The strategy behind customer loyalty programs has stayed the same for many decades. Most programs are centered on driving repeat purchases with a promotional currency thereby rewarding customers with economic incentives for making a purchase. But this approach is dated. While points, or promotional currencies still have a role, our ability to connect with consumers across digital touchpoints requires us to engage consumers like never before.
Yet, as marketers we have struggled to make connections with our customers especially through mobile and digital channels. This is because we’ve basically looked at ‘loyalty’ as a transactional relationship based on points or punches for every purchase and this has stayed the same for many years. While points or punches satisfy the economic value in the relationship with a consumer, are these efforts really driving loyalty?
Loyalty as only a transactional relationship builds ‘frequent buyer’ programs easily countered or matched by the competition’s incremental discount or offer. If all the relationship is based on is monetary value – that relationship is only surface level, not very deep and not very meaningful.
Now, there is another path. One based on customer intimacy and relationships built as much on emotional loyalty rather than purely economic loyalty. Brands need to go beyond the economic value proposition that has been enough to drive a sale. Through deeper engagement we can learn to better understand what motivates consumers and be able to deliver on those needs in a way that humanizes the brand experience and elicits emotional connections. This means putting emotional value first and economic incentive second. The right blend of the two is what will power loyalty programs of the future.
Creating customer loyalty in our highly connected, digital world requires:
A wider lens
With better methods to collect information outside of purchase, marketers need to identify other moments that matter to their brand that yield financial benefit. It’s not just looking at spend or the number of times a customer transacts. Monitoring and rewarding behaviors such as referrals, social sharing, product or service reviews will take your relationship with the customer beyond the purchase. But it mustn’t stop there.
Customer segments then need to be defined so when moments happen, marketers are prepared to respond by blending prior history with the action taking place in that moment. Responses are more relevant and deliver on the expectation of today’s consumer. This relevance builds engagement and trust and the emotional connection required to deepen customer relationships, meaning you won’t need to rely purely on points and economic incentives.
Technology, not mobile
The depth of the brand-to-consumer relationship is only as deep as the kind of information marketers are able to glean from their customers and act on. There’s a lot of attention being put on the mobile device right now because it provides access to the consumer and makes it easier for the consumer to interact with brands. But for the marketer, what’s happening from a technology standpoint is what matters.
Open-source platforms are required to bring customer interactions together in real-time across offline, online and social media channels. Consumers are interacting with brands in more ways through digital, presenting opportunities to marketers to better understand their customers. But organizing scattered fragments of data into clear, unique human identities can still be difficult. Your enterprise marketing technology and identity management capabilities must allow you to develop rich customer profiles across offline and online channels to be ready to act. Through the use of rules engines, machine learning and marketing automation marketers can use the information gleaned from their wider lens to engage with consumers in real-time. Real-time interactions will create a heightened sense of loyalty that goes well-beyond points-based incentives.
Understanding that not all customers are the same
Too often loyalty programs treat everyone the same with undifferentiated experiences. By quantifying the value of loyalty program members – beyond economic value – brands can allow for better alignment of marketing investment and design member strategies for high growth potential and more profitable customers. This in turn will forge longer-lasting relationships.
With reliance shifting from a purely economic loyalty approach centered on promotional currencies, discounts and coupons, it is time to shift your focus from driving a purchase to building relationships that lead to purchase (and repeat purchases). The ability to identify consumers in a variety of interactions and moments increases consumer insight and understanding. But you have to be looking at loyalty through the right lens, have the technology to act on that information and understand the true value of your customers.
Economic value propositions in loyalty are waning. If you can’t deliver the appropriate customer experience, points are irrelevant.
John Bartold is a loyalty and customer experience leader at Epsilon
