Loyalty Programs Valued, But Struggle With Engagement

Been to a CVS in the last six months? You’ve probably seen something like this.

So @smashleychavez  (opens in a new tab) buys one thing of honey, comes out with a receipt almost the size of her. CLASSIC CVS pic.twitter.com/dkh5wvHWM4  (opens in a new tab)

— Ricardo 🇺🇸🇲🇽 (@OhItsRicardo_) August 10, 2013  (opens in a new tab)

This picture, which went viral  (opens in a new tab) earlier this year, along with CVS’ tendency to print long receipts  (opens in a new tab) is something of a microcosm of the potential—and potential failings—of loyalty programs.

According to a new Forrester study  (opens in a new tab) that surveyed 50 loyalty-program marketers, the programs are becoming increasingly important to many organizations, but only about 16 percent of their customers are enrolled and redeeming rewards overall. What’s the deal, and what can associations learn from this? More details:

A problem of engagement: While 70 percent of the executives surveyed said consumer retention was a top priority with loyalty programs, consumer engagement was also a key issue for many executives. “Consumers are increasingly interacting with brands,” Forrester analyst Emily Collins said in a recent Loyalty360 webinar  (opens in a new tab). “Marketers turn to loyalty to deepen customer relationships because they can better identify and more easily reward customer behavior.” However, that engagement seems hard to come by. Fewer than half of their customers (45 percent) actually join such programs—and only 16 percent of consumers actively use loyalty programs.

Online vs. physical: While physical use of a card—think Starbucks—might be the first thing that comes to mind when thinking about interaction with loyalty programs, the most common way for consumers is more virtual in nature: 92 percent of the survey’s respondents said they rely on email to reach members, and 82 percent use a website. (Others, including call centers, direct mail, mobile, and point-of-sale, were further down on the list.)

So how do we improve this? In a recent interview with BizReport  (opens in a new tab), Martin Tongue, senior vice president of business development with loyalty program marketer Points  (opens in a new tab), says that part of the problem may be related to a glut of such programs, along with a lack of relevance. “While there has been an increase in the number of loyalty programs,” he explains, “many members are becoming disengaged because they don’t feel the rewards on offer are relevant to them personally, or because they have to jump through a number of hoops to earn miles or points that aren’t commensurate with their efforts.” Part of the solution to this issue may be to simplify the process so that one platform offers such services across the board, perhaps via an app—something Belly is doing  (opens in a new tab) in the consumer space and Larky is attempting in the association space.

Reconsider your program: Forrester’s report recommends that marketers perform a self-assessment to see how consumers are reacting to a program and then adjust to their needs. This sort of assessment actually came in handy for CVS, after it decided to shorten its receipts  (opens in a new tab) following a campaign against them that went viral. (Disclosure from author: I openly cheered when I read this, as I’ve had a few epic receipts in my day  (opens in a new tab).)

How often do you use loyalty programs? Tell us about it in the comments.

CVS recently faced backlash over its loyalty program, which relies on long streams of coupon-laden receipts. (photo by Ernie Smith)