Reinventing Loyalty Programs in the Digital Age

Loyalty programs are aimed at stimulating buying behavior through rewards, but in many cases, they can actually harm brand engagement.

As a matter of fact, a recent Capgemini study found that almost 90 percent of the customer sentiment regarding loyalty programs on social media is “negative.” The study revealed that the primary issues consumers cited include a lack of reward relevance, flexibility and value. Add to that, frustrations about a disjointed experience across channels.

Many programs fail to keep pace with technological changes, often leaving customers confused and frustrated — a clear reminder that brands should rethink and maintain a fresh approach to loyalty and to incorporate “engagement” as part of the goal.

As convenience stores seek to improve consumer loyalty beyond reward performance, how can digital technologies encourage higher loyalty and participation whether online, in-store or via mobile device?

Nearly four out of five loyalty programs include the mobile channel, yet only about one in four allow mobile redemption. Additionally, less than 10 percent of programs offer points redemption across all channels.

To reinvent loyalty programs, c-stores must inject digital into the way they innovate around customer experience. As they put customers first and focus on building engagement, they must in turn align their people, processes and technology around this mission. Done effectively, loyalty will follow.

The competitive landscape is rapidly evolving. With the emergence of small-format grocery stores competing with c-stores from a convenience perspective, and major chains bringing their loyalty programs into the convenience space in a big way, c-stores have no choice but to reevaluate ways to remain competitive.

Here are four key steps c-stores can take to jumpstart the next evolution of their loyalty programs by shifting the focus to consumer engagement: 

ENGAGE YOUR CUSTOMERS

Eighty percent of sales are derived from 20 percent of customers, so the goal of any loyalty program should be to provide the most value to your most valuable customer. C-stores should therefore revitalize methods for customer acquisition, stimulation and engagement by identifying not only valuable customers, but advocates, influencers and communities of interest across the entire brand engagement journey.

Leveraging the vast amounts of big data from the above audiences and capturing consumer preferences and requirements from all touchpoints, c-stores have the opportunity to engage customers with a win-win proposition and should then look for ways to develop trust and drive interest in their loyalty programs. One way to do this is by rewarding customers for meeting their loyalty goals.

BREAK DOWN SILOS

Gathering a 360-degree view of your customer is a daunting task, but one that’s essential to delivering a seamless customer experience and a loyalty program that closely aligns with marketing and brand strategy.

Gathering data requires organizations to think outside of their silos and become truly customer-centric, a big change-management challenge.

This is particularly important for truck stops and travel centers where a customer might shop for both personal and business reasons, and the organization might have separate departments devoted to each. Initially, these departments were created based on company objectives, but many savvy c-stores are reorganizing based on customer objectives so they can better understand and align their business to customer behaviors and needs.

ALIGN PROCESSES & TECHNOLOGY

To align processes and technology, c-stores can begin by assessing capabilities in the following areas: CRM, data-driven insight, marketing automation/campaign management, and the ability to execute these capabilities across any channel. This process begins by identifying the most logical starting point based on existing capabilities.

For example, Starbucks in 2008 introduced a card that users could register for and receive perks such as free Wi-Fi. This offer proved extremely profitable and immediately created transaction-based insights into their most loyal customers. In 2011, Starbucks introduced a mobile loyalty platform that moved the company along its customer engagement roadmap by adding an omnichannel capability in a way that leveraged the existing prepaid capability.

Technological advancements are also ushering in many new opportunities that leverage mobile transactions to obtain a unified view of the customer. Apple, for example, recently announced that Apple Pay will tie to retail loyalty programs, and companies like Walgreens and Dunkin’ Donuts are already on board.

C-stores with outdated loyalty programs will fall further behind as industry leaders adapt their offerings in lockstep with digital innovations.

Developments like EMV — an acronym for Europay, MasterCard and Visa, the three companies that originally created the security standard — and chip-and-pin, however, are driving many c-stores to upgrade store systems to enable payments. Many may add Apple Pay during these upgrades. We predict that Apple Pay adoption will enable c-stores to offer and manage loyalty programs that generate personalized offerings and promotions in a way that can’t be achieved with credit cards alone.

ESTABLISH SAFEGUARDS FOR DATA PRIVACY & INTEGRITY

In the wake of highly publicized data breaches at retailers and mismanagement of loyalty programs, c-stores must take proactive steps to alleviate customer concerns around how the data they share will be used.

In 2013, for example, four trucking companies filed a lawsuit over allegations of fraud through a retailer’s fuel rebate program. In an environment where privacy and complex loyalty program administration can take a backseat to sales, situations like this serve as a reminder that in order to drive loyalty opt-ins and maintain loyalty relationships, c-stores must first make sure their house is in order.

A recently released set of guidelines on consumer engagement and data privacy from the Consumer Goods Forum emphasizes the importance of “value exchange” for c-stores when it comes to loyalty programs. By informing consumers about the benefits and value of sharing personal information, c-stores can also help spur loyalty program opt-in and overall customer engagement.

Editor's note: The opinions expressed in this column are the authors' and do not necessarily reflect the views of Convenience Store News.