Q&A: Accenture study sheds light on the importance of ROI when building loyalty programs

Creating a loyalty program can be so time-consuming and complex that many food retail companies and food manufacturers may forget to incorporate a way to use the platform to increase revenue — and that can be a costly mistake.

Accenture Interactive published the findings of its latest research on this topic earlier this year, and the company found that loyalty club members can generate between 12 and 18% more retailer revenue than non-members. However, Accenture also found that just 19% of retailers said that ROI was one of the ways they calculated whether their loyalty programs were successful, and that’s an area of opportunity for grocers and CPG manufacturers.

SmartBrief sat down with Farrell Hudzik, managing director of Accenture Interactive’s Global Loyalty and Rewards practice, who explained how companies can flip the focus to allow loyalty program to increase revenue.

What are the reasons that loyalty members generate more revenue than non-members?

We find that it’s a combination of things. The basic intent on those who activate and apply for loyalty programs is definitely indicative of an affinity to brands and are more likely to have larger basket sizes and an increased frequency of visits when in the loyalty program. For those more daily visit places such as coffee shops, we’ve seen the high end at 40% more from a revenue perspective for those loyalty customers per week, with 30% more visits, and those are the programs that are really optimized today.

How can a company flip the focus of their loyalty program from simply adding subscribers to being more of a revenue generator?

There’s a fine balance, especially in the grocery space, because margins are so tight. But the ideal is that you are able to segment your customers based on their spend patterns and the share of food wallet, and then allocate an incentive for each group, such as a discount or a reward. It’s very important to be able to have the knowledge base within your loyalty program where you can mine information about your customer, tie it to the transaction level, understand the profitability of those customers and then translate that into how you understand the triggers of their behavior by looking at their purchase patterns over time and then offer customized rewards and offers, or a combination of the two.

Those who are doing it well are taking that into consideration and doing pretty robust financial modeling on the back end. So first and foremost, grocers and merchants in general should gain insights into how customers are spending based on identifiable information and use that to advance their ability to segment those audiences and then translate that into being able to treat those members and guests differently by rewarding them in different ways based on their triggered behaviors.

When a company is just starting to develop a loyalty program, what feature can they put in from the beginning to ensure that revenue remains at top of mind?

One of the first steps is to talk to your customers — performing both quantitative and qualitative research is something I highly recommend at the front end of building out loyalty programs. Understanding their price pressures, how they act, what they like and what they don’t like, will influence how you design the program and the incentives you build into it. You’ll also want to find out the customer’s overall behavior — suppose they go to the grocery store the same day they go to a coffee shop and they may take an app-enabled car service for all of these trips — you want to understand how those consumers act across the ecosystem on a daily, weekly and monthly basis to design the program. At that stage, you’ll research how those customers will want to interact both digitally, mobilly and with their loyalty program from a financial perspective.

What are the up and coming trends in loyalty programs?

Trends we’re seeing in the space revolve around things like invitations for incentives if you spend a certain amount and you earn a free reward. The concept of gamification, the ability to interact on a mobile device and then take your currency and be able to use that seamlessly at point of sale and combine it with cash and credit, are also key features. Another trend I’m seeing in the marketplace is card-linked offers. The card link is something I think we’ll see emerging and could have good considerations for the grocery space as well. It’s a good way to leverage the current rail systems of major credit card providers and have your preferred credit card linked either automatically or associated with the merchant loyalty program. So having that wallet, combining the credit card with the payment method, is also a key trend we’re seeing that I think is going to be helpful to increase engagement over time with loyalty programs.

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