Only 16% of Consumers Redeem Loyalty Rewards

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The customer at the center of all things
The customer at the center of all things

More than half of companies value their loyalty programs as strategic priorities. But only 35% of their members redeem awards. Since less than half of their customers are enrolled, the bottom line is that only 16% of their customer bases are motivated by loyalty rewards.

That's one of the key findings in “The State of Loyalty Programs 2013,” a report from Forrester Research based on surveys of executives at 50 member companies of Loyalty360, a loyalty marketing association.

“Loyalty marketing is on the cusp of an evolution,” says Forrester analyst Emily Collins, who directed the study. “There's a shift in focus from the idea that loyalty is all about transactions and discounts. In the future it needs to be more about engagement and emotion.”

Not surprisingly, 70% of executives named customer retention as the number one objective of their loyalty programs. But two thirds of them also had customer engagement on their lists and a 12% said it was the chief purpose of their loyalty campaigns. Yet, efforts to heighten engagement through loyalty programs often are stymied by a lack of infrastructure. Only a third of respondents affirmed that their loyalty programs were fully integrated with internal systems to provide offers based on customer insights.

“They understand what they need to do. Customer engagement initiatives have been hitting them in the head for some time,” Collins says. “But having the proper systems in place is a challenge. A lot of them are dealing with legacy technology.”

To “walk the walk” with customer engagement, the Forrester report makes three recommendations to loyalty marketers:

1.Embrace channels featuring two-way interaction. The top three channels used by marketers in communicating with club members are email, websites and Web portals, and call centers. Forrester strongly recommends that businesses begin dialogs with loyal customers via mobile and social media. Just about half of companies surveyed said social media currently figured into their loyalty club communications.

2. Balance the reward mix with personalized offers that present customers with one-of-a-kind experiences, such as concert tickets or cooking lessons. Points catalogs are fine in that they offer personal choice, but Forrester advises that companies that also offer personalized rewards to individual members will seize their hearts and minds before competitors do.

3. Bridge the strategy and technology gap. Providing those customized rewards means stepping up analytical prowess and technological execution to take advantage of customer insights.

Collins even suggests using predictive analytics to determine rewards instead of using past transactional behavior. “If I'm a Staples customer who comes in to buy pens regularly,” she poses, “is rewarding me with more pens a great loyalty strategy?”

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