, rewards programs have become an obligatory investment that millions of their customers never use.

The loyalty management market is projected to reach nearly $215 billion by 2022, a 17% gain from 2020. Yet fewer than one in three business leaders would increase their loyalty investment to enhance value to members. This is data squandering, and it will turn your members into bad-mouthers. Here are three data-forward ways to avoid that.

by Jenn McMillen

Ever Invest in a Product You Never Use?

For me, it’s a lifetime subscription to BollyX (Bollywood) dance, purchased during the height of the pandemic. Still haven’t taken a single class or even set up my account.

For many companies, rewards programs have become an obligatory investment that millions of their customers never use. These initiatives have attracted nearly 12 times more loyalty memberships in the U.S. than people – 3.8 billion. Yet 54% those memberships are inactive; they do n-o-t-h-i-n-g. Meaning the roughly $185 billion invested in reward strategies today is delivering ROI on only about 1.7 billion members.

Reward programs are like the treadmill of marketing. Customers buy into them, use them once, and then ignore them.

Is This Surprising?

Brand engagement, like getting the most out of a treadmill, takes conditioning. Lots of brands aim for high enrollment, but many don’t appear to understand that the loyalty footrace doesn’t begin until after enrollment. How else can you explain that while active reward members spend more than non-members, only 30% of companies increase their investments to improve the value their programs provide to these members?

Yet, as if on a treadmill, many loyalty program operators expect their initiatives to take their business somewhere. Their members, meanwhile, are walking away – or worse, telling others about their disappointment.

For many programs, the source of engagement breakdown can be pinpointed to the program’s data processes. We’re not talking only about analytics and extracting the necessary insights required to remain important to customers. No, the data processes begin at the moment the member enrolls.

Loyalty Programs Need Varsity-Level Data Management to Engage

Marketers can think of these data-management processes as a build on the basics of connection – the same tactics companies used to win shopper loyalty when their only contact was person-to-person. Fancy technologies and machine learning may have outshined these core principles, but they remain.

Here, those tactics are broken down into three steps.

Ensure you collect the RIGHT data.

Ask: What is the end-goal of your data collection? And does the type of member information you’re gathering suit these express goals? These objectives could change with the calendar and with events. For example, do you want to increase purchases per customer, to re-engage lapsed customers or to improve specific category performance? What about the touchpoints, the messaging cadence and the dayparts of promotion – do they support your goals? While there is no one rule of thumb of which data is the right data, I’ve found there are usually 12 to 15 points of data that accomplish 80% of company’s loyalty needs. The trick is figuring out those 12 to 15 data points, which requires some A/B testing or the service of a reputable third-party provider.

Ensure you trust the data.

Data can be like a banana – ripe today, old news tomorrow. So check: How up-to-date is your data insights mechanism, and are you investing in the latest systems to accurately make sense of yourmember data? Are you running regular audits to track engagement and ensure the data you collect reaches the analytics stage? In a real-time audit, a company’s staff members can enroll as “ghost” members who are tagged and followed throughout various channel and engagement points. This exercise helps the company detect if data is leaking from the pipeline or being misdirected due to a tech glitch. For deeper analytics, a company may be better off working with a seasoned partner than trying to build its own platform, which would impose its own trial-and-error period.

Ensure the data has a life plan.

Now it’s time to use the data to build loyalty programs that deliver topline revenue, which means members have to be active. This step can entail opt-in feedback from members – a practice that delivers double benefits because participation numbers serve as an engagement metric. Other common measures include the repurchase rate, which calculates a program’s ratio of repeat customers by dividing the number of those who have made at least two purchases by all customers. And there’s the old standby of recency, frequency and monetary value, which scores customer activity across three measures. It’s old school, but I am a cheerleader for it because it’s straightforward and reliable.

Run by the Expectations You Set

When loyalty doesn’t go both ways, it blows back. A well-invested loyalty program can protect a company in hard times. But if it is not an effective program, disappointed members could become more turned off than if there were no program at all.

It’s up to loyalty program managers to prove to their customers that their investments, too, are good ones and worth their time and effort. (Care to join me for a BollyX real-time, interactive dance lesson?) Know your audience, know their goals and help them meet those goals as an ally.

Otherwise your dollars are just running in place.

Jenn McMillen Gamestop LoyaltyJenn McMillen, nationally renowned as the architect of GameStop’s PowerUp Rewards, is Founder and Chief Accelerant of Incendio, a firm that builds and fixes marketing, consumer engagement, loyalty and CRM programs. Incendio provides a nimble, flexible and technology-agnostic approach without the big-agency cost structure and is a trusted partner of some of the biggest brands in the U.S.

Photo by Nathan Dumlao on Unsplash.

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