The New Year’s Resolution Curse On Loyalty Programs
At the beginning of 2015, much like the beginning of every other year before it, people all over looked forward with renewed energy and optimism at the chance to better themselves in the year to come. Resolutions come in all shapes and sizes, but one of the most popular resolutions always involves getting into shape, being accountable for your personal fitness and getting to the gym. Without fail, it’s by far the busiest time of the year for fitness centers. In the month of January alone, gyms can budget to acquire up to 50% more members than normal. But by the middle of summer, only a handful of these go-getters remain as active members. The rest have lost the drive, the motivation or the interest to continue.
This common human scenario mirrors one that practitioners in the loyalty marketing space are all too aware of, and it’s a concern of growing and dire importance — how do I keep members of my loyalty program actively participating and engaging with my brand?
According to the 2015 Colloquy Loyalty Census, loyalty program membership in the United States has risen from 2.6 billion members in 2012 to 3.3 billion in 2014, a staggering 26% increase. And this comes on the tail of a 27% increase from 2010 to 2012. But an enrolled participant does not an engaged participant make.
Even as consumers are enrolling in loyalty programs at an unprecedented rate, a growing problem is becoming all too clear: the number of members who actively participate in loyalty programs is declining. Since 2010, member participation has decreased from 46% to 44% in 2012, down to a disappointing 42% in 2014. The Colloquy study goes on to paint a picture of predominantly disengaged American households, reporting that out of the mean 29 loyalty programs that the average household is collectively enrolled in, the household was only active in 12 of those programs.
With the number of inactive program memberships hovering at around 58%, and with that percentage growing at a steady rate for the past five years, loyalty marketers obviously need to try something new. But what? Understandably, there isn’t a one-size-fits-all solution for the issue of disengagement among loyalty program members, but a new and fresh perspective on how to approach loyalty programs across the board could mean the beginning of not only increased customer engagement, but a lasting and meaningful relationship between your loyalty program members and your brand.
A new approach developed by Maritz Motivation Solutions begins by examining the way a brand and its loyalty program interact with members. Loyalty marketers are used to focusing on the ability of a program to drive repeat transactions and create revenue, and this is the end goal in mind from the program’s inception all the way to its implementation. “Spend, earn, redeem, repeat” has been the prevalent marketing mindset for the past 40 years, with the vast majority of loyalty programs centering on this model. But as more brands adopted this mindset and joined the fray with their loyalty programs, the loyalty space became flooded with look-alike programs that shared similarly lack-luster value propositions. It’s no wonder today’s customers are becoming less and less engaged with their programs.
In order for a loyalty program to thrive, it shouldn’t be born out of a will to drive transactions but instead should have in mind the end goal of building lasting, thoughtful and meaningful relationships with its members. Today’s loyalty program should be purpose-driven. In the book Marketing 3.0, Philip Kotler places us in the age of creative society and explains that people are increasingly valuing the non-material aspects of life and that are searching for an increasing sense of meaning and happiness. In this new environment, he argues, “Supplying meaning is the future value proposition in marketing.” This isn’t to say that driving transactions isn’t important. We want to keep the lights on at work and see our business grow. But this new approach goes beyond the transactional mental model of the previous era to embrace a broader approach to achieving customer loyalty where transactions occur in the context of a bigger purpose.
So the solution to creating not only more customer engagement, but also more lasting customer engagement begins with re-examining the way we engage with our customers. But it doesn’t end with transactional programs or relational programs. There are two more dimensions to consider when fostering customer loyalty that are critical to fully understanding the kind of interaction you are building with members: passive versus active engagement. In a passive program, members are asked to do little other than receive and appreciate program benefits and communications. Conversely, in an active program, customers are fully aware of their participation and are very deliberately working to maximize the value of their membership.
We’re now left with four dimensions to consider when designing loyalty programs that keep our customers engaged: Transactional, Relational, Passive and Active. But because of the growing need to keep members engaged, the programs that we as loyalty marketers design can’t afford to be focused on only one of these four dimensions; a program that’s nothing but transactional might drive repeat purchases, but it runs the risk of being perceived as manipulative by consumers that crave experiences. A program could provide outlets for members to engage with the program and utilize the active dimension of loyalty, but if they don’t feel like you’re invested in the relationship, they’ll find someone else to spend time with.
The best course of action is to build a loyalty program that implements a combination of these loyalty dimensions. In what could be called a “multi-loyalty” approach, a brand engages its members by utilizing a variety of methods. Creating a program with the end goal of forming lasting relationships with members (Relational) will highlight the transactions that they’re driven to make with you (Transactional) in the same positive light that they’ll shed on your brand while they’re actively connecting with other members of the program (Active).
So regardless of how often we might (“might” always seems to be the operative word) go to the gym, how much television we watch or how often we spend watching cat videos on our phones, as loyalty marketers our resolution for the years to come should be to seek more meaningful engagement with our customers by putting them first and employing a multi-loyalty approach that truly meets all their needs as human beings.
— Barry Kirk brings a decade of experience in customer retention and digital marketing to his role as VP of Loyalty Strategy for Maritz Motivation Solutions. In this role, he serves as the leader of the Maritz US loyalty practice. A sought after speaker, blogger and workshop leader, he has led the introduction of new disciplines like neuroscience and gamification to the loyalty space, and champions the belief that “consumers are human beings first.” Prior to Maritz, Barry led the consumer loyalty practice for Bunchball, a Silicon Valley tech startup focused on customer and channel engagement. Follow Barry online at www.twitter.com/barrykirk.
To learn more about the four dimensions and how Maritz defines the different types of loyalty, download the eBook: The 4D Loyalty Framework: A New Map for the Journey to Lasting Customer Relationships.