Loyalty programs not in line with overall company strategy
Squeezed margins and pressure to increase profitability are preventing loyalty professionals from personalising customer offers. This is despite evidence that they really do work.
Stuck in a vicious circle of blanket discounting, poor data, and squeezed margins, at a time when profitability is under scrutiny, far too many brands are still failing to implement a personalized loyalty program when it comes to promotions and loyalty.
Accoring to research from Harvard Business Review, which was sponsored by Talon.One, the study of 420 respondents at organizations with promotions strategies found that only 56% of those surveyed say their organization currently runs personalized promotions or discounts, as opposed to mass discounting for example. This is despite
The fact that amongst those who do personalise offers, 94% say they are reaping rewards: 62% say they’ve seen increased sales as a result, while nearly half (47%) say personalisation has increased customer loyalty, and 44% say it has delivered a better customer experience.
There remains a stubborn cohort of almost one in four (22%) at businesses who have no plans to personalize promotions or discounts, while 17% say they don’t personalize offers but plan to start doing this soon.
These benefits, reports the Harvard Business Review research, could be multiplied when promotions and loyalty strategies are integrated – which in turn helps brands to unlock personalization. Respondents at businesses that have already partially or completely integrated their promotions and loyalty strategies report improved customer loyalty (60%), increased sales revenue (58%), better customer experience (56%), improved data capture opportunities (41%), and increased ROI of marketing efforts (40%).
The tide is turning. As brands focus increasingly on profitability amid a challenging economic environment, in the next 12 months, 65% are planning to increase their focus on the profitability of promotions and discounting, and 66% are planning to increase their focus on profitability of customer loyalty programs (among those who currently have a loyalty program).
The personalization paradox
Despite clear evidence that a personalized loyalty program drives value for businesses and for customers, when respondents at organizations that don’t currently offer personalized promotions were asked what prevents them from personalizing offers or discounts, 25% cite unclear business value/Return on Investment (ROI) as a reason for not investing in personalization and 28% say other business initiatives take priority.
Oliver Page, principal at Deloitte Consulting LLP, who contributed to the report, commented: “One of the most critical mistakes we see is that loyalty programs are not in line with the overall company strategy. We see businesses setting these big organizational goals in terms of how they want to drive revenue, or which segments they want to target, and then you look at their loyalty program and the personalization elements within it, and they aren’t tied to those goals. It seems obvious, but we see this strategic disconnect all the time.”
Click here to read Getting Strategic About Incentives: Building Value Through Promotions and Loyalty Programs