Loyalty programs are no longer the sole domain of retailers and airlines. Photo: Jessica Hromas.
More than eight out of 10 Australians are a member of at least one loyalty program. Once the sole domain of retailers and airlines, loyalty programs are rapidly becoming a key marketing strategy for any business.
A growing number of brands are turning to loyalty programs to capture the hearts and open the wallets of Australian consumers, as the realisation hits that members are far more likely to spend on impulse purchases. The trend is notable across categories including travel, telecommunications, entertainment, accommodation, consumer goods and banking. The investment in loyalty and rewards programs serves to drive business goals such as incremental spend, frequency of visit and to keep brands in the hands of their members.
While some brands continue to question the value of loyalty programs, recent research confirms that successful programs have evolved from cost centres into key profit drivers, and provide a competitive advantage for brands.
According to the latest benchmark loyalty research study For Love or Money 2015, 82 per cent of members indicate they spend more with a program they are a member of, and 16 per cent on impulse purchases – buying items they didn’t need in order to earn or maintain program benefits. This figure jumps to 26 per cent for men under 45 years of age.
Just do the maths: Volume of members in a program x 16 per cent x average sale of impulse purchase = incremental revenue!
With more competition than ever before, programs are getting better. According to the research, 48 per cent of members believe programs have improved, up from 41 per cent in 2013. Further evidence is that fewer people are dropping out of programs, with member defection falling from 26 per cent in 2013 to 22 per cent this year.
However, your loyalty program can’t be a set-and-forget strategy. It needs to be a living, breathing asset to your business that requires constant care and attention to deliver the profit you deserve.
To avoid the clutter, ensure your program is more meaningful to your members and boosts your bottom line, there are many levers you need to orchestrate.
1. Ensure your objectives are clear and specific
Consider all the business drivers – the obvious ones being to increase spend, drive frequency and if you get the data part right, be relevant and personal with your communications. You may even want to add a program that simply thanks your customers, as Telstra has done.
2. Be committed to a program as a business growth strategy, not a marketing campaign
Too many programs fail because they didn’t start with the right commitment, from the right people. To be a profit driver, there must be unity across the leadership team.
3. Understand who your members are (and will be)
You also need to gain your team’s commitment. The yin and yang of a program are the members you want (to drive the behaviours you have determined) and the team you have to drive it. Both are critical to a sustained and profitable program.
4. Build a program that rewards members for transaction and interaction
While the research reveals members still want price discounts and redeemable points-based programs, there’s an increased preference for exclusive offers. You also need to make sure you reward your members for interacting with your brand, such as answering surveys, opening emails and attending events.
As you work through these imperatives, carefully consider the financials, the data and technology and ongoing reporting so that you build a program that is meaningful to your members and profitable to your business.
Adam Posner is the founder and CEO of strategic loyalty company Directivity.