- November 2nd, 2015
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Hair-Raising Loyalty Missteps: What Supermarkets Can Learn From Kroger, Amazon
Mismatched data, unrealistic promises and tricky rules – many retailers make these kinds of common mistakes in their loyalty program strategies. In honor of Halloween, here is a list of spooky loyalty missteps that could scare away customers any time of year.
Worse things can happen than getting a box of raisins on Halloween. Consider the fate of those who distribute them.
If you are a retailer, giving irrelevant or unwanted offers could be much worse than providing none at all, because those customers will be less likely to come back to your door. And unlike trick-or-treaters, customers pay for the opportunity.
Mismatched data, masked promises and labyrinth rules – many retailers make these kinds of common mistakes in their loyalty program strategies, and it could cost them not just shoppers, but families of shoppers. And that means money. A low- to moderate-spending family of four earmarks $700 to $1,000 a month on groceries, according to the USDA’s Center for Nutrition Policy and Promotion.
That’s a lot of raisins. Factor in the lifetime value of a customer, and we’re getting into some chilling numbers.
Haunting figure: 6 in 10 loyalty programs abandoned
What is especially vexing about common loyalty mistakes is they are occurring at the same time many program operators are losing the battle to retain customers. While memberships advanced by 26 percent from 2012 to 2014, to 3.3 billion, 58 percent of those programs are inactive, according to the 2015 COLLOQUY Loyalty Census. This is not a new trend; the rate of inactivity has been climbing over the years – in 2012, it was 56 percent and in 2010, 54 percent.
Why? Perhaps marketers can derive meaning from these 2015 survey results, also by COLLOQUY: The top two reasons consumers give for continuing to participate in loyalty programs are that the programs are easy to understand (81 percent) and that they offer rewards that are relevant (75 percent).
That’s a pretty straightforward message, yet many loyalty programs still offer boring rewards that are hard to earn. Why settle for raisins when the store down the street is giving away full-size candy bars in return for someone’s repeat business?
In honor of Halloween, here is a list of the spookiest loyalty program missteps that could scare away customers any time of year.
Gobblin’ the data: At the root of most loyalty disconnects is a lack of customer understanding. I’d bet the majority of supermarkets, even all retailers, offer some kind of membership incentive program, yet only a small percentage know how to use the data they collect to better interpret and benefit their customers. Those that do are the industry leaders. The Kroger Co., for example, in September promoted its chief information officer to also serve as an executive vice president to a new analytics subsidiary – a bid to better understand customer purchase data and be more competitive. Make no mistake, that data can yield information that illustrates the shopper’s values, personal preferences, life stage and even sports preferences.
Scaring up new memberships: Almost half of marketers (47 percent) invest the same in membership acquisition as member retention, according to a 2014 Econsultancy survey. Yet existing customers are 50 percent more likely to try new products, and they spend 31 percent more, than new customers, Invesp Consulting reports. A retailer should honestly assess whether it is creating meaningful relationships with the members it has before deciding to invest in acquiring more. Otherwise, it is just trading in old tricks for new. Further, long-term retention translates to reduced costs. I suggest investing 75 percent of the loyalty budget on retention.
Making zombie promises: Before embarking on a loyalty strategy, a retailer should carefully consider the implicit promises and ensure that it has the capacity and the commitment to deliver on these expectations. The British grocery chain Waitrose made headlines after promising its myWaitrose loyalty members free coffee or tea. Turns out many of the thousands (maybe millions) of members who cashed in were not buying anything, just taking up seats in its cafés. This annoyed paying customers, who complained. When Waitrose changed its policy and required members to buy something in return for a free beverage, loyalty members complained. The lesson: Customers agree to share personal information with the expectation of getting something of equal value in return – the trick is balancing how that value is delivered so that the brand recognizes better customers while also keeping new or emerging customers interested.
Bewildering rules: Small type is to a loyalty program what a spider’s web is to a dark stairwell – unwelcome and loaded with the “ick” factor. When creating its rewards initiative, a retailer should stick to one straightforward earnings structure with easy-to-understand benefits. The guidelines to earning those benefits and rewards should be easy enough for a child to understand, and they should be personalized to synch with what inspires and motivates the target customer. If the retailer can set short goals, all the better – that will help to maintain enthusiasm. Amazon Prime operates on a simple formula: The shopper pays for membership, gets free two-day shipping (including food through PrimePantry) and unlimited access to streaming video, including exclusive programming. A kid could understand that.
And even a kid could figure out that the neighbor who gives away pennies, apples and raisins on Halloween is the neighbor to skip. Even if that neighbor gives away enough to fill a shopping cart, what good is it if no one wants it?
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.