The State of Customer Loyalty In 2016

Forrester Research offers three ways to improve your customer loyalty program.
Customer Loyalty

Marketers have their sights set on improving loyalty in 2016: Forrester data shows that 80 percent of large organizations' marketing leaders said that it's a top marketing priority for the next year. Additionally, loyalty marketers have revealed a desire to shift from transactional loyalty to more emotional loyalty. Marketers want a deeper, lasting relationship with customers that tugs on both emotions and purse strings. But are they actually executing on it? Forrester surveyed 60 loyalty marketers from North America to find out.

Strategy: Marketers surveyed aspire to, and are investing in, evolving their loyalty programs and initiatives. They turn to loyalty to drive multiple business outcomes including retaining existing customers (of course), engaging customers, improving customer lifetime value, enriching relationships, and even acquiring new customers. Plus, they are invested in their current approach-literally and figuratively. Nearly 80 percent of marketers indicated that their programs and initiatives are effective at retaining existing customers, and a majority of them think they are effective at boosting customer profitability, improving share of wallet, enriching relationships, and enhancing the customer experience. What's more, the majority of respondents plan to increase their investments in important components of advanced loyalty such as customer experience, analytics, innovation, and mobile. Marketers are indeed thinking of loyalty beyond traditional discounts and points - with a handful even saying they plan to reduce funding for promotions and rewards - and planning their investments accordingly

Execution: The current state doesn't quite match up to marketers' stated goals. Even though marketers want to move their programs forward, they are stuck in a traditional points-and-rewards mindset. Less than half of programs leverage experiential benefits of recognition-based rewards, and the most common way that marketers defined active membership in their programs was based on earning activities. Less than one-third measured active membership based on interactions outside of the transaction--like mobile engagement, social shares, etc.

Marketers revealed real concerns about the value of their current programs: Three of the top five challenges that loyalty marketers face center on maintaining perceived value, ensuring awareness of the loyalty initiative, and differentiating their approaches from competitors in the marketplace. And these concerns aren't unfounded. On average, U.S. online adults belong to six loyalty programs, and are more fickle than ever. Plus, the marketers Forrester surveyed indicated that both personalization and measurement are top challenges; both shortcomings which make it even harder to command consumer mindshare in an already crowded environment.

Given the current state of loyalty, there are three key areas where marketers must double down: rethinking the rewards mix, getting serious about mobile (yes, it's time), and reinforcing their technology foundation.

1. Rethink the reward mix. Today, most programs leverage transactional rewards, like points and discounts that result in short-term spikes in activity around the offer delivery. But they come up short when it comes to soft benefits like unique experiences, recognition based on customer preferences, and enhanced customer service. In fact, less than half of programs leverage experiential benefits or recognition-based rewards. This is a missed opportunity: Seventy-one percent of U.S. online adults who belong to any customer loyalty program say that getting special offers or treatments that are not available to other customers is important to them. Consumers are empowered and can easily find the cheapest prices anywhere in the world. To elevate loyalty, marketers need to find a way to appeal to the hearts and minds of consumers, not just their wallets.

2. Get serious about mobile. As of 2015, 62 percent of U.S. online adults are always addressable. This means they own and use at least three connected devices, are accessing the Internet multiple times per day, and are going online from multiple physical locations. And, loyal customers are most likely to download and use a branded application. The opportunity to use mobile to enhance and extend loyal customers' experiences is huge, yet few marketers have even capitalized on the most basic mobile blocking and tackling. Mobile isn't going anywhere anytime soon, and should be at the top of loyalty marketer's' to do lists.

3. Reinforce the technology foundation. Loyalty strategies require technology for intelligent execution and marketers need to work with their business technology counterparts to find and leverage tools that will make their most loyal customers feel more special. This means investing in both modern loyalty technology and in integration with existing systems - like analytics, campaign management, and point of sale - to ensure that you can understand and respond to customers in a contextually relevant way.

There is still plenty of time left in 2016 to re-align your loyalty vision with reality. To get back on track, take stock of your rewards strategy, current mobile approach, and execution tools. Compare your own goals and challenges with the benchmarks I provided above to get an idea of where your program stacks up and where you can differentiate your approach.