Senior Vice President, Digital Customer Experience
Without a great experience, loyalty programs are less valuable to customers and abandoned early on even if they promise discounts. eMarketer’s Yory Wurmser spoke with Mark Taylor, senior vice president of digital customer experience at business and technology consulting company Capgemini, about consumers’ frustrations with traditional programs and how marketers can create a compelling loyalty experience.
eMarketer: In what ways have consumers changed but loyalty programs haven’t caught up with yet?
Mark Taylor: There’s a transactional side to consumers, but there’s also an emotional side. The transaction-based programs have always been problematic, but this is not a new phenomenon. What is new is that customers have changed their expectations, and transaction-based loyalty programs struggle to make anything valuable for the consumer and for the company. Few of these programs survive their first year and even fewer deliver the value on either side of the equation that they are intended to deliver.
eMarketer: What do consumers expect?
Taylor: Consumer expectations are set by the Googles, the Amazons, the Zappos and the Starbucks of the world. Consumers’ patience to jump through hoops to get some form of reward, which may not be valuable to them, is diminishing. The biggest consumer-side issue with a loyalty program is a lack of relevance and value. Consumers’ expectations have been changed by the companies that lead with experiences. Consumers are not prepared to sacrifice some form of transactional monetary value for an experience that doesn’t work for them.
“What is new is that customers have changed their expectations, and transaction-based loyalty programs struggle to make anything valuable for the consumer and for the company.”
eMarketer: What is the biggest source of unhappiness in loyalty programs?
Taylor: The program isn’t relevant to who I am. Two-thirds of loyalty programs are abandoned by consumers within the first year, because the value isn’t there. Consumers look for a seamless experience with brands more than they look for future discounts. They will not trade in today’s experience for tomorrow’s discount.
eMarketer: What’s an example of a loyalty program that offers relevant experiences?
Taylor: One example is the Special K loyalty program. How do I make you loyal to a breakfast cereal? It’s a challenge as a manufacturer. The brand doesn’t have that direct connection to you because it’s handled through retail. You can get sales data, but it’s hard to get customer data. But Special K understood that if their customer bought their cereal, some part of their personality led them to make healthier choices.
Special K established a program around healthy living. The value exchange was not about getting 30 cents off your next box of Special K. It was about content. They gave links to other products and created an opportunity for customers to learn about healthy living. They created something they believed their audience would be interested in. They extended the Special K line to other healthy eating options, and they learned a lot from their customer base. This is a great example of understanding what your customers care about.
eMarketer: Experiences can also be delivered through better customer service and targeted advertising. Is the utility of loyalty programs decreasing?
Taylor: Loyalty programs are derived from customer relationship management of the ’90s, which was skewed in favor of the brand, not the customer. They were about how to cross-sell, learn more about you to sell you something else and increase the lifetime value of existing customers. All of those are good business drivers, but customers didn’t find themselves in those programs.
“Consumers look for a seamless experience with brands more than they look for future discounts. They will not trade in today’s experience for tomorrow’s discount.”
While loyalty is massively important, loyalty programs are less relevant. Brands today should focus on ensuring that the experience is simple and pleasurable. It can’t always be pleasurable, but it can always be simple. Loyalty—not a loyalty program—is an emotional state of mind. The way to drive real loyalty is to create engagement through experiences.
eMarketer: Are mobile tools being used effectively to improve the experience?
Taylor: Retailers recognize that the mobile phone is the remote control for their customers’ relationship with them. If you examine the multichannel experience, [mobile comes into play when] consumers say, ‘Let me use my phone to pay you, redeem credit, comparison shop and get customer reviews while I’m in store.’
We have yet to uncover the right balance of the value exchange for consumers on mobile devices, but companies are working toward that. Starbucks, for example, integrated the loyalty experience with the whole brand experience. Once I download the Starbucks app, which I may use to pay for my purchases, the loyalty program is embedded in the overall experience. This will increasingly be the case and critical for the value exchange.