'Organisations waste billions of dollars each year on customer loyalty programmes that don’t work' – Accenture research

  • Regular voices
  • April 20, 2017
  • Ben Morgan
'Organisations waste billions of dollars each year on customer loyalty programmes that don’t work' – Accenture research

Of all the things that keep marketers awake at night, the vexed question of how to engender and maintain customer loyalty has to be top of the list. It’s just not as simple as it used to be.

While one person might value face-to-face interaction, being known by their name and offered discounts, another might place more value on a company’s website and how easy it is to navigate.

The digital revolution is here, and organisations have to catch that train or be left in the dust. Over the past few years, the worth of traditional loyalty programmes has been cast under the spotlight, and with good reason.

Organisations globally waste billions of dollars each year on customer loyalty programmes that don’t work, according to new research from Accenture, Seeing Beyond the Loyalty Illusion: it’s time you invest more wisely.

Accenture has found that, globally, members of loyalty programs generate between 12 and 18 percent incremental revenue growth per year than non-members. However, for growing numbers of consumers around the world, many loyalty investments are simply missing the mark.

A staggering 71 percent claiming loyalty programs don’t engender loyalty and 61 percent switched some or all of their business from one brand or provider in the last year.

In fact, 23 percent of global consumers demonstrate a negative or non-existent reaction to loyalty programs. And that number is rising, particularly among younger consumers who will be critical to driving revenue growth in the years ahead.

The truth is that traditional loyalty programs are costing significantly more, and delivering significantly less than many companies realise.

While there are notable successful loyalty schemes in New Zealand, there are reportedly signs that people have begun to disengage. Businesses are looking to social media more to engage with customers, particularly the younger generation.

Millennials number 1.8 billion globally with a lifetime value of $10 trillion, and they generally don’t like traditional loyalty programmes.

It’s critical that companies understand millennials’ impressions of loyalty and then tailor language and experiences to their values and behaviours.

A millennial is more likely to be swayed by a celebrity endorsement than lower prices, personalisation than product quality and innovative experiences than a single point of contact for issue resolution.

It’s a no-brainer to make social campaigns and mobile innovation a main focus – these are the group that check their phones as many as 157 times a day.

Spotify is an example of a company who are successfully keeping millennials loyal to the brand. When Spotify had an outage of a few hours, it proactively refunded customers as part of their monthly subscription and apologised.

In response to April’s widespread flooding in the North Island, Airbnb, another brand favoured by millennials, waived service fees so hosts could list accommodation for free. It also launched a disaster response page to connect with people in need of a place to stay. And it provided incentives in the form of insurance, security and host guarantees for people to provide free accommodation.

These are both great examples of companies who know how to build brand loyalty by showing loyalty over and above the norm, when it matters to a customer.

If you expect customers to be loyal to a brand without reciprocating, you will miss the opportunity to really deliver.

When you do show loyalty when it matters to a customer, and allow staff to do this, it can build brand love and amazing social influence.

While older consumers are generally more forgiving, millennials are quicker to switch providers and brands. They seek flawless experiences and spend less with brands with which they are loya than older people.

However, if you can get milliennials on-side, they will tend to share positive experiences with friends and family through multiple social channels, while others tend to keep product satisfaction to themselves. 

With all your loyalty programmes, justify every investment, with an eye toward margin growth.

Eliminate programs that don’t maximise investment. Identify every investment made in the name of loyalty (including rewards and capability investments) based on their ability to drive margin gains.

Recognise that actions speak louder than words. Given that customers’ loyalty feelings are no longer the predictors of buying behaviours they once were, companies might consider expanding their sensing capabilities to include customers’ actions.

Our research found, for example, that more than half of the most loyal customers actively recommend brands to others. And 14 percent express their loyalty by publicly endorsing or defending the company via social media.

View loyalty as a team sport. Loyalty is necessary, but it’s also an investment. It may make sense to work with partner organisations to create lower-cost acquisition channels and share the advertising and operating expenses of a loyalty programme.

Loyalty still matters. It always will. But the correlation between customers’ loyalty and purchasing behaviour is weakening. Build a strategy that takes into account the new reality, and free up your business and capital to grow. And remember be loyal to your customers when it matters most and they are more likely to stay loyal to you.

Ben Morgan leads Accenture Interactive in New Zealand.

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