Why the C-suite loves loyalty
Contributor Evan Magliocca discusses the benefits of loyalty and why increasingly leadership is pointing to it as a means to know customer health, show stability and keep investors happy.
Increasingly, retail executives are talking about customer files, customer insights, customer experiences, engagement and loyalty in their earnings calls. While this used to be unheard of, it’s now commonplace, and it shows a shift in how the C-suite views loyalty — rightfully so, as loyalty is a shareholder’s dream program, and CEOs are taking note.
Here are a few examples from recent earnings calls:
Fran Horowitz, CEO, Abercrombie & Fitch:
[blockquote] Our focus on closeness to our customers enables us to adapt and execute better and faster, ensuring more consistent delivery of the right product at the right time, with the right brand voice, and through the right brand experience … our rapidly growing loyalty programs, means we are better equipped to anticipate our customers’ needs whenever, wherever and however they choose to engage with our brands.[/blockquote]
Mary Dillon, CEO, Ulta Beauty:
[blockquote] Our loyalty program continues to represent one of our most valuable assets, as of the end of July, Ultamate Rewards grew to 25.4 million active members, which represents an impressive 23 percent year-over-year rise, driven by merchandising and marketing efforts and excellent in-store conversion. With 1.4 million new members added in the quarter and nearly 5 million new active members acquired over the past year, our share of the beauty enthusiast market has increased to 27 percent with plenty of opportunity remaining to attract more members. [/blockquote]
Art Peck, CEO, GAP:
[blockquote] We’re using our product capabilities to lead in loyalty driving categories to drive our business; we have a very robust, very profitable online and mobile business that meet our customers exactly where they are; and we have scale, and we’re using that scale to drive advantage growth and profitability. [/blockquote]
See the pattern? It’s not surprising, though. Loyalty really is the ideal program for executives based on what it can provide: growth, stability, great buzzwords (I’ll explain more on that later) and breathing room to take risks.
Stability at scale
Retail is in perhaps its most volatile market since Macy’s had to suffer through the Great Depression. Investors are afraid of retail, even at the value those stocks provide. So how can CEOs assuage those fears? They need to show stability at a large scale, and that’s a difficult challenge.
Stability is exactly what loyalty offers.
Each quarter, leadership can bank on loyalty driving a forecast percent of business and increasing customer spend and frequency by a specified amount. While email, stores, e-commerce and other channels can forecast predictions, those predictions are nowhere near as accurate as loyalty — they simply don’t have the data points to extrapolate that well.
Loyalty does have those data points, and leadership can know exactly what their customer health looks like going into each quarter. Loyalty is security from the unknown and a view into the future of customer potential.
Loyalty is measurable
Marketing is only as great as what it can prove. If you can’t prove it or measure it, what’s the point? You won’t know its impact, positive or negative, so you’re going on intuition, which should only be reserved for creatives. Marketers don’t use intuition; we use facts.
Facts are what show results. Results are all investors care about. Therefore, facts are all leadership is focused on.
Loyalty is the perfect medium. You’ve got all the data in the world at your fingertips. You can prove every program. I can’t stress enough the value of this at a time when digital advertising is increasingly opaque, e-commerce is a maze of attribution issues and email is surface-level.
The best buzzwords
Loyalty has the best buzzwords. I know this sounds dumb, but it’s actually important. Words matter. And when it comes time for leadership to stand at a podium and expose every aspect of the company to investors, buzzwords help keep things moving in the right direction — they allow leadership to control some of the uncontrollable.
Earnings growth, cash flow, debt — those are all factors that live outside the company’s control. But file growth, member growth, year-over-year program growth in revenue, membership, purchase frequency, engagement and a host of other metrics are all areas in which leadership can show positive results and encourage investors that the brand is stable and profitable.
So yes, buzzwords are important. Next time you’re talking to leadership, make sure to drop a couple and watch for how quickly they integrate them into their conversations and presentations.
A breath of fresh air
Perhaps the most important aspect of loyalty for leadership is that it gives them just the slightest amount of room to breathe, think and take risks. When programs are positive, there’s more room to operate, and loyalty is rarely a net negative.
More importantly, since loyalty impacts every marketing channel, it also boosts metrics for everyone else. Email numbers are going to go up; overall e-commerce conversions will be higher; and store numbers should see an uptick as well.
Loyalty gives management proof that customers are happy, engaged and profitable, and that gives them room to maneuver in other areas.
Leadership loves loyalty
Retail markets are going crazy. Nobody knows what the future holds or where it’s going. If anyone says they do, they’re lying. We can all guess, but it’s just that… a guess.
Loyalty is a lifeline. CEOs don’t have the luxury of saying, “I don’t know” or simply shrugging their shoulders. Loyalty keeps a pulse on customer health, and it provides the ammunition leadership needs to keep investors happy and show stability. So, go spout some buzzwords and watch leadership eyes sparkle with the possibilities.