Commentary

The Value Of A Brand Loyalty Program

According to the 2015 Loyalty Report from Bond Brand Loyalty, the past year saw more and more consumers opt-in to a variety of different loyalty programs with consumers overwhelmingly agreeing that loyalty programs are worth the effort.

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Enrollment is up, with meaningful year-over-year increases observed on all key sentiment trackers, and consumers reporting: 

  • “Programs are definitely worth the effort” 
  • “Programs make me more likely to continue doing business with certain companies” 
  • “I modify when and where I make purchases in order to maximize the benefits I receive” 
  • “I modify what brands I purchase in order to maximize the benefits I receive”

Marketers must focus on authentically fulfilling customer needs to break the habitual reliance on the discount-oriented value proposition.

  • The functional elements, including the ease with which rewards can be redeemed and amount accumulated per $1 spent, rank highly as drivers of program satisfaction. Yet, relying on these functional elements is a pitfall to which many brands have succumbed.

The program must serve the brand, not just the program.

  • 34% of customers say they would not be loyal to the brand if it weren’t for the brand’s loyalty program, and programs are seen as an extension of the brand as affirmed by the 76% of Americans who think that loyalty programs are part of their relationships with brands.

Mobile in loyalty not only improves the program experience, but ultimately drives loyalty to the brand.

  • Mobile is a strategic high ground in loyalty. It’s at once a combination of a communication conduit, a unique identifier, and a payment vehicle. It is the customer’s link between online and the real world. Mobile adds utility to marketing as part of an improved customer experience in a way that loyal customers appreciate.
  • And yet there is contradictory data. While 48% of Members agree, “I would like to engage with loyalty programs through my mobile device,” only 12% of customers have downloaded a program app, and 60% of smartphone owners are not even aware whether or not their program offers a mobile app.

Some of the most beloved brands have no formal loyalty program, yet lean on familiar loyalty design principles to achieve their covert and stealthy alternatives to formal programs.

  • These brands have crafted a value exchange that is not solely reliant on a discount and monetary exchange, but rather on one that fulfills customer needs, makes customers feel recognized and valued, and engages through relevant and personalized experiences. In short, these principles help brands outperform by making the experience with the brand better, get customers to a place where they’re willing to pay a premium, and make them more loyal to the brand.

In each of the years Bond Brand Loyalty has conducted this comprehensive study on consumer usage of and attitudes toward the loyalty programs in which consumers participate, they have captured and tracked a number of general sentiments, including:

  • 86% agree that programs are definitely worth the effort 
  • 83% say programs make me more likely to continue doing business with certain companies 
  • 76% agree that programs are part of my relationships with the brands
  • 76% modify when and where  purchases are made in order to maximize the benefits
  • 64%  modify what brands purchased in order to maximize the benefits

Consumer response, though, says that there’s work to do to improve programs in the very near future.

  • Despite the increase in average enrollments, the average number of programs in which Members are active (i.e., make a purchase) has not shown a corresponding increase. This suggests consumers are reaching a program engagement saturation point.
  • For some loyalty brands, the race for share of mind and wallet could be a race to the bottom. Only 49% of consumers agree they spend more after having joined a loyalty program, suggesting that marketers are incurring program costs with no corresponding increase in sales among a significant portion of their customer base. 
  • 44% of customers agree that “…it would be easy to replace the program with a competitor’s program”, suggesting that programs are falling short in terms of serving as a key source of competitive differentiation for many brands.

Program satisfaction is a worthy pursuit for marketers – in general, program satisfaction correlates well with many of the desired outcomes that marketers expect of an investment in loyalty. The more salient question that naturally follows, says the report, is: What drives program satisfaction? What are the program elements on which program operators should focus in order to most positively influence overall program satisfaction? Elements that ranked as top functional drivers of satisfaction include:

  • The appeal of rewards
  • The ease with which rewards can be redeemed. 
  • The amount accumulated per $1 spent. 
  • Ability to reach rewards in a timely manner. 
  • Number of ways benefits can be earned.

The study reveals a path for marketers eager to reduce their reliance on monetary incentives in pursuit of customer engagement and program satisfaction. The path is paved with experience-based drivers of satisfaction, which are as weighty as the functional rewards-oriented drivers in terms of their influence on overall program satisfaction. Elements that ranked as the top experience drivers include:

  • The program is worth the effort of participating. 
  • The program meets my needs. 
  • The program is enjoyable. 
  • The program is simple. 
  • The program is easy to understand.

34% percent of customers say they would not be loyal to the brand if it weren’t for the brand’s loyalty program, says the report, and 62% agree that “The program makes my experience with the brand better.” 63% agree that “The program makes me more loyal to the brand.”

The study also included the loyalty program as a factor in the Report, and assessed it alongside a host of other factors that potentially influence consumer satisfaction with brands, including the quality of product (or service), the consistency of product (or service) quality, price, value for money, location/convenience, and more.

What the results show is that the loyalty program ranks ahead of factors such as value for money, price, and convenience/availability of locations in driving satisfaction with brands.

Drivers Of Overall Brand Satisfaction

Influence

Relative Ranking

Quality of product/service

10

The brand meets my needs

8

Consistency of product/service quality

8

The loyalty/rewards program

7

Availability of products/services

7

Experiences at the brand are enjoyable

7

The brand treats me like a valued customer

7

Value for money

7

Customer service experience

6

Interactions with the brand are easy

6

Overall price

6

Communications received

5

Interactions with staff

5

Convenience and/or availability of locations

5

People I know are positive about the brand

4

People I know are loyal to the brand

3

Source: Bond Brand Loyalty, April 2015

Represented among the top drivers of satisfaction with the brand, and ranked second overall among all factors assessed is, “The brand meets my needs.” This tells us that “loyalty” is an opportunity for brands to close the gap between what they promise their customers and what their customers experience along the path to purchase, concludes the report. Done right, it becomes a path to repurchase that is frequently traveled by the customer who is engaged and loyal.

The role that all loyalty programs must play is significant, says the report; not just in terms of driving loyalty to the brand, but serving as a source of sustainable, competitive differentiation for brands. 

To access the free Loyalty Report, please visit here.

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