Given the start of the 4th quarter, companies are looking to finalize planning for 2013, and based on our discussions with clients, we know this topic is top of mind right now. 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 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 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. These measures can be expressed with 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.
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. Best Buy is a textbook example of using customer data for decision support beyond marketing – merchandise and assortment mixes, store location selection, etc.
Loyalty 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.
Finally, loyalty 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 do lead (Nordstrom, American Express, Amazon) outperform for customers and for investors.