Why You Should Invest in Engagement Over Loyalty

Stop and consider for a moment: how many coffee shop punch cards do you have? How many airline miles programs do you belong to? How many different credit cards do you amass points on? How many “10% off your next purchase” coupons are in your wallet? Chances are, too many to count. The average American belongs to 18 different loyalty programs; but only uses one-third of them. And three-quarters of loyalty programs that only focus on awards fail within the first two years.1

In today’s world, consumers not only want, but expect, more than what traditional loyalty programs offer. Consumers are looking for a personal experience that conveys the essence of the brand, for interactions that consistently delight, and for a seamless, hassle-free journey. It is no surprise, then, that traditional loyalty programs are so often ineffective. Given this, marketers should augment their loyalty programs by investing in a customer engagement strategy in order to develop not only a personal connection with their consumers, but a relationship that will result in mutual value.

The results of Rosetta Consulting’s Customer Engagement Consumer Survey reveal that brands should seek a highly engaged customer base, as opposed to simply a loyal one, to maximize benefits to both the customer and the brand.

The survey data revealed that when compared to customers who are simply “loyal” (those who agreed “I am loyal to this brand”), highly engaged customers are 40% more likely to feel the brand goes above and beyond their expectations, and know “who I am” and “what I want.” Highly engaged customers are also more than 35% more likely to believe the brand delivers relevant, worthwhile and useful marketing communications.

In addition, delivering on these attributes creates a group of highly engaged customers who are also more valuable to the brand than those who are simply loyal. The highly engaged group are stronger advocates, being 35% more likely to recommend the brand to family and friends, and twice as likely to recommend it online (via social websites, personal blogs, online reviews, etc.). They are also 70% more likely to try a new product or service from the brand as soon as it becomes available. Finally, when looking at spend and transaction data, highly engaged consumers spend 15% more in each transaction than their loyal counterparts and buy 25% more frequently, generating 50% more revenue for the brand per year.

While these results demonstrate the value of engagement, you still may be asking yourself, “Well, doesn’t loyalty lead to engagement? Aren’t I partway there?” The answer is: sometimes. Loyalty may lead to engagement, but it is more likely that engagement will foster loyalty. The survey found that while 30% of those who consider themselves loyal to their preferred brand are highly engaged with it, a whopping 94% of highly engaged customers consider themselves loyal. Moreover, over 80% of highly engaged customers report being very likely to sign up for a brand’s loyalty program.

One more testament to the value of Customer Engagement is the Starbucks Rewards Program. Realizing that the typical coffee shop punch card fails to deliver on higher-order customer needs, Starbucks rolled out a three-tier rewards program, with a Gold Elite level. Starbucks was on the right track, adding an element of prestige and a layer of extra, personalized benefits associated with the Gold status, but the true value came when the company shifted toward a more holistic Customer Engagement approach, merging their Rewards program with their mobile app. This merge not only made tracking rewards fun and exciting, it offered mobile app users the opportunity to engage with the brand via music suggestions, an online store, a location finder and more. Only when Starbucks evolved their Rewards program into something that delivered value beyond merely saving their customers money did they see the 26% rise in profit and 11% jump in revenue that they had been hoping for.3

While loyalty programs aren’t likely to go away, marketers will be significantly better off if they can better understand their customers on the individual level and deliver value to them beyond saving them money. When worthwhile, tailored and holistic brand experiences are delivered across touch points, perhaps then customers will continue to return to their favorite morning coffee shop, even if the competitor offers the eighth cup free.

To learn more about the consumer experience and the value of Customer Engagement, please see Rosetta Consulting’s Whitepapers Customer Engagement from the Consumer’s Perspective and Customer Engagement from the Marketer’s Perspective.

1 Source: http://www.entrepreneur.com/article/233021

2 The survey was polled to 4,800 U.S. consumers, and assessed experiences with 83 market-leading brands across 15 categories. Highly engaged consumers were identified using a predictive scoring mechanism that selected the respondents who best demonstrated a broad range of key engagement characteristics. Highly engaged customers make up about 20% of the respondent base.

3 Q2, 2013 Results; Source: http://loyalty360.org/resources/article/loyalty-program-triggers-starbucks-record-q2

For more facts and figures on the value of Customer Engagement, download the Rosetta Consulting white papers:

Leave a Comment