• by Karlene Lukovitz  @KLmarketdaily, January 25, 2010

Loyalty programs represent a large and growing portion of marketing budgets. But according to a new report from the CMO Council, relatively few companies are fully delivering the elements that are most important in acquiring and keeping participants engaged.

The council surveyed 700 consumers, as well as 600 marketers. About 75% of consumers reported enrollment in supermarket loyalty programs, 71% in airline frequent flier clubs, and 60% in credit card incentive programs, with smaller percentages reporting enrollment in other types of programs.

Consumers clearly confirmed that relevant, valued rewards -- meaning rewards that match their individual preferences and are easily redeemable -- along with relevant, personalized communications, are the most important factors in driving loyalty program participation and satisfaction.

The good news: 78% indicated being "very or pretty" satisfied with their program experiences. However, 70% said they want more discounts/savings, 44% want better deals/offers and 39% want free products/premiums for patronizing program operators. Moreover, 56% said they want more compelling personal benefits and services, as well as more relevant offers/individualized deals.

The program turnoffs most cited by consumers were too much spam and "junk mail" (43%), difficulties in redeeming points/miles (38%) and too many conditions/restrictions (38%). Insufficient value in rewards/membership, and insufficient personalization of communications and service, were also high on the complaints list.

Marketers aren't unaware of consumer priorities. Nearly 40% said that they view discounts/savings as the key member benefits, 34% said that they view free products/premiums as essential incentives, and 33% indicated that their companies are offering points for merchandise redemption as added motivators. Asked to cite common consumer complaints about loyalty programs, marketers' answers paralleled those of consumers.

Nearly 64% of marketers view loyalty programs as essential or very valuable to the marketing mix, and 80% are committed to maintaining or increasing program funding. Yet, 46% acknowledged that acquiring and maintaining motivated participants is their biggest loyalty program challenge, and only 15% view their programs as highly effective at leveraging member loyalty/brand preference.

Feeling thwarted by obstacles to delivering sufficiently personalized loyalty rewards and communications is a root problem, the research indicates. Aside from acquisition/retention, marketers' most-cited loyalty program obstacles/issues include measuring marketing value and effectiveness (42%); collecting, integrating and maintaining customer data (41%); deriving valuable insight and intelligence (38%); delivering more personalized offers and inducements (35%); and creating more customized communications (33%).

Nearly 73% of marketers' companies collect basic demographics and 68% track members' locations, but roughly one-third or fewer track factors such as members' product/personal preferences, satisfaction levels and brand loyalty.

Tellingly, there is a "chasm" between where companies are focusing communications/marketing investments and how members actually learn about loyalty programs, stresses CMO Council VP, programs and operations, Liz Miller.

Nearly 60% of marketers rely on Web sites, 58% on email, 47% on word-of-mouth, 46% on point-of-sale information, 41% on direct mail and 38% on sales/service reps. Cost-effective email is the channel preferred by 84% of marketers, followed by print mailings/statements (52%), corporate Web sites, dedicated club sites (32%), SMS text messaging (24%) and social networks (16%).

Meanwhile, 65% of consumers said they acquire program information via point-of-sale messaging at retail, versus 10% via online advertising and 3% via social media networks or blogs.

The real issue is not that companies aren't collecting customer data -- it's that marketers "feel paralyzed by lack of access to integrated, real-time, usable data" due to internal functional and/or IT infrastructure silos, says Sandra Zoratti, SVP marketing for Ricoh/IBM joint venture InfoPrint Solutions Company, which sponsored the research.

There is no question that companies must develop the capabilities to effectively deliver customized rewards and relevant, multichannel communications based on member transactions and contacts, says Zoratti. But instead of remaining paralyzed by internal customer data challenges, marketers can improve their programs by focusing on the rudiments.

"If you don't have enough individual member preference information, do a survey -- then concentrate on doing what's necessary to deliver the rewards and relevant, compelling communications that your members want most," she advises.