Can't Buy Me Love

Customer loyalty programs are growing exponentially as part of client retention strategies for small businesses. It’s an established fact that winning new customers generally costs exponentially more than retaining existing ones. After all, brand evangelists and repeat purchasers are the lifeblood of financially healthy companies. It would seem to make perfect sense then to create programs that nurture this kind of loyalty—or does it?  According to Accenture’s recent research report, Seeing beyond the loyalty illusion: it’s time you invest more wisely traditional loyalty program models that reward high volume purchase behavior can actually have a negative impact on loyalty. Why? Because they aren’t built to accommodate current shifts in consumer attitudes toward brand relationships.

Does this mean you should cross creating a loyalty program off your to-do list altogether? Not necessarily, but Accenture’s research does provide some valuable guidance for businesses that want to be more effective in nurturing the loyalty that will help them retain and engage customers over the long term.

Accenture reports there are more than 3 billion U.S. consumers enrolled in loyalty membership programs. Yet, despite the heavy investment brands are making in promoting traditional loyalty incentives, it’s not having the positive impact on revenue you might expect. Consider these findings from Accenture’s consumer loyalty survey which included 25,000 respondents from around the globe:

  • 77 percent of all consumers surveyed admitted they now retract their loyalty more quickly than they did three years ago.
  • 71 percent of consumers claim loyalty programs do not influence their loyalty.
  • 61 percent of respondents switched some or all of their business from at least one brand or provider to another in the last year.
  • 23 percent demonstrate a negative or non-existent reaction to companies’ loyalty efforts—not surprisingly, this number is even higher for younger consumers.
  • Consumers who spend more on brands to which they are loyal switched 17 percent more often than those who spend less.
  • “Loyal” customers who spend more on a brand are actually 9 percent more likely to rescind their loyalty altogether and choose another brand.

Accenture sums all of this up rather glumly, “The sobering truth is that for nearly a quarter of consumers, all that spend [on loyalty programs] is actually hurting the relationship.”

It’s not all bad news, though. While Accenture’s survey shows traditional loyalty-building tactics are becoming less effective, it also reveals insights that businesses can use to earn and increase customer loyalty, including:

  • 85 percent of survey respondents were more likely to be loyal to brands that respect and safeguard the privacy of their personal information.
  • 81 percent of survey respondents agreed that they, “Feel loyal to brands that are there when they need them, but otherwise respect their time and leave them alone.”
  • 59 percent of consumers report having more loyalty to brands that give them small rewards for their loyalty such as gift cards and personalized discounts.
  • 44 percent said they have more loyalty to brands that help them design or create products.
  • 41 percent said they are loyal to brands that provide personalized program offerings.
  • 23 percent report being more loyal to brands that include celebrity endorsements.

The message here is clear: fostering loyalty requires respect for, and intimate knowledge of, the consumer—it’s not simply a matter of providing behavior-based rewards. In addition, providing customers with the opportunity to personalize both brand interactions and the products they buy is key. These insights provide a solid blueprint for developing a loyalty program that can improve customer retention and galvanize engagement—both of which will positively impact your company’s bottom line.

Does your business have a loyalty program? Is it working well? We’d love to hear about it! Share your experience in the comments section.