Building lasting loyalty among existing customers has long been a focus for businesses across all industries, as it’s well-known that it costs five times more to obtain a new customer than to keep an existing one. However, with competition growing more intense in all sectors as digital distribution channels and technology has made it easier than ever for businesses to enter the market, growing loyalty and resulting retention has never been more challenging. In fact, a study revealed that only 24% of companies rated their loyalty and retention efforts as “very effective.”
In the past, businesses have often fought for customers’ loyalty using rewards programs; trading purchase frequency for discounts, gifts, and similar perks. There are currently an estimated 2 billion such loyalty memberships in the U.S. alone, and the average number of memberships per household is 18. However, as industries have grown to give customers more choice, so have customers’ expectations. As such, these traditional models are not as effective as they once were. Research by Forrester has suggested that loyalty programs that focus solely on discounts are not perceived as valuable as they used to be. In addition, a CMO Council study found that not only are consumers struggling to see the value of some loyalty programs, but they are even feeling inconvenienced by them. This is evidenced by the over half of loyalty program members who reported they are considering defecting because companies bombard them with spam and irrelevant offers. To win customers’ loyalty, businesses need to look beyond these traditional models.
Thinking Outside the Box of Traditional Loyalty Program Offerings
Many companies are addressing this increasingly more challenging goal by adding resources dedicated to loyalty and retention. In fact, 65% of companies surveyed shared they currently have a dedicated role for this effort and 13% shared they plan to add one. While companies allocating staff to this important function can help to optimize its effectiveness, it can also potentially drive up cost. As such, additional pressure is put on the individuals in these roles to deliver a strategy that increases program value to customers in order to not only justify the existence of their role, but also to help the company achieve its loyalty goals. Among top goals, companies recently surveyed shared that their top challenges to improving the effectiveness of their loyalty efforts are delivering offers with a high perceived value and differentiating their program from similar ones in the marketplace.
To overcome these challenges, businesses need to think outside the traditional method of adding value to their core offerings by providing customers discounts and gift cards, and look to what data suggest are widespread consumer concerns that they can address through their loyalty program strategy. A report from Forrester provides some insight into the different types of rewards customers would find valuable, revealing that 56% of U.S. adults want access to member-only services, whereas interest in points and discounts have remained stagnant over the past few years. One service that consumers have indicated a high interest in, and a growing number of companies are offering either as a complimentary value-added service or an additional revenue stream, is identity protection. Our recent consumer study showed that 50% of consumers are looking to purchase identity protection within the next two years and they will look to the companies they already trust with their data to obtain it. This is unsurprising considering data breaches reached a record high last year according to the Identity Theft Resource Center.
In addition to growing loyalty, offering identity protection can also help businesses to grow trust amongst their customers. According to a recent survey we commissioned, over half of all Americans (55%) would have more confidence that businesses are actively working to protect their data, and reduce their risk of identity theft or fraud, if these businesses were to offer identity protection services, whether for free or at a cost. Similarly, retail businesses that currently offer identity protection services, or that plan to do so in the future, instill greater confidence in 56% of Americans.
Choosing a Partner Who Will Be a Positive Extension of Your Brand
Another important consideration for businesses that are thinking about offering additional services as part of their loyalty program strategy, is that research has shown that consumers are more loyal to brands that not only offer them value and a quality product or service, but also provide an overall consistent experience. These consumer insights are particularly important to keep in mind when considering which providers to offer services from that will drive loyalty. It’s key that companies like yours consider a few things when selecting partners:
Determine how well-established the provider is to be sure they will be a partner your company can rely on long-term.
Carefully assess the provider’s customer service quality to ensure they will be a positive extension of your brand.
Calculate if the provider offers their services at a cost that’s competitive enough for your organization to offer it complimentary or, if you are planning to sell it, at a price for your customers will be willing to pay.
Evaluate if they will provide high-quality, hands-on customer service to your organization as well. Your partners’ commitment to managing the program administration and marketing in a way that supports your current processes and/or goals will relieve you of added or unnecessary administrative burdens. Furthermore, it will enable you to focus on other loyalty program priorities.
Choosing the right services to offer, and which company to offer them from, can help your company reach its loyalty program goals, without compromising on costs or time spent on administration. If you are ready to improve the effectiveness of your loyalty efforts and differentiate them from your competition, request a demo.