With customer loyalty, industry executives say while their strategies are effective, approaches lack innovation. And while optimizing customer loyalty is a top priority, executives acknowledged that prior tactics don’t work in today’s environment.
According to an executive survey from Mastercard (which teamed with Harvard Business Review Analytic Services), 42 percent of executives polled “believe their organization’s approach to customer loyalty is effective, and only 43 percent consider their approach to be digital-first.”
“With 55 percent of respondents saying they’ve updated or refreshed their loyalty strategy within the past two years, it’s clear that businesses are grappling with changing tides,” authors of the report said adding that the survey results “point to the need to challenge standard notions of rewards, and begin reimagining the future of customer loyalty.”
That reimagination starts with understanding the needs and demands of shoppers, which is anchored by a digital-first lifestyle.
“Today’s consumer has a bank branch, a retailer and all of her friends within her reach,” said Francis Hondal, president, loyalty and engagement at Mastercard. “We need to meet consumers where they are, when and how they want to engage. This means connecting them across channels in a meaningful way and bringing them high-value services. These are the building blocks for robust, loyalty programs today and into the future.”
The researchers polled 400 senior executives across multiple industries. The researchers found that as recently as five years ago, “traditional rewards such as points and miles were considered the top determinant of a loyalty program’s success.”
But today, respondents rank “traditional rewards” as the fourth most important tactic. Forty-two percent of those polled said it is a top driver of success, which compared to “exceptional customer service” at 51 percent and digital and omnichannel access at 48 percent.
In the report, Erin Warren, general manager of the Rakuten In-Store Network, stated that consumers today “don’t necessarily need to receive something physical or tangible to feel rewarded.”
“Your best customers want some kind of acknowledgment that they are indeed your best customers, Warren noted. “Rewards are a component for driving customer loyalty because it makes them feel special and recognized by the companies they buy from.”
And it’s that “emotional connection” between a brand and the consumer that makes the difference and defines success. By region, North American businesses were pegged by the researchers as connecting the most with consumers on an emotional level (66 percent versus 57 percent of all businesses polled).
In regard to prioritizing a digital-first loyalty strategy, Asia led the way while businesses in Europe were shown to be aggressive in making investments in AI as they viewed customer service as a top priority. The survey also showed that companies are turning to solution providers to manage loyalty programs.
“Given the importance of customer loyalty, it’s not surprising that some companies are looking outside their own organizations for help in developing and administering customer loyalty programs,” authors of the report said. “Thirty-one percent of respondents already let an external partner manage their loyalty platform or would like to do so. Additionally, 28 percent use an outside partner to handle loyalty-related marketing campaigns or would like to outsource that function.”
In response to the survey results, Mastercard recommends businesses “create seamless, unique experiences” while also delivering “contextual loyalty” — which means building “personal relationships with consumers” and meeting “them precisely where they are.” And aside from deploying a “digital-first” loyalty strategy, brands need to leverage technology such as predictive analytics.