Why we told one of Australia’s most Prolific Retailers NOT to Launch a Loyalty Program

The story is all too familiar. A board member says we need a loyalty program! Another says, why don’t we have an app!?

Stuck between a rock and a hard place, the CMO has someone in their team with something loosely in their title related to either digital or CRM send out loyalty tender documents.

As a provider, it’s a scramble to make your ten pages read, sound and look better than the 25 other versions being prepared elsewhere in the world and there are some big numbers on those pages. It may be well into the six figures and sometimes even seven.

Then it begins. This is no longer a process about what the customer needs. It’s an old-fashioned sales contest (and let’s be honest, sometimes it’s a Dutch auction).

Everyone rolls out the buzz words, aims to have an “included features” list longer than that of anyone else and there are at least four rounds of presentations which are effectively just system demonstrations.

During the coronavirus pandemic, it’s become worse.

With the pressure on retail, several key operators have used the time to either launch a new loyalty program or announce that they will be investing more heavily in the one they have, because that’s how they think they will keep customers.

However, if the ability to earn a few loyalty points or claim a discounted gift card as a reward is the only reason customers are staying with you, then surely your problem is somewhat larger?

Now meet our prolific Australian retailer that has been in the fortunate position during COVID to not only have traded well, but to have thrived.

They have won so many new customers (hundreds of thousands of them in fact), that they don’t know how they are going to keep them once people begin returning to what we’re all calling “the new normal”.

The call came from their board, we need a loyalty program! The marketing department had to scramble and then, well you’ve already read above what happened.

Our business Wink is solely focused on customer acquisition and retention. Often, that can be related to a loyalty solution, but not always. In this case, we looked at the requirements and provided a different perspective.

This retailer is not a company that customers necessarily want an on-going relationship with. It’s not a company where you would expect people to come back and regularly buy. It’s just one of those places where when you need them, you need them.

Our response surprised them. We told them we would love to work with them but that we would not sell them a loyalty program.

We populated our ten pages as to the real work that needs to be done:

  1. Understanding what is their loyalty problem? If you’re going to spend hundreds of thousands of dollars on a program, then for what reasons are you actually doing it? What data do you have to back up those decisions?
  2. Determine why, of the thousands of loyalty programs, someone would want to be a member of and engage with yours. The average person is now a member of more than 14 loyalty programs but is only active in about half.
  3. Remember that it’s not just about buying a system which companies often say they can just “capex up front”. There are on-going costs associated with the management of any loyalty program. On top of humans and time, there are communication requirements, customer service needs, on-going IT implications and tonnes more.

More than anything, we told our now retail partner that the best loyalty system in the world does not replace relevant and personalised customer communication which delivers an emotive connection.

We warned them that their loyalty investment would be in the hundreds of thousands of dollars and in the first years, could top a million.

Our recommendation was to make their existing marcomms assets work harder while trialling a series of new retention marketing initiatives to see what best moves the needle with their customers.

Ultimately, these activities may inform the design of a future loyalty program, but it will be one that delivers the kind of offers and benefits that resonate with their customers and drives the kind of behaviours our client is wanting.

They will go into it with eyes wide open. They will have a program that solves the right problems for the business and provide a framework for customer happiness for the long term.