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Back to the future: Forget loyalty programs, it’s about customer engagement

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Back to the future: Forget loyalty programs, it’s about customer engagement
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When I read the recent headline “Only 16% of Consumers Redeem Loyalty Rewards” on the pages of Direct Marketing, I was taken aback. Are loyalty programs really that ineffective these days? If so, that’s not good, because if your customers aren’t redeeming for rewards, they’re likely not seeing any value in your program.

The 16% redemption figure was one of the key findings in a recent report from Forrester Research titled “The State of Loyalty Programs 2013,” which was based on surveys of executives at 50 member companies of Loyalty360. A Forrester analyst suggests the results signal a movement away from traditional loyalty programs.

“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.”
I’m feeling a sense of déjà vu and maybe you are, too. Almost three years ago, I penned an article titled “The Death of Loyalty Rewards As We Know Them?” for Loyalty Truth, but in actuality this movement away from “transactions and discounts” toward “engagement and emotion” goes back much further than that.

I would argue that the idea of engagement was first introduced as “permission marketing” by Seth Godin way back in 1999. At the firm Bill Hanifin and I once worked at, Frequency Marketing, we took this idea and ran with it in the early-2000’s, promoting “dialogue” between customers and companies and stressing the need for engagement across multiple customer touch points.

That’s why this recommendation from the same article on “The State of Loyalty Programs 2013,” sounds positively retro, at least until you hit the words in bold type:

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.

The addition of these two new ways to communicate with customers are the fresh components in the mix, as the way we engage with customers continues to expand. And it’s interesting to note that, while not mentioned in this article, old-school direct mail continues to be one of the best ways to interact with many segments of the population.

There’s one more passage in the story had me smiling, as it also brought me back to the past, and it had to do with the nature of rewards. Again, what is being passed as a current recommendation sounds dated to this loyalty vet:

Balance the reward mix with personalized offers that present customers with one-of-a-kind experiences, such as concert tickets or cooking lessons.

It’s something we at Frequency Marketing called “experiential rewards”, a phrase that Tom Parker or one of my other bright colleagues coined a decade ago and has been in the loyalty marketplace for years. But just like the emphasis on “engagement”, maybe everything old is new again. Or as the saying goes, the more things change, the more they stay the same.

Editors Note: The Forrester study provides additional endorsement for the move towards Contextual Loyalty, outlined in the 2013 Loyalty Manifesto, available on this site. We’ll soon publish a second installment of the Contextual Loyalty story with our take on which companies are leading the movement.

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