21st Century Loyalty Marketing: Don’t Get Left Behind

Brenda FialaGuest Post: Brenda Fiala is a Executive Vice President of Strategy in the Wunderman Network, and leads a global strategy function and the global strategy & planning council for the agency.  You can connect with Brenda on LinkedIn.

Connecting Customer Data Creates Personal and Enduring Consumer Experiences

Loyalty marketing as commonly practiced is quickly moving to the dustbin of marketing history. While the principle tenets and benefits of loyalty marketing remain as powerful as ever, previous models of execution are giving way to higher impact, more personal, and more efficient approaches to loyalty marketing.

Newspaper-GlassesAdvances in data and connectivity are bringing a revolution of experiential content, personalization, and micro-targeted delivery. Today we bring to the customer a robust brand experience in a way that is most meaningful to that individual, at a time when they are most receptive to the message, and via a distribution venue they most prefer.

Brands stuck in the past—clinging to points programs, every 10th one free and consumer redemption driven programs—will surely struggle and waste valuable marketing dollars.

Brands open to new approaches that embrace connected data and meaningful recognition of consumers actual behaviors for short- and long-term sales not only will thrive, they will build an enduring and formidable competitive advantage. A quick look back illustrates the evolution to the revolution.

Traditional “Transactional” Loyalty Marketing

Loyalty programs were born in 1896, with S&H Green Stamps to reward consumers for the dollars they spent at retailers. Collect enough stamps in your book and select a gift. Earn enough points and be eligible for free travel. Peel off the box top and to see if you are a winner. Type a code into a website and find out what you have won. And the list goes on.

Most traditional loyalty programs are time-bound, focusing on a specific sales outcome; cast a wide net; and, require little tailoring. Their premise: buy more to increase your chances for free stuff. For years they worked extremely well — driving both short-term sales and brand excitement. Today, airline and hotel programs continue to reward their heaviest users in this way, and they probably will for a while. Now, with technologies exploding to capture consumer data at every turn, these traditional transactional loyalty programs are showing their age.

Here’s proof. While more brands have loyalty programs than ever before (membership is substantial at 2.65 billion and rising), for the past four years, activeparticipants have dropped. Less than half (44%) of loyalty program members are active participants according to Colloquy last year. The implication is startling for marketers investing millions of dollars. It is true, more companies have loyalty programs, but fewer have active members, even as members sign up for to be part of more programs.

Changing Consumer Expectations & Behaviors
The proliferation and ubiquity of social media keep the stream of immediate communication and recommendations about products, services and offers at people’s fingertip. The rise of “discount sites” selling almost everything has raised the bar on the types of discounts and benefits that drive excitement and participation in a rewards-based model. It is no wonder that the traditional programs are losing impact.

Consumer interest is waning because long timelines to earn and redeem points just don’t fit the “reward-me-NOW” generation. There is also the increasing financial liability of currency-centric programs that many companies do not want to endure.

Google, Amazon, Netflix are making a real statement by skipping loyalty programs altogether. How many others will follow suit? Instead, these companies are simply using the data consumers are entrusting them with to provide a more personalized experience based on their clicks and content generated. You don’t need to sign up to be “loyal,” you click and purchases are automatically tracked and logged. This personalized experience, over time, continues to increase consumer expectations from all companies.

A wealth of anonymous and known consumer data goes unused as many companies invest in time and resources in developing loyalty programs that often require the consumer to track their own purchases, input their own actions, and request their own rewards. More important, what was once seen by consumers as “choice” is now being perceived as a burden given that other companies can instantly recognize and reward consumers through their digital environments.

These changes also bring rise to tremendous opportunities to adjust the way we execute loyalty marketing that will take brands to new heights.
21 Century “Behavioral” Loyalty Marketing
In just five years, a seismic shift in how we as marketers think about both data and community is driving new ways to connect with consumers. Connected consumer data is enabling marketers to deliver peronalized benefits and recognition that are compelling customers to remain loyal. From a brands perspective, who should be first in line, if not our most frequent consumers? This is not about providing additional dollar benefits to consumers who would have purchased again. It is about the human truth that people want to be recognized for the value they provide to brand (purchase, recommendations, and advocacy).

As a result, loyalty programs need to shift away from high volume purchasing with free stuff as the incentive to loyalty programs that recognize true brand champions and reward them with something they truly value. Delivering rewards against purchase does not require a deep understanding of the consumer. Delivering recognition requires tracking a consumers behavior, understanding what matters to them, what they value, and delivering relevant rewards at the right time. Done right, it unlocks a sustained level of loyalty unseen by previous era of programs.

What does that mean for marketers?

Here are two simple rules which will dramatically impact your marketing results:

  1. Look beyond the survey to the aggregate of consumer behaviors and use this data to create an inherently personal, timely, and increasingly social, environment for consumers and they will keep coming back again and again.
  2. Move from transactional or currency-based rewards programs to behavior recognition-based programs.

A brand or product experience that fits seamlessly into a consumer’s everyday life is like a good friend showing up for a visit and just the right time and staying for just the right amount of time. We support them, and they support us.

21st Century Loyalty Marketing, using today’s cross-channel experience and data platforms, can be that engine for business growth.