Harvard Business Review report finds transactional loyalty wanting
The need for companies to re-imagine their loyalty programmes has been confirmed by Harvard Business Review, which suggests that experiences are now more of a loyalty determinant than points and rewards.
Sponsored by Mastercard, the survey of 400 executives across a dozen industries found that 58% of executives surveyed believe their organization’s approach to customer loyalty is ineffective.
Today, executives rank traditional rewards like points and milesfourth most important, behind exceptional customer service, digital and omnichannel access, and ease of use. Five years ago, points and miles were considered the “top determinant” of a loyalty program’s success.
“There’s much more to building consumer loyalty than just the transactional aspect of points,” said Francis Hondal, Mastercard’s president of loyalty and engagement. “We have to evolve towards experiences and enabling access to the experience.”
Lack of digital
Only 43% of executives said their approach prioritizes digital, while more than half said they’ve made changes to their loyalty strategy within the past two years.
“It’s pretty metrics-driven,” said Hondal. “Measuring a loyalty program is pretty straightforward, but I think what’s happening now is that there is so much coming at a consumer, and digital creates a whole different opportunity to engage consumers.
But that engagement can come with risks. “If you’re not as savvy or well-developed [digitally], then you run the risk of becoming less attractive for a consumer who can go somewhere else,” she said.
Executives’ goals for their loyalty programs differ too: 65% said the main objective is attracting new customers, while 57% prioritized building a stronger “emotional connection” to a brand.
“I am giving you a reason to continue to do business with me, not only because I’m giving you a good product but because I value the relationship I have with you. That’s emotional connectivity,” Hondal explained.
According to the report, more than 90% of leisure and hospitality companies operate a loyalty program, versus 61% of all companies. However, 55% of leisure and hospitality companies say their loyalty strategy is ineffective.