Is a loyalty programme right for your business? Only if you can work around the bad and ugly stuff. It comes down to understanding your market, warts and all. Inspiring customer loyalty is not just about having a loyalty programme, it’s about a customer-centric strategy that focuses on giving your customers the kind of experience that meets their exact needs.
What do our customers really need?
While consumer behaviour has certain generic trends the world over (like emotion-based buying), marketers also need to be attuned to the regional factors at play.
We’re a bit different in South Africa. Here the majority of people aspire to rising out of poverty and improving their lifestyle, so we see high levels of buying on credit. Almost half of South Africa’s approximately 20 million credit active consumers are over-indebted and have impaired credit records – they are living beyond their means. The consequence is that we are often unable to use LSM as a benchmark of buying behaviour.
One result is that points-based loyalty systems are failing. Consumers who can’t actually afford to buy items over and above their normal baskets have learnt to manipulate the system and are substituting purchases to score points instead of buying additional items.
The aspirational drive also weakens customer loyalty. 55% of South African customers say that they are not loyal shoppers. Instead, they are willing to experiment with brands when their perception is that the brand promises greater happiness and success. Again, it comes down to emotion – the buying decision is driven by the desire to have or experience more of the good stuff.
In the same vein, we choose the easy road. South Africans are quite passive – couponing is not for us. We opt for buying experiences that offer the least effort.
And the least risk. Paradoxically, in certain market segments the most loyal customers are often the most cash strapped. Brand loyalty to certain household products has enjoyed legendary success in low income areas because shoppers don’t want to risk their hard earned money on an unknown product.
So however loyalty is used, the mechanism must allow for less effort and less risk for the customer, along with greater emotional gratification.
Why do some loyalty programs fail?
This is the ugly part – not all loyalty programmes succeed in meeting their objectives. Be aware of these five points of failure before you embark on your own loyalty program:
- Poor product offering: It can be that the core product simply doesn’t cut the mustard. If competitors are offering something better, that’s where the market will go.
- Technology gremlins: Often technology dictates the solution, especially if you can’t invest in customised technology that is built around the solution. Loyalty programmes are tricky to manage and without highly customised functionality and metrics, the model may simply be unsustainable.
- Budget, budget and budget: younger consumers are embracing the importance of supporting local economies The marketing team may be under pressure to innovate, both in benefits and channels, but not have the budget to do this effectively. Or Finance puts pressure on you to optimise the program and reduce costs, which slashes the benefits and innovation opportunities even more.
- The KISS factor: Remember the behaviour of your market. When rewards are not simple and easy to claim or if there is a barrier to entry or, quelle horreur, there are costs to join, you can kiss your customer loyalty goodbye.
- Communication first and forever: There are actually companies out there that develop highly effective loyalty models, but then don’t market the offering properly. A particular failing is to take shortcuts via generic instead of personalised communication. Eish!
Effective Customer Experience (CX) can instil loyalty in your customers and also fetch you new ones.
Stay tuned for part 3!
Torque Communications thanks the speakers and hosts at Marketing Mix Conferences for sharing their insights and learnings on Loyalty Programs.