While retailers continue to invest heavily in loyalty, many are failing to successfully engage digital customers, with only 24 percent of loyalty programs allowing redemption through mobile, according to a new report from Capgemini.

The report, Fixing the Cracks: Reinventing Loyalty Programs for the Digital Age, found that critical tactics for driving value among digitally enabled consumers are being ignored, resulting in only 44 percent of loyal program memberships being active and a large percentage of the $2 billion invested in loyalty ending up wasted. Beauty retailer Sephora is pinpointed as an example of a marketer that is successfully engaging its customers via a mobile-driven loyalty strategy.

“It’s surprising how few retailers had integrated the loyalty experience into their mobility strategy and vice-versa,” said Mark Taylor, global lead for customer experience transformation at Capgemini Consulting. “We found that only 24 percent of loyalty programs actually allow redemption through mobile.

“The mobile device should be the hub of a customer’s relationship with a retailer,” he said. “The expectation on the part of consumers is that the loyalty program be a fully integrated part of their experience with the brand.

“The retail brands that we saw as being the most successful have mobile at the heart of their customer relationships and have fully leveraged the mobile platform in their loyalty efforts.”

Meaningful brand interactions
The report takes a look at why active participation rates in loyalty programs are often low and why 89 percent of social media opinions on loyalty programs are negative. It is based on Capgemini’s research of the loyalty programs of 160 global companies across various sectors and a scan of 40,000 consumer conversations on social media.

One key finding is that 97 percent of programs base rewards on purchases, with only a small minority recognizing and rewarding members for engaging and interacting with the brand in other meaningful ways.

The report also found that most loyalty programs lack personalization and fail to offer cross-channel redemption. Only 9 percent offer point redemption across all channels.

The findings include that only 11 percent of loyalty programs offer personalized rewards based on a customer’s purchase history or location data.

While 79 percent of loyalty programs use the mobile channel, only 24 percent allow redemption through it.

Additionally, only 16 percent of loyalty programs reward customers for activities such as taking online surveys, rating and reviewing establishments or referring friends to the program.

A meager 14 percent use gamification mechanisms to reward customers.

Sephora gets it right
The report pinpoints Sephora as a marketer that has built a loyalty program that meets the needs of digital consumers.

The retailer’s “Beauty Insider” loyalty program matches loyalty accounts with Sephora’s mobile app as well as the Apple Passbook mobile wallet. This allows Sephora to provide a seamless purchase experience, where customers can track their purchases, view offers and redeem reward points on the go via their mobile devices.

The strategy appears to be working, with Sephora’s Passbook users purchasing twice as much and twice as frequently as the average Sephora customer, per the report.

Mobile is a priority
Capgemini recommends that brands consider loyalty programs within the larger context of a marketing strategy that is focused on driving customer engagement. To be commercially successful, programs must engage customers across every customer touch point, per the report.

Additional recommendations include delivering personalized customer experiences, conducting social listening to understand customer needs, rewarding members for social media engagement and advocacy, using gamification techniques to drive deeper participation and providing value beyond traditional rewards.

“The big opportunity here is to design the loyalty program around the mobile device first,” Mr. Taylor said. “The key elements we observed in successful programs are best delivered via the ever present mobile device: Fully integrated loyalty with overall customer experience; personalized experiences; rewarding engagement and not just transactions, and gamification.

“For retailers specifically, all aspects of the customer relationship – from browsing to purchasing to engaging with the brand in multiple ways in multiple places, to collecting, managing and redeeming rewards – should be designed and delivered on the mobile device as a priority.”

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York