The Loyalty Evolution Research Report

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Since the inception of loyalty programs more than century ago, much has changed in the way consumers interact with companies and how companies work to foster consumer loyalty. In an increasingly cross-platform world, the fight for customer loyalty has exploded into a 24/7 endeavor. Many would suggest that customer relationships and loyalty are now the primary source of competitive advantage for all brands entering what Forrester Research calls "Age of The Customer." The good news is that the majority of organizations seem well aware of the primacy of fostering loyalty. According to Forrester Research, improving customer loyalty is likely to be a top marketing priority for 80 percent of decision-makers at large organizations 1 and 82 percent of decision-markers at mid-size organizations 2 in the next twelve months. According to a new survey from the Chief Marketing Officer (CMO) Council, 61 percent of CMOs believe that loyalty program participants represent their best and most profitable customers, and they view investment in customer loyalty programs as an essential part of their marketing strategy. 3 The big question this research paper seeks to answer is how close are brands in the United States to effectively executing loyalty programs today? 4 More than 230 brands across a wide range of industries responded to the survey. The findings reveal that just over 50 percent of respondents believe their current customer loyalty programs are successful. In addition, 88 percent of respondents with Multichannel programs—loyalty programs that ensure harmony across channels and data sets—rate themselves as successful. Despite current successes by some, most still feel there is a lot more work to be done as they look to navigate several hurdles, from technological deployment and data management to budget allocations, to make loyalty programs as successful as possible. While many brands are daunted by the roadblocks ahead, they are increasingly committed to making loyalty a priority by putting their money where their mouths are, with the majority predicting that their customer loyalty budgets will increase in 2017. For brands that are not executing loyalty programs—or are executing them poorly—the heat in the kitchen will get hotter in the future. EXECUTIVE SUMMARY The Roots of Loyalty Many believe that the beginnings of customer loyalty programs come from the late 18th century with so-called "premium marketing" programs in which American retailers began to give copper tokens with purchases that could be redeemed for products on a future purchase. Around 1891, stamps replaced coins in such loyalty programs. One of the earliest (and most well known) programs was the S&H Green Stamp program, in which consumers received tiny stamps when they made purchases from participating merchants. The stamps were saved and redeemed for products when the accumulated stamps had attained a certain value. Just how popular was the program? S&H Green Stamps once issued three times as many stamps as the U.S. Post Office, and by the 1960s, S&H was the largest purchaser of consumer products in the world. Many consider the S&H Green stamps as the first "modern" loyalty program and these could arguably be considered a predecessor to Air Miles programs today. HISTORY LESSON 1. The Forrester Wave™: Customer Loyalty Solutions For Large Organizations, Q1 2016, Forrester 2. The Forrester Wave™: Customer Loyalty Solutions For Mid-Size Organization, Q1 2016, Forrester 3. Getting a Business Lift From Loyalty: The Leaders in Loyalty, CMO Council 4. For the purposes of this study, customer loyalty is generally defined as programs that increase the likelihood of customers to continue to buy from a specific brand or company, as a result of positive experiences, satisfaction, and the perceived value of a product or service.

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