Capgemini: Loyalty schemes fail to involve digital clients

07 April 2015 4 min. read
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Loyalty programmes have not evolved with the digital age and as a result are failing to engage digital consumers, research by Capgemini Consulting shows. The majority of schemes still primarily focus on transaction-based rewards instead of customer-engagement, which, according to the consulting firm, is essential to a successful loyalty programme. The firm suggests companies look at each step of the development of a programme through the prism of engagement.

Global strategy and transformation consultancy Capgemini Consulting recently released a new report on loyalty programmes, titled: ‘Fixing the cracks: reinventing loyalty programmes for the digital age’. For the report, the consulting firm researched the loyalty programmes of 160 global companies across 7 sectors* on a number of parameters, including their central objective, their use of digital channels, and their ability to provide a seamless experience across channels. In addition, 40,000 consumer conversations on social media were scanned to measure customer sentiment towards loyalty programmes. The overall conclusion: loyalty programmes are often failing to engage digital consumers, resulting in low active participation rates and loyalty.

Capgemini Consulting - ‘Fixing the cracks: reinventing loyalty programmes for the digital age’

The research of the loyalty programmes sentiment on social media shows that 89% of customer opinions were unfavourable. The highest negative sentiment is found in the Telecom industry, with 96% of opinions unfavourable, followed by Consumer Electronics (94%) and Retail (93%). Sentiments were the least negative for the Hotel industry, with 72% of opinions negative. Almost half (44%) of the negative social media sentiment related to a lack of reward relevance, flexibility and value. Other reasons include a lack of a seamless multi-channel experience, concerning 33% of negative sentiment, and customer services issues (17%).

Loyalty Programmes - Social Media Sentiment

Not digital proof
The key finding of the study is that that loyalty programmes are not evolving at the same pace as the digital age, with 97% of loyalty programmes still relying primarily on purchases made by consumers. Only a 25% of loyalty programmes recognise and reward consumers for engaging and interacting with the brand in other meaningful ways. This includes rewarding consumers for activities, such as taking online surveys, rating and reviewing establishments or referring friends to the programme (used by 16%), employing gamification mechanisms (14%) and rewarding consumers for mobile app downloads (6%). The strong focus on transaction-based rewards can prove unsuccessful for the companies behind these programmes, as 77% of those programmes actually fail in the first two years, Capgemini notes.

Reward Mechanisms in Loyalty Programmes

Another issue to be taken into account when setting up a loyalty programme, is to engage customers across every customer touch point, offering cross-channel redemption services. A service that is currently only offered by one in ten loyalty programmes (9%). Especially the mobile channel is underutilised as redemption channel, and although 79% of loyalty programmes use this channel, only 24% allow redemption through it.

Support for Reward Redemption across Channels

Focus on customer-engagement
Capgemini stresses that companies should focus on developing of customer-engagement focused loyalty programmes as a highly engaged customer is equally likely to be loyal. The report explains: “Customer engagement is the sum total of specific, actual behaviours that can be measured in the immediate term. Customer loyalty is an outcome and measured by the quantum of repurchase over the longer term. Engagement is therefore a leading indicator of customer loyalty and financial performance.” To develop such a loyalty programme, companies should looking at each step of the development process, from design to iteration, through the prism of engagement.

Developing an Engagement-Based Loyalty Programme

“Brands need to revisit their approach to loyalty. For us, the key is to integrate the loyalty programme into the overarching customer experience and to reward engagement as well as the simple transaction. Additionally, since relevance is the highest form of customer intimacy, offering advanced levels of customisation and tailored experiences will enrich loyalty programmes and further encourage customer engagement,” explains Mark Taylor, Global Lead for Customer Experience Transformation at Capgemini Consulting.

* The seven sectors researched are: Retail, Banking, Consumer Products, Telecom, Airlines, Hotel Chains and Consumer Electronics.