Sadly, we are now many years into retail loyalty marketing programs and as a consumer, I still don’t see much that’s new, engaging or innovative. However, as a retail loyalty marketing professional I can imagine the board room conversations that lead to these uninspired programs. From challenges in demonstrating clear ROI to lack of alignment with goals, there’s a reason the retail industry has so many lackluster loyalty programs.
It doesn’t have to be this way. By creating strategies to avoid common pitfalls either pre-launch or as the program is phased to the next level, retail brands can make loyalty programs far more compelling to consumers as well as more profitable for the company.
The most common mistakes I see retail marketing organizations make as they enter into loyalty programs fall into three buckets.
- Treating loyalty as a marketing or IT initiative rather than an enterprise wide effort. This approach limits the scope of where customer data can be leveraged and does not ensure true buy in with key partners like store ops, IT, finance and merchandising. Because loyalty and CRM can require a significant investment of energy and resources, company-wide buy in is critical to success. Successful programs are a core company priority, not a side project competing for attention.
- Not having clearly defined and agreed upon success metrics. Don’t assume having customer data and a tool will automatically lead to success. Before investing company resources into a loyalty initiative, you need to agree on a clear ROI that takes into account time, money and opportunity costs.
- Viewing loyalty as a project that can be completed in a short period of time. Any good loyalty program will constantly evolve and require organizational patience. By its very nature, customer data is iterative. The more a company learns, the more they tend to want to know. Early stage loyalty/CRM programs can often feel like drinking from a data fire hose. The organization needs to think of loyalty as a journey, not a destination.
So how can brands avoid these pitfalls?
- Partner with key teams during the beginning stages of the program. The launch of a loyalty program has an impact on every facet of your brand. Store associates will have to be genuinely engaged and trained. POS and internal systems will need significant modifications. The IT department, which likely already has too many projects, will be stretched into new capabilities. Merchants will have to think differently about everything from pricing to promotions. The finance team will need to help with a P&L, KPIs, and constantly proving the ROI of the program. Once you consider how the program depends on and affects other teams, it’s obvious why their input cannot happen at the end of the cycle. Collaborating with these departments from the beginning lets them develop clear ownership and accountability for the program’s success.
- Make the finance team a co-owner on loyalty profitability. As much as you believe in halo effects, customer engagement and brand loyalty, your finance team wants to hear about the bottom line. Show that you care about it, will commit to it, and will help track against it by establishing easily proved ways to predict and measure profitability. Examples of this include increases in incremental sales from direct marketing using newly acquired customer data, average basket size increase, and year over year customer counts. The key is to keep it simple and measurable.
- Never stop communicating and re-communicating what the roadmap is and where you are on it. The Loyalty Leader in marketing has to also be the Customer Loyalty Evangelist charged with educating the organization on both new programs and ones that have been around for a while. Keep other teams in the loop by attending departmental staff meetings, presenting on outcomes at company-wide meetings, and creating quarterly updates for senior management.
As trust and engagement are built around the loyalty program over time, it will be far easier to continue evolving the program and developing more engaging consumer benefits.