The Loyalty Continuum: Where Does Your Company Fit?

By Carlos Dunlap, Vice President, Solution Design, Maritz Loyalty Marketing

The Loyalty Continuum: Where Does Your Company Fit?
The numbers are in and the pressure is on. Your previously coveted brand is losing strength. Sales are down. Costs are increasing. Your customers are defecting. Grasping for a quick fix, you turn to a new or existing loyalty program to mend what ails the company. After all, bank cards and airlines make this marketing solution seem easy. Beware loyalty programs have saturated the marketplace, and while these programs attempt to inspire true customer loyalty, many fall short of achieving it. Moreover, effective loyalty programs may create positive changes in customer behavior, but many fail to create lasting changes in customer attitudes. Companies may find they win the sprint, but eventually lose in the marathon. An effective long-term loyalty strategy demands a more holistic view. Are you considering a loyalty program? Or do you already have a points-based program that is rarely, if ever, measured or enhanced? Jumping into a new program or maintaining the status quo of your current program likely is not the most appropriate or profitable solution in your companys quest for true loyalty. Instead, this situation requires refining your approach to customer loyalty using a Loyalty Continuum Lifecycle model and careful evaluation based on specific questions for each lifecycle stage.

The Loyalty Continuum Lifecycle

Traditionally, points-based loyalty models focused on using incentives to create changes in behaviors that were intended to lead to loyalty. Using this approach, many companies may only see two stages in the lifecycle of their loyalty programs there is either a program in place or there isnt. However, in a new, customer experience-based approach, attitudinal shifts occur, leading to changes in behaviors and then, to true loyalty, rather than the false or perceived loyalty achieved by traditional points programs. Using this approach, companies should work through the four phases of the Loyalty Lifecycle: Phase One: Considering a customer experienced-based loyalty program Phase Two: Designing a program Phase Three: Evaluating a program Phase Four: Enhancing a program Across the lifecycle, a primary theme prevails the establishment of metrics and ongoing measurement of success through financial return. By using advanced analytics, market research, and voice of the customer and employee research within each phase, you get a truly broad and holistic view of your customers experience. Using this panoramic view, you can construct sound loyalty objectives and strategies that are aligned with your business goals. Following are some of the questions you should be asking based on your companys position in the Loyalty Lifecycle: I. Considering a program 1. Is a customer loyalty initiative suitable for my company? 2. Can I build a financially sound business case?

Understanding True Loyalty

First, there needs to be an understanding of the term true loyalty. Maritz defines truly loyal customers as those who avidly use a brands products and services while resisting competitive offers based on their attitudes towards a company. To achieve true loyalty, companies must understand that loyalty is a continuum a living, shifting state always in motion, rather than a stagnant goal. Your customers loyalty continually evolves along the continuum and so should your approach to generating loyalty.

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3. What are customers saying about their experience with my brand? With our loyalty program? 4. What are employees saying about the customer experience? 5. Will a loyalty program help achieve our business growth objectives? II. Designing a program 1. Which variables are most likely to impact financial returns? 2. What risks and trade-offs do I need to consider? 3. How can I work with my organization to impact the customer experience? To get my organization strategically aligned? 4. Which customer loyalty strategy do I deploy? III. Evaluating the program 1. How effective is the loyalty program in achieving the results predicted? 2. What are key loyalty trends we should consider implementing? 3. How can I best use the programs communications tools and what are their effects on consumer behavior? 4. How can we extend profitable member lifecycle stages? IV. Enhancing the program 1. How can we evolve our program to be more effective? 2. How can we move from analyzing results to accurately predicting both member behavior and financial results? 3. What are the common traits of responsive program members? 4. What types of partner offers would be appealing? 5. How do we leverage the program for retention and acquisition?

(recency, frequency, monetary value) modeling, purchase cycle evaluation and other market evaluators, it was evident that with the recent acquisition of competitors, the companys customers were truly confused by the lack of brand consistency. The research also revealed the corporation had considerable data it could leverage to deepen the customer relationship through relevant, strategic communication to target consumer segments. Maritz developed a pilot solution that included a highly segmented dialogue communication plan, targeted to bring high-value customers into the inner circle, while also educating all customers on the continued brand value. Phase Four Case Study How Can An Existing Loyalty Program Evolve Into a Differentiator? A large financial institution and consistent leader in the world of points-based equity programs, decided it needed a differentiator or would risk losing profitable customers in a commoditized market. The company enhanced its highly successful loyalty program with a customer experience management approach. Maritz conducted touch point analysis to identify inconsistencies and problems the company had in fulfilling its brand promise with customers. By fully integrating all customer touch points within the company, including Web interaction, email communications, billing centers, call centers and reward redemption, the company was able to measure all aspects of the customer experience, and make improvements that impacted both financial and non-financial business results.

Conclusion
To win true loyalty, companies must change the way they think about and approach customer loyalty. They must see it as a continual, company-wide pursuit, not an isolated program. They must gather the relevant information, share it, and act upon it to build differentiated approaches to loyalty with the necessary financial rigor attached to make a strong business case. It may seem daunting at first, however, great customer retention, acquisition and growth achievements are possible when loyalty initiatives are developed and sustained with rigor, and from a holistic point-of-view. Maritz.com 1(877) 4 Maritz

The Loyalty Lifecycle in the Real World

Phase One Case Study Is a Loyalty Program the Right Approach? A large software client was losing significant market share and instinctively decided to build a loyalty program. Maritz recognized the company had overlooked several key questions. Rather than simply developing a traditional points program, the team began by determining whether a customer loyalty initiative was suitable for the company and if it addressed their key business requirements. After thorough qualitative and quantitative research, RFM

MLM-62127-02 3/08 2008 Maritz Inc.