For this month’s sponsor spotlight, we talk with Merkle Loyalty Solutions senior strategist Allison Cripps Ferguson about the Great Loyalty Reset: the need for retail and consumer packaged goods (CPG) loyalty programs to become more effective, meaningful, and relevant to today’s shoppers in the face of profound and irrevocable changes in the shopping experience. The solution: deliver “connected loyalty” – a deep understanding of today’s consumers through the orchestration of strategy and technology to connect all customer capabilities within the organization and across every touchpoint.
Q. Tell us a little about your background in loyalty marketing and about Merkle Loyalty Solutions.
Ferguson: I’ve been a loyalty practitioner on both the client side and consulting side for 20 years. Today, I primarily help clients in the retail, hospitality, and financial services industries with loyalty program strategy and enablement, including the design, refinement, and measurement of successful rewards-based and experience-based loyalty programs.
Merkle Loyalty Solutions is the manifestation of the acquisition of 500friends by Merkle, a leading marketing services agency. Merkle acquired 500friends based on their understanding of the deep connectivity between loyalty marketing, analytics, customer relationship management, and customer experience. Together, these capabilities comprise what Merkle calls “connected loyalty.” Our connected loyalty strategy is deeply integrated with Merkle’s wider marketing capabilities, and we’re able to bring our clients’ loyalty strategy to market quickly through our Loyalty Plus software platform.
Q. You recently released a deep research report on retail and CPG loyalty called “The Great Loyalty Reset.” Can you talk about the genesis of that study?
Ferguson: The genesis of the Great Loyalty Reset was our retail and CPG clients’ resounding need for loyalty benchmarks and other insights from both consumers and program operators. Often, retailers and CPGs are reluctant to share the results of loyalty program efforts, so we felt a set of insights that reflected those results from both consumer and operator perspectives would benefit the marketplace as well as inform our own practice. Our client experience demonstrates some key recurring challenges in achieving loyalty marketing outcomes, and we wanted to better understand those challenges and share them for the benefit of the wider loyalty marketing community.
Q. In the report, you talk about the need for retailers and CPGs to approach loyalty differently – to the point that you’ve identified the need for a “loyalty reset.” Can you elaborate on that notion of a reset?
Ferguson: Retail and CPG marketers have approached loyalty marketing in the same way for years without, in many cases, achieving clear results. For example, while best practice dictates that loyalty programs provide a more discriminating value proposition based on customer value, many retail programs still barrage every member with the same discount offers. If everything in your store is always 40 percent off, then I’ll never shop with you unless there’s a sale.
In another example, consider that the private-label store card has become a profitability crutch for many specialty retailers, and that a focus on store cards leaves many retailers without a complete customer view – so a loyalty reset might include a focus on multi-tender loyalty programs. To us, a loyalty reset means both looking at tried-and-true loyalty strategies with a fresh eye, as well as moving the core principles of customer loyalty into a modern context. The reset means evolving retail and CPG programs into the world of connected loyalty, which means joining loyalty, CRM, analytics, and CX into a single strategy and a suite of capabilities within an organization.
Q. Tell us a little more about how your research study helps reinforce this need for retailers and CPGs to evolve to connected loyalty strategies.
Ferguson: From members, we wanted to understand the impact of their loyalty wallet: how many programs they participate in, how often the disengage from programs, the impact of programs on their behavior, and the reasons they may or may not stay loyal to a brand or program. From program operators, we wanted to understand the penetration of loyalty into their active customer base, their current program goals and performance metrics, their key challenges in delivering loyalty, and their current capabilities and plans for technology. Our goal was to uncover areas of alignment between consumer and brands, as well as areas of divergence, so that the broader loyalty community would better understand how to evolve toward a connected loyalty strategy.
Q. What was the most surprising finding in your study?
Ferguson: On the consumer side, the most surprising result reflected the strength of loyalty program participation as an indicator of the brand spend; across North America, Europe, and Asia, 86 percent of consumers said they shop more with a brand if they like the loyalty program, and 58 percent said they spend 15 percent more with the brand as well. That’s a strong indicator of incremental behavior due to loyalty program participation. Conversely, 63 percent of consumers indicated leaving a loyalty program means they’ll shop less with the brand – or not shop at all.
On the brand side, the most compelling, if not surprising, finding is the breadth and depth of the challenges marketers face in operating a modern loyalty program. Most loyalty marketers cite both operational and financial challenges such as changing consumer shopping behavior, the difficulty in hiring qualified loyalty professionals, and managing financial dimensions of their programs such as funding rates and rewards structures. Operators have an ongoing need to make the case to the C-suite to continue funding their programs.
Q. What do you see as the biggest disconnect between consumers and loyalty program operators?
Ferguson: A disconnect is apparent in the way consumers lament that that brands don’t understand them while most marketers claim to have a 360-degree view of their customers. This disconnect often results in poor experiences that lead to consumer disloyalty. Loyalty marketers have a wealth of data that can help fuel predictive analytics, personalized offers, and optimization of communications across channels – and yet consumers are still leaving loyalty programs for addressable reasons such as lack of perceived value and relevance in rewards.
Q. So how can marketers begin to close this gap in consumer perception?
Ferguson: The path forward is connected loyalty: orchestrating your loyalty strategy within the context of your broader CRM capabilities; designing mobile, social, and commerce channels for the loyalty program that reduce friction and encourage members in profitable behavior; practicing financial rigor by evaluating program performance in terms of both member behavior and company value; and deploying program data to improve and personalize the customer experience.
Connected loyalty also means continually evaluating your strategy, and continuing to innovate to ensure that your program delivers on your brand promise. That’s where we’re headed, and we encourage loyalty marketers to join us on that journey.
Allison Cripps Ferguson is senior loyalty strategist for Merkle Loyalty Solutions. This content is sponsored by Merkle Loyalty Solutions. To learn more, visit Merkle here.