In an era of unprecedented consumer choice and easy availability of information, is consumer loyalty dead? No, but it has become a lot harder to achieve. Unfortunately, most marketers are still using conventional ideas and means to build their consumer franchise.
As a result, loyalty programs, like many other marketing efforts, look increasingly similar across companies and brands. Many have been reduced to give back schemes, with little focus on the consumer and on building loyalty.
Well designed loyalty programs can be effectively used to increase market share, understand consumer behavior, introduce new products and build buzz around the brand at significantly lower costs. But, far too many companies start a loyalty program as a competitive response, with little clarity on the objectives of their program or how they will use it to create differentiation.
As a result, they create me-too programs which ultimately become cash sinks with little benefit to the company. On the other hand, Tesco designed its program with the objective of studying and responding to consumer needs. By using such insights they have been able to create a dominant market position across categories.
Despite the cost involved in running a loyalty program, few companies do a detailed thinking through of the design and the cost structure of their program. Consumer’s expectations and behavior varies widely by brands and categories. These consumer insights need to be understood and incorporated in loyalty program design. Also, many companies instead of choosing a segmented approach try to cater to all possible customers with their program. As a result, they struggle to develop a compelling proposition for their truly valuable and otherwise loyal customers.
Effective programs ensure that the benefits and spends are aligned with the life time value of the customers, as well as their purchase behavior. Jet Airways provides such segmented benefits reserving the highest benefits for its most valuable members.
Most loyalty programs fail to maintain consumer excitement after a point of time. At best, they degenerate to cash-back schemes or databases for mailing. This happens once the strategic focus is lost. Like any other marketing efforts loyalty programs also need to continuously evolve with the changing consumer and competitive landscape.
But what is loyalty today might not be loyalty tomorrow. The loyalty quotient is a circle of memory. They are not numbers which provide an index of loyalty but a polysemic notion where a thing is tied to ideas like friendship, joy, everydayness and their beauty. Probably, loyalty is due for rebirth. Another day, another time, and another form.
The trouble with concepts like loyalty is that they float happily about reality and yet seem to define the real for people who make decisions around markets. Taken seriously loyalty quotients like the word mid-life crisis say too much and too little. Taken playfully, it shows connections that we may not otherwise think abo
Analytics can be used to sharpen consumer behavior understanding and tailor make new consumer offerings and experiences. There are huge rewards for those who retain this focus. Neiman Marcus has retained an aspiration value for its “Chairman’s Circle” program. Harley Davidson has used its loyalty program to create a cult brand by taking community building to a new level.
Building a loyalty program that engages and retains its appeal for one’s consumers is a difficult job; more so in today’s competitive environment. Few companies seem to be able to do this. This leads most marketers to believe that loyalty programs are passé. The truth, however, is that the flaws are in the execution not in the concept.