The future of loyalty is social

The current loyalty model is more than 25 years old and has prioritised rewards for transactions with services and benefits. Now because social media has shifted the time frame for interactions with brands, consumers are no longer willing to accumulate points over a long period.

To counter evolving needs, HMV, Play.com and Costa have all recently adopted different elements of social media to build loyalty and CRM programmes (see box).

My HMV, which replaces offline scheme Pure HMV, will integrate with Facebook and other social networks. HMV says this integration will help it build up better profiles of its customers and serve them with more personalised and relevant experiences based on all interactions with the brand, not just transactions.

Mark Hodgkinson, e-commerce and marketing director at HMV says: “Over time, increasingly we expect that customers will want to be recognised when they come into store. The more customers interact and the more we understand about them, the more relevant it will become.

“[My HMV] is also a more instantaneous relationship than traditional CRM. Pure HMV has been centred around purchases, but it can take some time to do something meaningful with it but the opportunity with My HMV is that there’s interaction as soon as you enter a store.”

Stuart Evans, general manager at loyalty consultancy ICLP, agrees that separating the concept of loyalty from purchases is important in a new era of relationships with brands. If a customer has to pay to receive a benefit then it is no more than a bribe for a future behaviour, whereas if a reward is free, it is a thank you for past behaviours, he says.

Evans says that these new emerging consumer needs – the desire to be recognised, share opinions and information and be part of groups, is bringing a new “fourth dimension” to loyalty marketing building on brand, product and relationship marketing it has been based on until now.

“The fourth dimension [of loyalty marketing] is these new customer needs – ‘I want to be involved, want to be social ,want to be seen to have opinions and seen to be doing good things’. As marketers, we have to understand what is driving those needs and look at social space alongside product, brand and relationship marketing,” he says.

This so called “new dimension” of loyalty, however, doesn’t mean that there is no value in a points and rewards based loyalty program, but to satisfy the changing needs of consumers any brand that wants to create a meaningful relationship must go beyond this.

Social channels also offers brands an opportunity to leverage the data available to create a personalised relationship with customers on a one to one level and move away from a “one-size-fits-all” approach that uses generic points.

Costa Coffee has launched a Facebook app for its transaction-based points and rewards programme and says that adding social aspects to the programme is a “natural progression” but not the be all and end all for its CRM activity.

Costa foresees expanding the social aspects of the programme further in coming months but collecting points with purchases remains at the heart of the programme allowing customers to accrue points and redeem them.

Ben Cook, loyalty manager at Costa, says: “The biggest thing for us is that we’re recognising that people are interacting with us in different aways – it’s not about moving everything social but these people are interacting with us day in and day out.”

He says that a Facebook app provides another channel for customers to interact with the brand adding that while many brands have relied on email as a channel of communication for CRM and loyalty programmes, email isn’t as relevant to people as it has been in the past as they turn to private messaging on networks like Facebook.

Evans advises brands to find ways to reward consumers for different types of interactions because whether a fan just consumes a brand’s content or shares it with others or creates additional content for a brand makes their interaction valuable in different ways.

Play.com recently revealed that its Facebook fans are worth 24 per cent more than non Facebook fans in terms of transactional value. It is now investigating how it can use this information to reward customers that are more vocal about its brand and do more to promote it on social networks.

It is looking at ways to use social data in other marketing channels to make better use of behavioural targeting, recommendations and promotions that create a “more enriched experience” for each user.

Play.com marketing director Adam Stewart says: “The traditional element is you give them some points, they come back and redeem them. But, within the social space as soon as customers start engaging the viral element of social means the reach extends and from a loyalty side of things that’s where the power comes from.”