Increased spending on loyalty programs not increasing engagement

Companies spent $2 billion on loyalty programs in the United States last year, yet a majority of businesses are reporting that these investments are not translating into increased customer engagement.

As much as 89 percent of social media opinion on loyalty is negative, and these negative feelings are attributed to a lack of reward relevance, flexibility and value, according to a Capgemini Consulting report. For example, while 79 percent of loyalty programs use a mobile channel, only 24 percent of these same programs allow redemption through a mobile device.

Another problem is that loyalty programs are lacking personalization. Only 11 percent offer personalized rewards based on a customer's purchase history or location. However, according to a new study from Accenture, U.S. consumers are torn between the desire for a personalized retail experience and a hesitance to disclose too much personal information. In fact, 60 percent of shoppers want real-time promotions, yet only 20 percent want retailers to know their location and just 14 percent are comfortable sharing their browsing history.

Only 16 percent of loyalty programs reward customers for activities such as online surveys, and just 14 percent use gamification mechanisms to reward shoppers.

The report recommends that loyalty programs be seen within the larger context of a marketing strategy that is focused on driving customer engagement.

"Brands need to revisit their approach to loyalty," said Mark Taylor, global lead for customer experience transformation at Capgemini. "For us, the key is to integrate the loyalty program into the overarching customer experience and to reward engagement as well as the simple transaction. Additionally, since relevance is the highest form of customer intimacy, offering advanced levels of customization and tailored experiences will enrich loyalty programs and further encourage customer engagement."

Finally, the research stated that less than 10 percent of loyalty programs offer point redemption across all channels.

Last week, American Express (NYSE:AXP) announced a new customer loyalty program that attempts to give more options on the redemption front. The program will allow shoppers to rack up points with multiple select retailers and use them at participating stores such as Macy's (NYSE:M) and Rite Aid.

For more:
-See this Capgemini press release

Related stories:
Toys R Us commits to TRU Transformation
Macy's, Rite Aid partner for customer loyalty program
Retailers big and small are going hyper local
Customers torn between personalization and location information
37% of shoppers compare prices via mobile while in store