Loyalty schemes should be about loyalty, not discounts

There is a strange irony in using data to demonstrate the ineffectiveness of data. That is what research company Forrester appeared to do last week, with a report indicating that 42% of chief marketing officers either think their loyalty programmes perform badly or erratically, or simply do not know.

CMOs seem to be well aware of what is wrong with their schemes, however, and are all too ready to identify the faults. The report names seven possible reasons they might not be delivering results, five of which were named by more than half of respondents as failings of their own schemes.

The worst problem is a lack of differentiation, which was picked out by 91% of CMOs. Disturbingly high percentages also cited overoptimistic goals (82%) and an overabundance of offers (73%).

When so many marketers are spotting the same mistakes in their approach to one marketing discipline, it seems bizarre that they have not done more to address them. There is a fairly clear link between many of the problems mentioned in the survey.

That loyalty schemes are missing differentiation from each other and that brands are sending out too many promotions both indicate that marketers should be thinking more carefully about how they position these schemes as brands in themselves. This is further backed up by the 55% of CMOs who say their programmes are not “in sync” with their wider branding.

As a rather less scientific way of proving this point, take a moment to consider how many loyalty schemes you could actually name, how you feel about each one, and what was the best reward you received from it. I defy you to find more than one or two for which you could answer all three questions convincingly. And you are a marketer.

The fact is that loyalty schemes are currently not good at creating feelings of loyalty. As Marketing Week wrote in October, 62% of people are in at least one scheme but only 26% say it makes them more loyal to a brand.

Of course, nearly 60% of marketers say their schemes perform in line with expectations, so it as not as if loyalty schemes are a futile endeavour. But even the successful ones are often just a mechanism by which customers can access lower prices.

Instead, take a leaf out of Hilton’s book. The hotel company recently launched a branding campaign for HHonors, the rewards programme whose members account for 40% of Hilton’s revenues. The aim is to shift the focus onto experiences you can unlock, rather than how to build up your points tally.

In such a competitive environment, loyalty schemes need to be more inspiring if they are to be anything more than a means of undercutting yourself to drive volume.