How to design a loyalty program that is both economical for its margin and satisfactory for the customer? A balance that many companies have not yet been able to find, a proof is a recent abandonment by Decathlon, the famous French distributor of sporting goods, of its loyalty program. A fact that should not discourage fanatics of customer loyalty, because the digital era has never been so ready to reinvent the loyalty program as we have known.
More than 60% of French people say they own more than 10 loyalty cards. Are they satisfied? Not really to believe the Observatory of Loyalty and customer loyalty. Indeed, while 40% of them believe that it does not provide enough advantage, 60% even say to forget to do it when the opportunity arises. A cruel finding for programs that are costly for companies, whose generosity rate oscillates between 1 and 3% of their customers’ expenses. Thus out of 100 euros spent, a client member would get a reduction of 3 euros in the best case. A modest amount compared to the many commercial transactions on the web that are open to all throughout the year and reach 5, 10, 15% discounts.
The transactional logic of loyalty: a model in decline
The majority of companies have a transactional logic of loyalty, where the rewards are based primarily on the purchases of the subscribing customer. In this way, the customer receives points to redeem for gifts or discounts. But do they really expect this type of model from their favorite brands? Not according to the American consumers, who regret that the discounts lack values by not being aligned on their preferences (44%), nor on the purchase path (33%), ie the recognition of the adheres to all points of contact of the company. Unsurprisingly, personalization and customer experience are the two key elements of loyalty in the digital age.
Digital: pivot of personalization and customer commitment
Many companies were able to seize the opportunities offered by ICTs to offer their customers a loyalty no longer just transactional but above all engage. And Sephora is one of them. Thanks to its application, its most loyal customers have synchronized their membership directly on their smartphone. In this way, Sephora customers are able to track their purchases, view offers, redeem reward points on their trips and be recognized by the brand regardless of the point of contact with it. A paying strategy since in fluidifying the cross-channel customer journey through the mobile, its members have spent more times than an average customer.
Regarding the personalization of the offer, fashion retailers like H & M base their discounts on the location or the customer’s purchase history. With the increase in ICT-generated customer data, targeted programs are becoming more relevant to basic segmentation. Mobile payment is also an opportunity to enrich the customer’s incredible knowledge because retailers are able to contextualize very precisely the personalized journey of the customer.
Social networks are also perfectly used channels by some companies to boost customer engagement. For example, L’Occitane rewards its Spanish customers by giving an opinion on their products purchased or shared on a social network. Making each customer a potential influencer powerhouse for the brand. Otherwise, social networks are also incredible crowdsourcing bases. By surveying their customers about the benefits of a loyalty program, companies build a loyalty program that reflects the image of its consumers. In this way, the use of social networks increases the chances of a loyalty program that has already generated commitment from its inception.
So, these many examples show several things. Advances in technology have evolved loyalty programs by giving them greater personalization of the customer experience and commitment. Transforming loyalty no longer as an indicator sufficient to judge the financial performance of a loyalty program. From now on, it is customer engagement which is the benchmark indicator of the loyalty and financial performance of a loyalty program.