CMS Authors: Mehdi Daoudi, Rishi Bhargava, Harry Trott, Xenia von Wedel, Carmen Gonzalez

News Feed Item

Loyalty Programs Dole Out Rewards but Fail to Fully Connect With Consumers Says New CMO Council Study

Big Opportunities to Leverage Member Insights to Deliver What Customers Say They Really Want: More Rewards for Staying Loyal and Less Irrelevant Communication

PALO ALTO, CA -- (Marketwire) -- 01/25/10 -- As more marketers turn to loyalty and rewards programs to spark business growth, a new report from the Chief Marketing Officer (CMO) Council report indicates that marketers are under-valuing these often costly programs even as customers give the perks, discounts, deals and additional service opportunities high marks. Both customers and marketers agree: deeper engagement and personalized contact drives loyalty, not mass blast communications and gimmicks.

"The Leaders in Loyalty: Feeling the Love from the Loyalty Club" is the latest research from the CMO Council, tapping into the insights of over 600 marketers, and gaining first hand perspective from the recipients of these programs in an audit of over 700 consumers. Sponsored by InfoPrint Solutions Company, a joint venture between Ricoh and IBM, the study shows that loyal consumers expect marketers to understand them better and deliver more relevant and valued offers. Unfortunately, marketers are not giving themselves high marks in meeting the needs of their business, and question their ability to meet the needs of the customer. Given that over $2 billion is spent annually in growing and running loyalty and rewards programs, this raises questions about the value and return of investments in this area of customer relationship and insight building.

The Marketer's View

Most marketers (61 percent) believe that loyalty program participants are the best and most profitable customers. So it is not surprising that an almost equal number of respondents (65 percent) view customer loyalty program investments as a very essential, or a quite valuable part of the marketing mix. Unfortunately, only 13 percent of respondents believe they have been highly effective in leveraging loyalty and brand preference among club members, and nearly 20 percent don't even have a strategy for this. Another 25 percent admit they have not mobilized brand loyalists to become active advocacy agents, either.

The study also reveals that marketers are mostly inducing loyalty with discounts or free products and premiums rather than quicker, better service or improved customer handling. Some 39 percent of respondents view discounts and savings as the key member benefits, 34 percent view free products and premiums as essential incentives, while 33 percent are committed to offering points for merchandise redemption as a further motivator.

When asked to outline typical customer complaints about loyalty programs, nearly 30 percent of marketers report that some customers see little or no added value to becoming a loyalty member; 24 percent indicate rewards lack substance; a similar percentage feel they don't get enough personalized attention; and 21 percent have problems with receiving too much spam email and junk mail. Customer complaints also touch on a lack of individualized communication (23 percent) and issues with redeeming points and miles (18 percent).

Despite these challenges, investments in loyalty programs will continue as nearly 80 percent of marketers are committed to maintaining or further funding loyalty programs as customer retention and relationship building vehicles. Over 34 percent report they are significantly increasing their commitments, and 45.9 are maintaining their current commitments. Just 4 percent expect to discontinue their programs.

Online channels dominate expected investments as nearly 60 percent of respondents said they planned to make better use of the Web and new community and networking tools to grow and develop loyalty programs. Other key actions for generating a greater ROI from club members include:

--  Personalizing interactions and target messages (51 percent)
--  Increasing frequency and relevance of communications (39 percent)
--  Gathering more insights and intelligence for better customer handling (38
--  Adding new benefits, incentives and inducements (36 percent)
--  Studying industry best practices and making adjustments accordingly (19

Marketers appear to be falling down on extracting greater value from customer loyalists. When it comes to in-depth profiling of customers, the vast majority of marketers still only aggregate and analyze limited customer data sets. 73 percent collect basic demographics and 68 percent track the location of members, but critical insights -- such as advocacy rates (14 percent), brand loyalty and attachment (27 percent), personal preferences (31 percent), satisfaction levels (33 percent), and product preferences (38 percent) -- are not being leveraged.

