loyalty programs

Do loyalty programs work anymore?

In Content Strategy by Rob JohnsonLeave a Comment

Loyalty programs are common nowadays. Every company from major enterprises to your local coffee shop run them. But according to a story in the latest McKinsey Quarterly, your customers say they’re loyal. But most of them have a roving eye.

The study looks at consumer behaviour across a wide range of industries. Only 13 per cent of consumers were loyal to brands they had done business with. The other 87 per cent shopped around.

Loyalty programs don’t breed loyalty

“What surprised us was not only how ephemeral loyalty is, but also how often consumers switched brands once they decided to shop,” the authors write.

Forty per cent of the consumers studied stayed with a brand, but 58 per cent went on to change. When consumers did switch brands, 70 per cent were to brands those consumers already knew. Which suggests it’s important for people to be aware of you, even if they’re not ready to buy yet.

In short, it’s easier to lose your existing customers than it is to find new ones. If a large percentage of your marketing budget is allocated to pushing sales at the bottom-of-the-funnel, you are facing a world of ever-diminishing returns.

“We’re not suggesting that marketers ignore other parts of the consumer decision journey,” they write. “Providing quality and service, or rewarding your most loyal customers during the postpurchase experience, remains important… But investing too much of your marketing dollars in loyalty is risky when today’s shop-around environment means it’s easy to lose consumers faster than you add new ones.”

If you’re spending a lot on loyalty and retention, it may be for naught.

Looking at the top of the funnel

Instead, McKinsey’s suggest companies that are interested in growing should be focusing on building relationships at the top of your sales funnel. The examples they offer of companies that do that are all examples of content marketing and audience building.

That may involve creating online sites where people can educate themselves on your product category. Or alternatively, creating web-based tools that can help people compare products when they’re still in the ‘awareness’ stage of the sales journey.

It’s worth reading the full report. You can find it on this page titled The new battleground for marketing-led growth.

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