Companies Must Rethink their Loyalty Programs, Accenture Report finds

Companies are wasting billions of dollars a year on customer loyalty programs that aren't paying off and need to rethink their approach if they wish to retain customers, suggests new research that Accenture Strategy released today.

"There's a loyalty illusion going on, which assumes that once I've earned a customer's loyalty, they'll stay loyal; the evidence really points in another direction," says Robert Wollan, senior managing director, global lead of advanced customer strategy at Accenture Strategy. "We've found, this year, that there's still millions of loyalty points staying dormant, which is not the whole intent of creating loyalty programs."

Accenture’s report, titled "Seeing Beyond the Loyalty Illusion: It's Time You Invest More Wisely," factored in the responses of 25,426 consumers worldwide, 2,532 of whom were U.S.-based, to questions regarding their stance on brand loyalty. The survey found that more than half (54 percent) of U.S. consumers have switched providers in the past 12 months due to a poor experience or service, with a fifth (18 percent) saying that their expectations around brand loyalty have drastically changed in the past three years.

And "with an increase in customers switching providers, the more troubling thing is that we actually found out that 78 percent of U.S. consumers are actually retracting their loyalty earlier than ever before," Wollan adds. In essence, that means that customers are likely to pull back their loyalty very quickly when they don't get—or continue to get—what they need.

"You have to understand how to communicate to your customers, when historically you may have really been focused on pricing and promotions to keep [them] coming back,” Wollan says. He highlights five new "languages of loyalty"—driven by experimentation with digital experiences—that are resonating with U.S. consumers, particularly those who fall between the ages of 18 and 34. These are:

1. "Tokens of affection." Fifty-nine percent of customers are faithful to brands that offer them personalized discounts, gift cards, and special offers to acknowledge their loyalty.
2. "Getting to know me." Forty-one percent are loyal to companies that allow users to cocreate bespoke products or services. They are also likely to stick with brands that reach them on their preferred channels, are there when they need them, and otherwise respect their time and privacy.
3. "Thrill seeker." Forty-four percent of customers don't leave the companies that engage them to help design products or services. They tend to think fondly of the companies that are innovating and trying out groundbreaking technologies such as virtual reality or augmented reality.
4. "If you like it, I like it." While 23 percent of customers maintain connections with firms who partner with celebrities, 23 percent are loyal to those who team up with "social influencers"—bloggers, vloggers, and the like. Thirty-seven percent also said they show loyalty to companies who support social causes they believe in, such as charities.
5. "Hook me up." Thirty-nine percent feel positively about brands that give them access to other brands while enabling them to transfer loyalty points or rewards.

"We're continuing to see these new ways of looking at different kinds of loyalty, and how to build it, and how to grow it—it's dramatically being redefined right in front of us," Wollan says.

He recommends that to get started on improvements, companies "turn the telescope around" to figure out who their most profitable customers are, understand the factors that resonate with that base, and take the opportunity to refocus on building relationships in a visible way. "These languages will communicate to customers that you care about them."

"I think that what we're learning is that, when it comes to loyalty, like the song says, money can't buy me love," Wollan says.

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