"Relevant profiling data continues to be a limiting factor in customer engagement," said Donovan Neale-May, executive director of the CMO Council, "Without a deeper customer insight, marketers will be limited in their ability to do meaningful predictive modeling, market segmentation and revenue forecasting. Better understanding of customer behaviors, predispositions, intentions and preferences enables more effective and relevant messaging. It is also an essential part of customer revenue optimization and lifetime value building," Neale-May adds.

Loyalty program operations, however, are increasingly challenged. Acquiring and retaining motivated and engaged participants is the number one problem facing 46 percent of marketers. Other obstacles and issues include:

--  Measuring marketing value and effectiveness (42 percent)
--  Collecting, integrating and maintaining customer data (41 percent)
--  Deriving valuable insight and intelligence (38 percent)
--  Delivering more personalized offers and inducements (34 percent)
--  Creating more customized communications (33 percent)

Digital marketing channels are definitely taking precedence in ways marketers promote their loyalty and rewards programs. Nearly 60 percent rely on web sites, nearly 60 percent on email, 47 percent on word-of-mouth, 46 percent on point-of-sale information, 42 percent on direct mail, and 39 percent on a sales or service representative. Most member communication is monthly (30 percent), while 20 percent interact with members on a daily, weekly or bi-weekly basis. Cost-efficient email is the preferred mechanism for member communication among 84 percent of marketers, followed by printed mailings and statements (51 percent), corporate web sites (45 percent), dedicated club sites (32 percent), SMS text messaging (24 percent), and social networks (16 percent).

"Targeting has taken on a very different meaning in today's marketing mix," stated Sandra Zoratti, VP of Global Solutions Marketing for InfoPrint Solutions Company. "Before, targeted messages relied on basic data to engage in rudimentary segmentation and single channel communication delivery. Today's loyalty leaders are better leveraging customer insights to deliver highly personalized, multi-channel communications that are more relevant to the individual customer and provide for ongoing interaction and attachment."

The Consumer View

Marketers can take a deep breath as consumers report they see value in loyalty program membership. A surprising 79 percent of consumers surveyed say they are very, or pretty, satisfied with their loyalty and rewards program experiences. But 70 percent want to see more discounts and savings, and 52 percent more compelling personal deals and offers as reward for steering their business to loyalty program operators. In a definitive call for personalization, 58 percent say they want more compelling personal benefits and services, as well as more relevant offers or individualized deals.

And while social media also tops the list of investments for marketers, consumers report that point-of-sale information, service representative interactions, company web sites and word-of-mouth are the primary sources for learning about loyalty clubs. Nearly 65 percent acquired information about the programs in retail environments compared to only 4 percent in social media networks, 3 percent in blogs and 11 percent in online advertising. This finding is not surprising when you consider that consumers engaged in loyalty programs demand high-touch direct engagements, versus mass messages, regardless of channel.

Too much spam and junk email topped the list of negatives associated with loyalty and rewards program membership (44 percent), followed by too many conditions and restrictions (38 percent), and rewards that lacked real value (37 percent). Other prevalent beefs included members having a hard time redeeming points or rewards, program membership lacking value, as well as communications and service not being personalized or targeted specifically for members.

More than 700 respondents participated in the online research initiative conducted in Q3 and Q4 of 2009. Over 50 percent had household incomes of over $100,000 and were fairly evenly split across gender and age groups. Nearly 75 percent reported enrollment in supermarket loyalty programs, 69 percent in airline frequent flier clubs, and 58 percent in credit card incentive programs. Hotels and motels, drug stores, warehouse price clubs, specialty retailers, rental cars, and restaurants are other leading beneficiaries of loyalty and rewards enrollment.

Surprisingly, soft economic conditions are not necessarily inducing consumers to sign up for loyalty and rewards programs. Only 22 percent said the economic climate had raised their interest in these programs compared to 41 percent who indicated it had no impact at all.

"It is notable that the economy is not a big driver of program participation, indicating that as marketers look to recovery, fully leveraging these programs must be a strategic priority," notes Neale-May. "Figuring out ways to deliver added value to those willing to repeatedly purchase your products and services, advocate your brand on a viral level, or more actively respond to offers and incentives, is critical to marketing effectiveness."

