How the customer-first revolution is disrupting loyalty
By using data to communicate experiences that pull customers in, rather than pushing undifferentiated offers, brands can transform loyalty’s effectiveness.
Virtually every discipline and technology in marketing has been disrupted in the past two decades, but over that time loyalty marketing hasn’t evolved as fast. While marketers are constantly experimenting with the mechanics of reaching their customers on specific channels in specific ways, or what they do with the vast volumes of marketing content now being created, moving on to the next generation of loyalty remains just an aspiration for most brands.
Many companies first established their loyalty programmes decades ago, and while there have been attempts to innovate in the loyalty ecosystem, the majority are still stuck in a legacy era. People don’t want 50 different loyalty cards or apps, but they still have to deal with hotels, airlines, retailers and financial brands distributing and commercialising their programmes differently, creating as many headaches and complexities as they are benefits.
One answer might be to link them all together, and some brands have gone down this route. But there are barriers to data collaboration – after all, who owns the customer? Nectar is a great example of a scheme that puts the customer at the heart of the loyalty ecosystem, but who is the customer loyal to, Nectar or the partners within it? What we have to figure out is, are we in a customer-first revolution and how does loyalty fit in?
We have to acknowledge that trying to fix the loyalty system initially yields more questions than it does answers – questions that have to be asked at all levels of an organisation. Is loyalty being reinvented to the level that it should be? No. Is loyalty all about remuneration or points? Also, no. Should it be about a personalised customer experience? Yes.
What does that mean for brands – do we believe that loyalty still creates value for brands? Absolutely it does. Loyalty to a brand now extends beyond giving good products for good value; it’s about environmental, social and governance standards too.
A category in need of disruption
We need to take inspiration from disruptive brands. It was only when fintech started disrupting the legacy world of financial services that established companies felt they had to do something different. Today, the financial services sector is all about financial wellbeing, but traditional companies couldn’t have made this shift if they kept the elongated processes that meant it took days to apply for a deposit account. Today, you can get one in minutes. They had to reinvent themselves and that took disruption.
Look also at the healthcare sector, another industry focusing less on transactions (making an appointment, getting a prescription) and more on overall, holistic experience – in this case physical and mental wellness. Vitality is a great example of a loyalty programme going down the route of encouraging and rewarding healthy behaviours, such as going to a gym. That in itself is useful, but on top of that, it gets you reduced private healthcare premiums.
Such offerings are increasingly the norm today, but it still took a new organisation like Vitality to come in and disrupt the sector before loyalty was reinvented.
Most typical loyalty schemes will push offers, but they won’t communicate personalised experiences that could pull customers in.
More industries will see this kind of change. Take the travel sector, where brands have the potential to provide the best customer experience from a loyalty perspective, and have every opportunity post-pandemic to take their loyalty schemes to the next level. Some airports have caught onto this, helping loyal customers to avoid the worst of the recent air travel disruptions where they can. Loyalty needs to be about more than just accruing rewards – it has to be about better and more personalised experiences.
But again, it’s about more than just removing some pain points. Where’s the added value? Disney is a past master at this, but I doubt it would even call its approach a loyalty scheme. Whether you’re on a cruise or in one of its parks, an app tells you ahead of time where you need to be, which ride is up next, how to get to the front of the queue, where the merchandise is. They’ve marshalled the mob for you. So how do we translate this into other sectors?
Retail, the original home of the languishing loyalty points card, could take its cues from Disney. Do you want to visit our shop? Did you know it’s quiet right now and we can give you a personal service? Or, come to the store at 11am on Saturday when there’s an event that is right up your street.
Mindset shift
Most typical loyalty schemes will push offers, but they won’t communicate personalised experiences that could pull customers in. Product X at 20% off isn’t that interesting to me, but knowing I can come in at a certain time on a certain day when the aisles are quiet, the food has just been delivered from the wholesaler, and it’s nice and fresh and plentiful – that’s valuable to me.
This is the mindset shift we need in the loyalty world, and the focus needs to be on the three Cs of ‘creating’ new strategies through design thinking, ‘connecting’ data and technology at enterprise level to support it, and ‘collaborating’ with like-minded partners to ensure a customer-first approach. The fundamentals are often in place at brands already, the shift just hasn’t been top-of-mind for business executives and marketing leaders.
Brands also need to make sure the infrastructure is in place to communicate with customers in more innovative ways. If we’re going to tell them that “the food is fresh and plentiful at 11am on Tuesday”, we need to know when the supplies come in, when they’re going to hit the shelf and what happens when they do. Those use cases are non-existent in most companies, but the advanced analytic techniques are available, so they are achievable.
There are three big mechanisms – people, process, and data and technology – that you need to make sure you can do loyalty properly. It would be an all-round better experience versus the raw commercial exchange we see largely happening today. How do you differentiate your loyalty programme from others? It all comes down to experience, and that’s all about personalisation.
Personalised experience, not offers and discounts, will be the design thinking of future loyalty programmes. I, personally, will be excited to see brands take on this next step in their loyalty journey.
Mike Menzer is executive vice-president and general manager of Acxiom International.
