Customer Portfolios' Blog

CRM C: Rethinking Your Loyalty Strategy

At the CRM C Conferencein Chicago a hot topic was whether or not Chicago-style pizza is better then New Haven style, customer and brand loyalty.

Loyalty is defined as the ‘quality of being loyal to someone or something.’ However, in the retail world loyalty programs typically reward consistent purchase behavior with points that can be redeemed for “free” goods, experiences, or services. These are not loyalty programs as much as they are entitlement programs that reward loyal behavior.

A commonly used approach is the points-based program that set thresholds for customer purchases, and a set of rewards a customer could choose from for reaching that threshold. The belief is that customers would keep their purchases with one company to hit those rewards. However, most offers are one size fits all and while they may be meaningful to some, they are not meaningful to all.

Companies are spending money to reward predictable behavior, not incremental spending or behavior that becomes more profitable for the long-term. Example: The quick service retailer rewards ten purchases with a free purchase is probably rewarding behavior that the customer would have achieved without the reward. The customer is not spending incremental dollars, and the ROI of the program is most likely very low if it exists at all. In short, this not loyal behavior.

Instead of thinking about loyalty as a rewards or a one-size-fits all point system that encourages existing behavior, brands should look to their data define what their loyalty metric is. At Customer Portfolios, we define customer loyalty as the point when customers are more than 50% likely to make a repeat purchase. For most brands, this is at the fourth purchase. By assigning a metric to loyalty, brands can quantify a customer’s affinity for a brand or product.

By leveraging existing customer behavior and data, retailers can incent desired behavior that drives a repeat purchase, getting customers a step closer to the loyalty threshold. To support this, our Predictive Marketing Platform, MARCIE, executes multi-channel campaigns that are relevant to the customer and more importantly, relevant to encouraging and rewarding behavior that also syncs with retailers’ priorities at that time.

The campaigns are targeted even as customers’ behavior modifies or the loyalty behavior changes. This approach uses technology to intuitively understand that some customer engagement and purchase behaviors indicate that a “next right action” will be a different variable depending on that customer. The result is an automated triggered programs and optimizes the relevance, frequency, and timing of marketing communications to drive true customer loyalty.

 

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