Understanding the ‘three Cs’ of successfully unlocking retail loyalty.
By Anthony Stevenson
Retailers understand that loyalty programs are crucial to their success, not only in terms of generating incremental purchases but for better understanding their customer behaviors, preferences and motivations. But what makes a loyalty program effective? Are there key pillars retailers must embrace to get loyalty right? And what happens when consumers – and the retail landscape itself – starts to evolve?
Even in a shifting environment, there are bedrock principles on which retailers can build a successful loyalty program. We call them the “three Cs” of loyalty: customers, content and connection. But before applying these three principles, it’s critical to look at the challenges facing retailers, particularly with respect to loyalty.
Challenges of Retail Loyalty
The laundry list of challenges facing retailers today has been well-documented. And in an industry beset by the forces of “disruption,” it can feel like retailers have to constantly reinvent themselves in response to:
* Digital upstarts-turned-behemoths (hello, Amazon);
* Radically shifting consumer purchasing habits and methods (hello, Alexa); and
* The deluge of information available to every customer everywhere at any time (hi there, Google).
Retail loyalty has not been immune to these developments, and neither have consumers’ attitudes toward traditional loyalty programs. Some popular retail loyalty programs are consolidating, while other legacy programs have fragmented, and consumers are redefining their expectations as to what a loyalty program should deliver.
Recently, we analyzed the impact these shifts have had on the loyalty landscape, and the results were significant: nearly half of consumers had quit a loyalty program, and of those who did, 57 percent will shop less or quit shopping with a brand altogether. The way consumers want to participate in loyalty is changing, too, with growing percentages expecting to manage and redeem rewards on their mobile devices.
The good news is that our data shows that the retail sector has the second-highest level of consumer engagement in loyalty programs (41 percent, lagging only grocery at 77 percent). But to maintain this engagement – and to make it pay off in terms of sales and repeat business – retailers must redefine, reshape and re-create their loyalty strategies to better align with the changing needs of today’s consumer. Only then can a retailer create a true connection to customers that makes them want to engage with the brand and redeem the offers and rewards they receive.
Any loyalty strategy that can deliver those benefits to retailers starts with the three Cs.
The Three Cs
Put simply, the three Cs of successful loyalty center on identifying and understanding the customer and collecting the data into one single customer view to appropriately segment and target to them; the dynamic and engaging content needed to gain and maintain interest; and the digital connection between the store and the customer to not only deliver content, but to solidify the relationship with the brand. Although these work together and inform one another, they can also be considered in isolation to examine their individual contribution to a successful loyalty program.
Customers – Delivering insights into customer behaviors and motivations is perhaps one of the greatest advantages of a loyalty strategy. If a loyalty program cannot provide the customer data necessary to segment against activity and demographic, it loses its utility to a larger customer relationship strategy. Of course, loyalty program data is only one aspect of customer data that can be collected; the most successful retailers will combine loyalty data with transactional data, CRM data, and data from other customer touchpoints to create a truly holistic view of the customer.
Content – With a clear view of the customer based on data – who they are, what they like and what motivates them –developing content that is compelling and relevant to that customer should be straightforward. But many loyalty programs lack the technological capability to dynamically deliver content like personalized offers and communications to customers in real time, or at the right point in the purchasing cycle. The best ones do have that capability, however, and by delivering the right content, to the right person, at the right time, they maximize the retailer’s ability to capture and maintain the customer’s interest … and build a stronger relationship with the brand.
Connection – Of course, the right channel through which to deliver that content is crucial as well. Loyalty programs that establish a strong digital and mobile connection with their members have an advantage here: They can reach their customers where they prefer to be reached. More often than not, that is the mobile channel. We found that 87 percent of millennials want to receive smartphone promotions and 75 percent are interested in loyalty-driven payment and redemption apps.
A full 59 percent of older millennials (ages 25-34) say it is important to access to their loyalty program via a mobile device, and 41 percent want to monitor their points on a digital wallet. Perhaps more importantly, a direct digital channel gives retailers equal footing with pure-play e-commerce retailers, with their built-in owned, direct-to-consumer channel.
Retail loyalty programs that are built on the three Cs have a solid foundation for success, and the retailers that pursue these loyalty strategies are best positioned to surmount the challenges facing the industry as a whole.
Anthony Stevenson is the international new business director at Eagle Eye, helping retailers around the world strengthen their loyalty and marketing strategies to drive business growth.