Part 2: Foundational principles for developing a brilliant loyalty strategy. View part 1 here.
The Evolution of Loyalty: Loyalty Programs are already changing
Technology has driven fundamental changes in Customer behavior and how they shop. Today, Customers search for products, seek thoughts and opinions of other Customers, and increasingly order and pay for items online and via apps. Customers are also commenting on social media and even playing online games to earn virtual rewards. Thus, retailers have increased opportunities to listen to Customers and connect with them to deliver added value and help meet their needs at every touch point. For example, we can recognize our loyal Customers and drive engagement by providing advice on wine pairings, for example, or thanking them for posting a review and surprising them with a personalized offer while they are shopping online. By tracking and rewarding interactions beyond spend, we obtain a deeper understanding of our Customers to build stronger relationships. It’s about creating lasting connections through relevant rewards and experiences where and when Customers want them.
The evolution is already underway, and the ‘table stakes’ have changed, as illustrated in this chart:
Foundational principles for developing a brilliant loyalty strategy
Below are principles to follow to develop a successful loyalty strategy:
What to Avoid
Although loyalty programs have been around a long time, many of them still have fundamental limitations.
For some consumers the rewards are not worth the effort to participate in the program. For others, the requirements of participating are inconvenient, such as showing your card to earn points or getting paper versus digital rewards. If the proposition is too complex, busy Customers will just opt out. If reward thresholds are too high, it may take too long to earn a reward so Customers may just stop give up.
Below are program pitfalls to avoid:
- Low relevance for Customers
- Low perception of generosity
- Barriers across the Customer experience
- Reward/tier thresholds that are too high
- Developing a complex proposition which is difficult to understand
- Treating the program just as a promotional tool
- Having partners lack appeal or relevance
- Requiring too much effort for the Customer to participate
A Look to the Future
Programs designed today should consider emerging trends to be relevant into the future. Below are my thoughts on what to expect:
“Digital” and “omni-channel” are outdated terms
Both have been buzzwords in recent years, and with good reason. Customers own an average of 3.4 devices, and think of themselves, of course, as one person who just naturally integrates several modes of connection. Retailers and brands must recognize and interact with their Customers across all channels cohesively; 53% of Customers expect this right now, an expectation that grows exponentially every digital moment.
Accordingly, a separate ‘digital’ or ‘omni-channel’ strategy is meaningless
Both are elements of a larger Customer strategy, or as simple communication channels / executions within the loyalty or marketing strategy. Companies who have separate initiatives or departments focusing on digital or omni-channel are already almost hopelessly behind the curve. If your digital marketing strategy is different than your brand marketing strategy or your Customer Strategy, you are in big trouble.
Also becoming outdated are “points”
Points are becoming increasingly implicit within loyalty programs. Programs’ messages should focus more on the actions and rewards, rather than the point process within the program. Lately, best practices are really recognition and engagement programs that use ‘softer’ or implicit points within a loyalty proposition. As members make purchases within these type of programs, they receive more interactions, benefits, offers, and insider access, and those are the desired payoffs.
Companies are targeting Generation Z as they become more active Customers
Gen Z is coming into the spending picture more now at ages 12-23. The interesting thing about this age group is that they have never known a world without technology, mobile, and social. They are more tech-savvy and tech-demanding than other age groups. This will advance the mobile trends we have already seen in recent years, and require companies to pay even closer attention to their behaviors as they define their shopping identities.
Customers want companies to demonstrate a commitment to doing good
Although not typically viewed as a component of loyalty programs, consumers are increasingly aware of companies’ corporate social responsibility and it influences their opinions of brands. Corporate responsibility and philanthropy are nothing new, but it is now being incorporated into loyalty programs. Many programs today include charitable actions in their messaging, and more importantly to directly impact Customers, are offering opportunities for Customers to participate in charitable elements.. One example, members can choose donations to a relevant cause as a reward option.
Customers co-create their own experiences
Perhaps the most exciting and interesting concept, and one that Customers truly appreciate, is the opportunity for Customers to create their own experiences. Tesco’s former BuyaPowa proposition put Customers in the role of pricing managers – the more wine they encouraged their friends to buy, the cheaper the price was per bottle for everyone. Walmart enlists Customers to be new product developers and then category managers, driving innovation in new products. Canadian Tire’s Customer-driven ‘Tested’ panel are de facto quality control experts. Even the constitution of Iceland was rewritten by its citizens, who contributed their thoughts for a better society in a social media campaign.
Measuring the Success of Loyalty Programs
There are many ways to measure loyalty programs– diagnostic measures that evaluate how well the program is being executed. Do you have awareness, appeal, and participation? Is the program driving engagement and increased loyalty among members? Stay tuned for Part 3: Measuring the Success of Loyalty Programs.
This is the ninth in a series of LinkedIn articles from David Ciancio, advocating the voice of the customer in the highly competitive food-retail industry.