Far too many brands are still failing to implement a personalised loyalty program when it comes to promotions and loyalty – stuck in a vicious circle of blanket discounting, poor data, and squeezed margins, at a time when profitability is under scrutiny.
That’s according to new research carried out by Harvard Business Review and sponsored by Talon.One, the leading incentives platform. The study of 420 respondents at organizations with promotions strategies found that only 56% of those surveyed say their organization currently runs personalised promotions or discounts, as opposed to mass discounting for example.
There remains a stubborn cohort of almost one in four (22%) at businesses who have no plans to personalise promotions or discounts, while 17% say they don’t personalise offers but plan to start doing this soon.
The perks of a personalised loyalty program with integrated incentives
Yet, among those at organizations that do personalise discounts, 94% say they are reaping rewards: 62% say they’ve seen increased sales as a result, while nearly half (47%) say it’s increased customer loyalty, and 44% say it has delivered a better customer experience.
These benefits could be multiplied when promotions and loyalty strategies are integrated – which in turn helps brands to unlock personalisation. Respondents at businesses that have already partially or completely integrated their promotions and loyalty strategies report improved customer loyalty (60%), increased sales revenue (58%), better customer experience (56%), improved data capture opportunities (41%), and increased ROI of marketing efforts (40%).
This comes as brands focus increasingly on profitability amid a challenging economic environment. In the next 12 months, 65% are planning to increase their focus on the profitability of promotions and discounting, and 66% are planning to increase their focus on profitability of customer loyalty programs (among those who currently have a loyalty program).
The personalisation paradox
Despite clear evidence that a personalised loyalty program drives value for businesses and for customers, many businesses are yet to recognise this. When respondents at organizations that don’t currently offer personalised promotions were asked what prevents them from personalising offers or discounts, 25% cite unclear business value/Return on Investment (ROI) as a reason for not investing in personalisation and 28% say other business initiatives take priority.
This data highlights what we call the Personalisation Paradox. Until businesses invest in personalising promotions and can see the ROI directly, they won’t grasp the business benefits and will be reluctant to push it up the list of strategic priorities. This means that today, too many brands still rely purely on blanket discounting – which eats into their margins and holds them back from improving customer engagement and loyalty.
– Christoph Gerber, CEO, Talon.One
But, if mass discounting offers a vicious circle, integrated and personalised incentives programs represent a virtuous one – with more data, personalisation, and added value for businesses and their customers, growing both margins and loyalty as a result. Unlocking this virtuous circle might require resource and tech investment, but it’s important that brands hold their nerve and make smart strategic changes that will give them competitive advantage. One of the most critical mistakes we see is that loyalty programs are not in line with the overall company strategy. We see businesses setting these big organizational goals in terms of how they want to drive revenue, or which segments they want to target, and then you look at their loyalty program and the personalisation elements within it, and they aren’t tied to those goals. It seems obvious, but we see this strategic disconnect all the time.
– Oliver Page, principal, Deloitte Consulting LLP
