It is no secret that customer loyalty is critical to business success. Consumers are inundated with programs and mobile apps that track their purchases and even their geographic locations to deliver offers that that encourage repeat purchases. And to some degree, efforts to drive customer loyalty are working. The number of loyalty memberships in the U.S. is up to 2.6 billion and the average U.S. household is enrolled in about 22 loyalty programs, according to Colloquy, the research arm of marketing and transaction services provider Alliance Data.
But not all memberships are active, since customers often sign up once to receive a discount and never use the program again. According to Colloquy, only about 10 memberships are active for every household.
More than half (55 percent) loyalty members drop out of a program within the first year, reports marketing research firm L2. And more than 90 percent of members want to receive communications from loyalty programs but only 53 percent receive relevant content, according to the survey.
As a result, marketers are investing in solutions to drive higher engagement rates from loyalty members. CRM data and Web analytics are the top two areas that marketers are investing in to improve loyalty engagement rates with social media management systems coming in last, according to L2's survey of more than 100 retailers.
These findings are in line with sporting goods retailer Sports Basement's cautious approach to loyalty programs and social media. David Rumberg, project manager and partner at Sports Basement, says the San Francisco-based company mainly advertises through word-of-mouth advocacy but has yet to offer a loyalty program.
"Frankly, we don't see a reason to ask people to sign up for a loyalty program especially when a lot of those programs pester you with emails and notifications that aren't always relevant," Rumberg explains. "As soon as you annoy a customer, you've lost them and we don't want to risk that."
As for social media, the company has profiles on LinkedIn, Facebook, and Twitter but the company is "still trying to figure out how to best use these sites for engagement," Rumberg admits. "I can't say we completely understand it," he adds, "and we don't want to pump out information that amounts to more noise, so we're only on social media to a basic level and only if people interact with us directly."
Takeaways: Relevance and customer choice are essential. In addition to offering rewards or deals that meet the customer's needs, allow customers to control the frequency and type of deals that they receive.