Relationship or loyalty marketing strategies come in many forms. Let’s explore the different approaches, highlighting their advantages and disadvantages.
Table of Contents
Data at the heart of loyalty strategy
No program
Subscription program
Coalition program
Relationship marketing program
Loyalty program
Private coalition program
Premium program
Advanced loyalty program
Which relationship marketing strategy to choose?
Data at the heart of loyalty strategy
Foremost, let’s remember that a relationship strategy is an exchange program whose goal is to create a commitment to a brand. The program offers customers value-added elements, such as points, benefits, content, useful features and relevant, personalized offers, in exchange for member information.
Customer data then enables the brand to better understand its customer base (and customer segments), and thus personalize its various communication initiatives to increase their relevance and engagement rate.
Further reading: Data, the beating heart of relationship marketing.
The more a company can collect and use different types of data – transactional, behavioural, and attitudinal – the more effective and profitable its relationship strategy will be.
Relationship marketing and loyalty strategies
1. None, limited relationship marketing approach
The absence of customer data translates into non-personalized communication initiatives such as generic (non-segmented) emails and newsletters, as well as a presence on social media. This approach lacks personalization, resulting in low levels of engagement.
Examples: Most companiesRelationship efficiency: Very lowComplexity and costs: Very low |
2. Subscription program
The subscription formula offers different types of benefits to members in exchange for an annual or monthly fee. This strategy usually enables access to transactional data as well as the creation of customer segments.
Examples: Costco, Amazon Prime, Harley Owner’s Group (H.O.G.) and Dollar Shave ClubRelationship effectiveness: Medium to high, depending on the brand (love brand) and chosen benefitsComplexity and costs: Low, thanks to recurring subscription revenues |
3. Coalition program
This type of loyalty program brings together different banners or brands from multiple sectors unrelated to the program promoter. Members earn unique points by purchasing through the network of retailers (from different banners). However, retailers have limited access to the customer data collected, and their use is relatively limited.
Examples: Air Miles, Scene+ and AeroplanRelationship effectiveness: Low to mediumComplexity and costs: Medium to high |
4. Relationship marketing program (with access to transactional data)
This approach promises members certain benefits in exchange for their identifier (email or cell phone number). Communication initiatives can include notifications of upcoming sales, periodic offers and discounts, exclusive invitations, extended return periods and more.
However, data quality is variable. For example some emails are invalid, some employees may not be diligent enough to request the identifier, a 360° customer view is impossible, etc. That said, certain segmentation strategies are possible, as is the personalization of offers and content, but they remain limited.
Examples: Reitmans, Aritzia, Aldo Crew and Strom spaRelationship effectiveness: Low to mediumComplexity and costs: Low |
5. Loyalty program
Loyalty programs are a common practice in business, offering customers the opportunity to accumulate points based on their purchases and commitment to the brand. For example, a purchase of $5 could earn the customer 100 points. The database is mainly transactional, and enables the bonus of different types of behaviour: amounts spent, frequency of purchase, level of engagement, etc. Offers and content are personalized based on segments or analysis.
Examples: SAQ Inspire, MyMcDonald’s Rewards and Cuddle Club (Mondou)Relationship effectiveness: HighComplexity and costs: High |
6. Private coalition program
Another type of loyalty program, the private coalition, allows members to accumulate and redeem points with different banners belonging to the same group (holding). This strategy has the same advantages as a loyalty program, but they are amplified by the wealth of customer data available.
Examples: MOI (Metro), PC Optimum (Loblaws group), Gap Good Rewards and Triangle Rewards (Canadian Tire)Relationship effectiveness: HighComplexity and costs: High |
7. Premium program
A premium program is usually binded to an existing loyalty program (as an additional option). It targets the most committed members and requires a monthly or annual fee. In exchange, members enjoy additional benefits such as a points multiplier, free delivery, additional discounts and exclusive offers.
This increasingly popular strategy is proving to be highly effective. When we compare the behaviours of a program member with a member of the same program who has joined the premium component, we observe a significant increase in1 :
- commitment to the brand or program
- overall program performance (LoyalT score +31%)
- purchase concentration (Behaviour index +27%)
- perceived generosity (+77%) – even if the member pays a fee to access the various benefits!
Examples: PC Insiders (Loblaws group), Triangle Select (Canadian Tire), Indigo Plum+ and Unlimited Sip Club (Panera Bread)Relationship effectiveness: High to very highComplexity and costs: High |
8. Advanced loyalty program
This strategy is suitable for large organizations that place relationship strategy at the heart of their vision and business strategy. Their customer-centric organizational structure integrates numerous resources for analytics and program management (e.g., strategy and operations).
This strategy is also characterized by:
- greater use of artificial intelligence (AI)
- advanced analysis and predictive models
- combination and use of several types of data (transactional, behavioural, attitudinal)
- hyper-segmentation
Examples: Beauty Insider (Sephora), Starbucks Rewards, Target Circle and Chipotle RewardsRelationship effectiveness: Very highComplexity and costs: Very high |
Which relationship marketing strategy to choose?
There’s no magic formula for deciding which relationship strategy is best or most appropriate for each company.
Choosing the right strategy depends on a number of factors:
- business sector
- organizational culture
- senior management’s vision
- business objectives
- organizational structure
- technological ecosystem
- financial resources
- available team
- frequency of customer visits
The above diagrams do not represent an ideal evolution. In other words, not every company that wants to develop a relationship marketing strategy needs to opt for an advanced loyalty program. A well-tailored approach to your customer base, even simple, can be extremely effective. Amazon Prime is a good example. By focusing on highly sought-after benefits, this relationship program has won over nearly one in two Canadians1.
Whatever approach you choose, it’s vital not to choose your relationship strategy solely on the basis of cost. This is a common mistake in loyalty. It is essential for a brand to conduct a thorough financial analysis in order to ascertain the return on investment (ROI). This must be projected over several years (around 5 years), taking into account costs and behavioural changes generated (retention, “upsell”, “cross-sell”).
To determine the right strategy, R3 and Adviso have developed a structured approach that has been used successfully by many great Canadian brands over the past 20 years. Learn more about our approach.
What is the best relationship marketing strategy for your brand? Contact us for a personalized consultation.
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