Are today’s customers disloyal? Many retailers would say yes; they are spoilt for choice, and therefore the stakes for committing to a brand are much higher. However, is this lack of loyalty because the grass really is greener on the other side, or because retail organizations aren’t doing enough to keep customers close?
I should state at this point that there are a number of companies doing loyalty very well. However, there are also companies whose incentive programs are out of synch with what shoppers want, due to a few basic errors – which are often fairly straightforward to fix.
Here, I will outline four common mistakes that affect retail loyalty schemes, along with guidance on how retailers can address them:
Mistake #1 – thinking one size fits all
Most retailers are acutely aware of varying customer needs and behavior patterns, and therefore loyalty schemes must be flexible enough to accommodate a broad spectrum of shopper requirements. For example, while some consumers may be price sensitive, others are pushed for time, and so a discount only model will not work.
Personalization of promotions and incentives is very important too; bombarding repeat customers with irrelevant offers will only prove counterproductive. Retailers must use data to understand individual customers, and strive towards ‘surprise and delight’ tactics to impress the most loyal advocates.
Mistake #2 – not involving the customer enough
It’s surprising how many retail organizations set the terms of their loyalty scheme without stress testing it on a shopper focus group. If the reward levels are too high, then customers simply won’t engage with the program because they find the benefits unattainable.
Equally, marketing teams need to be really proactive in the promotion of these schemes, to drive greater sign ups. It can be a hassle to process special offers or redeem points, but the lifetime value of a customer that regularly engages with incentive schemes is higher than one who signs-up for a points card and then lets it gather dust in their wallet.
One way to overcome low redemption rates is to set a time limit on offers; retailers should look at the time frame for customer drop off rates, and then set the expiration date just before a big decline in visitors.
Mistake #3 – ignoring mobile
If there’s one piece of advice I would give to retailers when it comes to customer loyalty, it’s this: make mobile a priority. Running disparate systems in-store and online is not particularly productive, because shoppers feel that they aren’t being equally rewarded whichever channel they are interacting through.
At the very least, retailers should have a mobile loyalty scheme that enables users to check their balance, view the latest offers and redeem them wherever they are shopping. This will benefit loyalty engagement rates in all channels.
Mistake #4 – lacking a long-term strategy
The hard work really begins once a loyalty scheme goes live, and retail businesses need a clear vision of where their program is heading from the start. The key to success is having a true understanding of customer demographics, and scoping incentives around their needs and behavior patterns.
It’s also important to define what success will look like. If there is a clear performance target in place, retailers can benchmark their progress on the road to customer advocacy.