Marketers already aware of the value of customer loyalty, but defining and communicating a marketing strategy that gets long-term support from business leaders who are typically under pressure to show results sooner rather than later. Phil Rubin’s Q&A, featured in the “Ask the Experts” section of the latest Loyalty Management Magazine, addresses the key points you need to know when making the case for Loyalty Marketing Strategy to Senior Management.
Q: How does one make the case for a loyalty program internally, particularly to senior management?
A: For many companies, loyalty marketing strategy is not high on the priority list. When it’s not, building a case for it may become quite a challenge for marketers. Without a strategic mandate to become more customer-centric (e.g., from the Board), competitive pressure or exasperation over the lack of accountability from existing marketing efforts, it can be futile. The result: low customer retention.
While organizations and their leadership teams have differing cultures and requirements for strategic decision-making, here are five fundamentals that make an effective case for loyalty:
Loyalty is the most measurable driver of organic growth via incremental sales from existing and new (expensively acquired) customers, unlike most other marketing activities. Marketers can’t rely on data alone, nor should they suggest that success will be easy. Even still, these measures can be expressed in terms a CFO will support, and CEOs always look to their CFOs for endorsement on significant and longer-term investments.
Loyalty marketing creates efficiencies by correlating marketing and other resources to sales growth and profitability with precision. By definition, loyalty marketing is recognizing individual customers, understanding their value and investing accordingly. By contrast, many companies try to do everything for everyone. Worse yet, some companies try to do too much without understanding what defines a successful customer experience. These insights help companies determine where and how to expand their business and where and how to focus on their core value proposition.
Loyalty yields insights for the entire business. It answers existential questions such as “why are my sales down?” by revealing which customers are the source of declining sales. Customer data is the ultimate business intelligence. Acting on this intelligence accordingly can deliver new insights and profitability in multiple areas of the business. Best Buy is a textbook example of using customer data for decision support beyond marketing – merchandise and assortment mixes, store location selection, etc.
Loyalty marketing strategy is not a program. It’s a common misconception to equate loyalty marketing with discounts, points and rewards. Loyalty is anything a company does to better connect, be relevant and deliver value to customers. Properly developed and executed, it’s a brand amplifier that costs measurably less than advertising. Loyalty programs aren’t passé, but they better work to enhance, not detract from, the customer experience and connection with the brand.
Finally, loyalty marketing strategy is a question of leadership. The majority of companies don’t lead with customer-centricity or loyalty. Ultimately, it’s a question for company top management to decide whether they want their company to lead or follow. The ones that follow look to outdated loyalty programs as a band-aid for systemic failure. The ones that do lead (Nordstrom, American Express, Amazon) outperform for customers and for investors.