Loyalty programs miss with mobile shoppers

Amazon and Kroger are among retailers harnessing the most engaging loyalty programs, but there's new evidence to suggest that many retailers are not keeping pace with digital technology, thus losing loyal customers in the process.

Loyalty programs are among the most powerful tools that retailers have to motivate shoppers and cement long-term relationships. Loyalty program engagement has reached an all-time high, according to a new study by Bond Brand Loyalty. And Amazon (NASDAQ: AMZN) and Kroger (NYSE: KR) rank at or near the top of shoppers' lists of favorites.

Amazon Prime topped the list of shoppers who voted "very satisfied," with a 71 percent approval rating, and Kroger Fuel ranked just below with 70 percent. Other industry leaders in retail include Food Lion with its MVP Card and Cabela's Club Rewards.

The number of loyalty programs shoppers engage with is also increasing, from 10 per person in 2014 to more than 13 per person in 2015.

But there's also mounting evidence suggesting that in spite of increased investment by retailers, loyalty programs aren't producing good returns as retailers fail to focus on the kind of customer engagement available through mobile devices.

Capgemini researched the loyalty programs of 160 global companies across seven sectors including retail. Capgemini also conducted a scan of 40,000 consumer conversations on social media to gauge customer sentiment towards loyalty programs.
 
The research revealed that most loyalty programs follow a basic transactional philosophy focusing on more rewards for more purchases. Only a small minority recognize and reward consumers for engaging and interacting with the brand in other meaningful ways. Furthermore, most loyalty programs lack personalization and fail to offer cross-channel redemption services. The negative social media sentiment on loyalty programs stemmed mainly from the lack of reward relevance, rigid reward structures, user experience issues with online channels, and poor customer service.
 
Just 11 percent of loyalty programs offer personalized rewards based on a customer's purchase history or location data; 79 percent use the mobile channel but only 24 percent allow redemption through it; and only 16 percent of loyalty programs reward shoppers for activities such as taking online surveys, ratings and reviews or referring friends to the program. Only 14 percent employ gamification mechanisms to reward customers and less than 10 percent let shoppers redeem points across all channels.
 
"Brands need to revisit their approach to loyalty. 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," said Mark Taylor, global lead for customer experience transformation at Capgemini. "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."

Retailers looking for a case study should look to Sephora, according to the report. The study cites Sephora's "Beauty Insider" loyalty program, which matches loyalty accounts with Sephora's mobile app, as well as the Apple Passbook mobile wallet. Customers can track their purchases, view offers and redeem reward points on their mobile devices. Sephora's Passbook users purchase twice as much and twice as frequently as the average Sephora customer as a result, according to the report.

Getting it right means winning a shopper's loyalty. According to the Bond Brand Loyalty study, 70 percent of respondents reported being influenced by the opportunity to maximize loyalty points when choosing where to shop, and one-third said they wouldn't show as much dedication to their favorite brands if not for loyalty programs.
 
For more:
-See this Bond Brand Loyalty press release
-See this Capgemini press release

Related stories:
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