For marketers, the big question is how much loyalty club membership influences purchasing decisions and customer affinity and attachment to brands. Club membership strongly motivates, or is a big factor, in influencing buying decisions, for 52 percent of survey respondents. When it comes to word-of-mouth, nearly 20 percent of club members say they are big brand boosters and almost 50 percent say they sometimes talk up the product or service they support. On the other hand, 54 percent of survey respondents stated they would give up their loyalty or rewards club membership if they had a poor product or service experience with a brand.

Despite spam and junk email concerns and irritations, over 64 percent of loyalty club members want to receive information, notifications or updates electronically. That's good news for the environment and a significant contributor to cost reduction. Nearly 16 percent say they are comfortable visiting web sites to source their loyalty information and about 14 percent prefer a monthly printed statement.

"Today's consumer loyalist wants essential information delivered through multiple channels in the most relevant, personal and customized way possible," said Zoratti. "Customers are issuing a very clear warning to marketers. Give me relevant communications that reflect my history and connections to you, or we will go elsewhere with our business. Smart marketers will respond by taking what they know about customer wants, preferences and behaviors to be more targeted, efficient and relevant in their messaging to improve response rates and increase customer gratification and purchase intent."

Relevant Facts and Figures

--  It is estimated that there are some different loyalty programs with 1.8
    billion members in the U.S. (COLLOQUY 2009 Loyalty Census).
--  Marketers spend about $2 billion annually on operating these programs,
    reports PROMO Magazine.
--  The average U.S. household is enrolled in 14.1 loyalty and rewards
    programs, but is only active in 6.2 of them, notes COLLOQUY.
--  Top U.S. loyalty program memberships ranked by industry include Financial
    Services 422 million; Airline 277.4 million; Specialty Retail 191.3
    million; Hotel 161.8 million; Grocery 153.3 million; Mass Merchants 124.8
    million; Casino/Gaming 106 million; Department Stores 92.8 million; Drug
    Stores 73.9 million; Fuel/Convenience 51.2 million; Restaurant 13.7
    million; Car Rental and Cruise Lines 10.7 million; and all other types are
    put at 127.9 million, reports COLLOQUY.

About the CMO Council

The Chief Marketing Officer (CMO) Council is dedicated to high-level knowledge exchange, thought leadership and personal relationship building among senior corporate marketing leaders and brand decision-makers across a wide-range of global industries. The CMO Council's 5,000 members control more than $125 billion in aggregated annual marketing expenditures and run complex, distributed marketing and sales operations worldwide. In total, the CMO Council and its strategic interest communities include over 12,000 global executives across 100 countries in multiple industries, segments and markets. Regional chapters and advisory boards are active in the Americas, Europe, Asia Pacific, Middle East and Africa. The Council's strategic interest groups include the Coalition to Leverage and Optimize Sales Effectiveness (CLOSE), Marketing Supply Chain Institute, Customer Experience Board, LoyaltyLeaders.org, Online Marketing Performance Institute, and the Forum to Advance the Mobile Experience (FAME). www.cmocouncil.org

About InfoPrint Solutions Company

InfoPrint Solutions Company, headquartered in Boulder, Colorado, is a joint venture between IBM and Ricoh built on IBM's nearly 50 years in the production print space and Ricoh's excellence in technology innovation. Together, the two companies are bringing to market a portfolio that includes solutions for production printing for enterprises and commercial printers, as well as office workgroup environments and industrial segments. Operating in 36 countries worldwide, InfoPrint holds more than 200 technology patents in the printing and output related industry including the invention of the Advanced Function Presentation (AFP) Architecture, which is a de-facto industry standard for production printing environments. In 2010, InfoPrint will become a fully owned subsidiary of The Ricoh Company, joining an extensive portfolio of innovative technology brands in the Ricoh family. Ricoh Company Ltd., is 72-year-old leading supplier of office automation equipment and electronics, with fiscal year 2007 sales in excess of $22 billion, a 7.3 percent increase over the previous year. Visit www.infoprint.com for more information.

