September 19, 2016

Not Another Loyalty Program: CRM v. Loyalty

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A whopping 80% of restaurant chains now have some sort of loyalty program in place in an attempt to retain and incentivize continued engagement from their best customers.

But according to Colloquy, a leading publisher on loyalty, 54% of those loyalty memberships become inactive within one year. With changing consumer demand, the biggest threat to any loyalty program is clearly churn. If earning rewards takes a lot of effort, many of your guests will ultimately stop engaging. And if you can’t keep your customers interested, the entire design of your loyalty program crumbles away. So, is loyalty actually the right move?

Starbucks Coffee is an example of a loyalty program doing something right. They boast a jaw-dropping 25% engagement rate among their customers. That number puts them in the very top tier of user engagement for any loyalty program of its kind. Yet, if you take a moment to think about this, it still means that 75% of guests that buy Starbucks products have no engagement whatsoever with their loyalty play. What’s worse, Starbucks’ program seems to be the anomaly rather than the norm, based on a foundation of strong customer evangelism supported by the ubiquity of Starbucks’ locations and high brand loyalty. So what are the rest of us to do?

One option is to adopt a Customer Retention Management (CRM) strategy. CRM is a term that refers to strategies and practices to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving business relationships. It is a strategy that will take time to implement and to optimize, but which will see a significant return on your investment.

The first step to establishing any CRM is to start by measuring interactions, computing a variety of data points and analyzing guest behavior throughout the guest journey. Only when you collect enough data will you begin to see how best to interact with different segments of your customer base in rewarding ways.

But the results of a CRM strategy can be far richer and far more engaging than that of a straight loyalty play. Loyalty programs are, on the surface, a great way to give back to your frequent guests in a way that seems generous, but does not actually give too much away. A CRM strategy where you put the consumer first is a cultural shift that will thoroughly change the way your company does business.

As Roger Bezuidenhout, a digital marketing expert wrote, “In Search Marketing terminology: Loyalty programs are like PPC advertising (not really trusted). CRM is like organic SEO. It is done through sharing and talking about branding and topics by people who are truly interested.”

Your customers can ultimately tell you how best to engage with them. But step one is setting a system in a place that allows you to listen.