Loyalty & Millennials: are rewards really the answer?
Identifying the problem
Throughout our playbook we have used the terms ‘loyalty programme’ and ‘loyalty scheme’ given that these terms are what the majority of today’s marketers will identify with. However, the reality is that no programme alone will ensure loyalty. These programmes exist to reward and while they are designed to engender loyalty, they will only have a chance of working as part of a well-constructed brand relationship programme. In order to achieve true loyalty, the two must work in unison.
Where did it go wrong?
Although there is no definitive answer, most sources say that it costs between four and ten times more to acquire a new customer than it does to keep an existing one. So why are companies prioritising attracting new customers over keeping their existing customer base satisfied? Loyalty schemes in one form or another have existed for hundreds of years – some people can probably even recall the ‘Green Shield’ stamps! Once upon a time, these schemes served their purpose by delivering real value and driving repeat custom. However, in the current marketplace, where customers are overwhelmed by choice and expect immediate gratification, they have stagnated. With more than 90% of companies currently employing some form of customer engagement or loyalty programme, how can you make sure yours stands out for the right reasons?
Most loyalty schemes revolve around the same one-dimensional premise of spend for discount; everyone already knows what they’re getting and it’s simply not exciting anymore. This is evident with most brands achieving less than 50% active participation and reward redemption and with 58% of loyalty accounts becoming inactive within the first year of sign up. Although the reasons for this lack of engagement vary, the key reasons for negative sentiment surrounding loyalty programmes have been confirmed as lack of reward relevance (around 85%) and flexibility and value (44%). One way to tackle this lack of engagement is by offering immediate rewards; redemption rates for real-time rewards can run as high as 70% to 80%, a figure that drops in half when offered two hours later. This need for immediacy becomes more of a pressing issue when targeting young people, most of which agree that they are impatient and 50% have quit a programme because rewards took too long to accrue.
Lack of accessibility
A step in the right direction for loyalty programmes is increasing the accessibility of these rewards – the amount of times I go to buy a coffee only to realise afterwards that I had a stamp card in my purse which would have got me one step closer to that elusive free coffee… but no, it was buried in my wallet behind a plethora of other loyalty cards. If only it was on my phone, with the glorious ease at which I can search for apps or through my digital wallet, maybe then I would have remembered to use it! And this isn’t just me by a long shot; research conducted by YouGov shows that 41% of millennials want to be able to redeem points using their smartphone and the same percentage want to be able to monitor their points with a digital wallet. These options not only make it more difficult to forget about the existence of your loyalty programme but can also help to ensure relevance, in turn leading to higher brand engagement which is a leading factor in driving loyalty.
Customers expect more
Customer loyalty is now rooted in more than simply reward, people expect to be engaged with relevant content, at the right time, through the right channels. The alternative is disengagement, which is not an attractive prospect when highly engaged consumers make 90% more frequent purchases, spend 60% more in each transaction and are five times more likely to choose the brand in the future. The main problem with relying solely on conventional loyalty programmes to connect with consumers is that they reinforce a purely transactional relationship, fostering a fickle connection between consumers and retailers. What needs to be understood is that loyalty is actually an emotional relationship, not a synonym for repeat purchases.
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