Add to Digg Bookmark with del.icio.us Add to Newsvine

Media Contact:
Matt Farrell
Email Contact

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

IoT & Smart Cities Stories
Moroccanoil®, the global leader in oil-infused beauty, is thrilled to announce the NEW Moroccanoil Color Depositing Masks, a collection of dual-benefit hair masks that deposit pure pigments while providing the treatment benefits of a deep conditioning mask. The collection consists of seven curated shades for commitment-free, beautifully-colored hair that looks and feels healthy.
The textured-hair category is inarguably the hottest in the haircare space today. This has been driven by the proliferation of founder brands started by curly and coily consumers and savvy consumers who increasingly want products specifically for their texture type. This trend is underscored by the latest insights from NaturallyCurly's 2018 TextureTrends report, released today. According to the 2018 TextureTrends Report, more than 80 percent of women with curly and coily hair say they purcha...
The textured-hair category is inarguably the hottest in the haircare space today. This has been driven by the proliferation of founder brands started by curly and coily consumers and savvy consumers who increasingly want products specifically for their texture type. This trend is underscored by the latest insights from NaturallyCurly's 2018 TextureTrends report, released today. According to the 2018 TextureTrends Report, more than 80 percent of women with curly and coily hair say they purcha...
We all love the many benefits of natural plant oils, used as a deap treatment before shampooing, at home or at the beach, but is there an all-in-one solution for everyday intensive nutrition and modern styling?I am passionate about the benefits of natural extracts with tried-and-tested results, which I have used to develop my own brand (lemon for its acid ph, wheat germ for its fortifying action…). I wanted a product which combined caring and styling effects, and which could be used after shampo...
The platform combines the strengths of Singtel's extensive, intelligent network capabilities with Microsoft's cloud expertise to create a unique solution that sets new standards for IoT applications," said Mr Diomedes Kastanis, Head of IoT at Singtel. "Our solution provides speed, transparency and flexibility, paving the way for a more pervasive use of IoT to accelerate enterprises' digitalisation efforts. AI-powered intelligent connectivity over Microsoft Azure will be the fastest connected pat...
There are many examples of disruption in consumer space – Uber disrupting the cab industry, Airbnb disrupting the hospitality industry and so on; but have you wondered who is disrupting support and operations? AISERA helps make businesses and customers successful by offering consumer-like user experience for support and operations. We have built the world’s first AI-driven IT / HR / Cloud / Customer Support and Operations solution.
Codete accelerates their clients growth through technological expertise and experience. Codite team works with organizations to meet the challenges that digitalization presents. Their clients include digital start-ups as well as established enterprises in the IT industry. To stay competitive in a highly innovative IT industry, strong R&D departments and bold spin-off initiatives is a must. Codete Data Science and Software Architects teams help corporate clients to stay up to date with the mod...
At CloudEXPO Silicon Valley, June 24-26, 2019, Digital Transformation (DX) is a major focus with expanded DevOpsSUMMIT and FinTechEXPO programs within the DXWorldEXPO agenda. Successful transformation requires a laser focus on being data-driven and on using all the tools available that enable transformation if they plan to survive over the long term. A total of 88% of Fortune 500 companies from a generation ago are now out of business. Only 12% still survive. Similar percentages are found throug...
Druva is the global leader in Cloud Data Protection and Management, delivering the industry's first data management-as-a-service solution that aggregates data from endpoints, servers and cloud applications and leverages the public cloud to offer a single pane of glass to enable data protection, governance and intelligence-dramatically increasing the availability and visibility of business critical information, while reducing the risk, cost and complexity of managing and protecting it. Druva's...
BMC has unmatched experience in IT management, supporting 92 of the Forbes Global 100, and earning recognition as an ITSM Gartner Magic Quadrant Leader for five years running. Our solutions offer speed, agility, and efficiency to tackle business challenges in the areas of service management, automation, operations, and the mainframe.