February 6, 2019  •   Knowledge Momentum

Why Customer Experience is Key for Loyalty Programs in 2019

Experiential rewards are becoming a top priority.

‘Customer Experience’ is a top priority for businesses and 2019 will be no different. No longer do customers base their loyalty on price or product. Instead, they stay loyal with companies due to the experience they receive. The harsh reality is that if you cannot keep up with their increasing demands, your customers will leave you.

Many have coined ‘Customer Experience’ the next battlefield of Marketing- not a surprising statement when looking at the numbers:

  • 86% of buyers are willing to pay more for a great customer experience
  • 73% of buyers point to customer experience as an important factor in purchasing decisions
  • 65% of buyers find a positive experience with a brand to be more influential than great advertising

A Walker study even suggests that by the year 2020, customer experience will overtake price and product as the key brand differentiator.

 What is ‘Customer Experience’?

Customer Experience is your customers’ perception of how your company treats them. These perceptions affect their behaviours and build memories and feelings to drive their loyalty. In other words: if they like you and continue to like you, they are going to do business with you and recommend you to the others and they will spend more. To make your customers like you, you need to know what they like and then use this knowledge to deliver personalized experiences that will entice their loyalty.

Loyalty Programs

Loyalty programs are generally seen as a great way of enhancing customer experience. By rewarding your customers for shopping with you, brand affinity is boosted, generating higher sales. At least, that’s what loyalty programs are supposed to do. Reality is that, although more companies have loyalty programs (they’re growing at 9% a year), the number of customers who actively participate in them continues to hover at only about 50%. This contrast suggests that there is something missing in most programs.

Research by McKinsey in Silicon Valley found that having a successful loyalty program does, in fact, drive significant value and is critical for growth. Having a program scoring high on the ‘Loyalty Performance Score’ is strongly correlated with greater shareholder return, especially in the airline, retail, and grocery/drug/mass-merchandise sectors. This measures both how customers feel about loyalty programs and how well programs drive value for the company — for instance, how often customers choose the brand over other options or pay more to earn a higher status.

The same research also yielded that customers who participate in top-quartile loyalty programs are 80% more likely to choose the brand over competitors and twice as likely to recommend the brand to others.

Really Great Loyalty Programs

So how do you move your loyalty program up into this lucrative top tier? Providing a terrific Customer Experience within your Loyalty Program will push things in the right direction. Below are four key principles to keep in mind:

  1. Appeal to rational and emotional motives.

A basic “earn-and-burn” points mechanism isn’t enough in today’s market. Customers care almost as much about a company making them feel special and recognized as they do monetary benefits. “Surprise and delight” features like unexpected gifts and special recognition deliver exceptionally high value to customers and can be achieved at low cost.

  1. Speak to all parts of the loyalty funnel.

Top-performing loyalty programs address customers in all levels of the loyalty funnel. Most organizations do a good job at some levels but not others. A point along the loyalty funnel that generally presents a great opportunity is when customers have joined a program but aren’t actively using it. Companies should take the time to show these customers how the loyalty program can be of added value to them.

  1. Offer customers rewards today and tomorrow.

Customers want access to more types of benefits. They want to feel like a program is working for them in the short term, while also knowing they can work toward something quite substantial in the long term. This is especially critical in sectors where products or services are more expensive and may be purchased less frequently, such as airlines and hotels. In that case, “instant gratification” rewards keep customers involved and aware that they’re benefiting from the relationship with the brand.

  1. Make it easy to understand and use.

Difficulty signing up for the loyalty program is a common reason for customer churn right at the start of the loyalty funnel. Feature-wise, companies have added many bells and whistles to their loyalty programs along the way. Throwing too much at customers, especially at one time, can be confusing and disempowering. Companies need to strike a balance by keeping loyalty programs relevant to their customers’ needs while also easy to use.

Fix it, or else…

With a great customer experience at the centre of your loyalty program, the road to loyalty and retention should be a more clear one.

But what happens if you fail to provide a positive customer experience? Simple. Customers will be frustrated. According to Esteban Kolsky, if a customer is not satisfied, 13% of them tell 15 or more people that they are unhappy. On the other hand, 72% of customers share a positive experience with 6 or more people. This only underlines the importance of a positive Customer Experience -preferably in combination with an appealing Loyalty Program- even more.

Do you want to know how you can offer your customers both? Join Momentum Protocol, the standard protocol for loyalty programs. Go to the Momentum Protocol website, or follow us on one of our channels:

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