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[16 comments]

The three most important words for loyalty marketing in 2014

February 6, 2014

Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.

Setting annual goals can be a precarious venture. We can easily set goals that are too vague or too lofty for us to maintain focus. A recurring condition of executive level presentations these days is to "keep it tight," "make it clear" and "do it in no more than 10 pages." And so, I've elected to forecast the most important trends and areas of change in customer and loyalty marketing in 2014 using just three words:

Disruption: There will be continued disruption of Consumer Value Propositions (CVP) and the technology that delivers loyalty programs in 2014. These changes continue to evolve and I don't think any honest person can definitively say they completely understand and can accurately predict exactly how consumers make purchase decisions. Data-driven loyalty marketing programs in particular have to change to meet consumers, not just where they are, but where they will be in two years. The rewards must also reach the right customers as opposed to all customers.

The technology that enables customer communication and offer delivery is changing too. In just the past month, I have seen a Belly enabled iPad set up in a UPS store; an iPad POS system from Revel Systems in another local retailer; and POS driven loyalty programs at several franchise operations. The question for 2014 is whether larger brands will continue to pay huge prices for enterprise loyalty systems "because they can" or whether they will increasingly experiment with alternate solutions "because they can."

(In)Security: With the recent security breaches at Target and Nieman Marcus, the NSA scandal and the current scare campaign supported by Microsoft warning consumers to resist being "Scroogled," consumers may become more hesitant in 2014 to share their data with brands. Legislation could be introduced at the Congressional level to shift ownership of customer data from the brand back to the consumer.

One thing is certain: the burden will be on marketers to show "why" they are asking consumers for specific data points and "how" they are using it. Marketers will need to demonstrate they are listening to their customers and how they return tangible value to customers in return for the data they have "borrowed."

Context: Are we using the channels that are most relevant to our customers? Do our customers want to collect points, redeem instant surprise rewards, play a game with us, or is there another model we can try? How close to the point of purchase can we engage our customers? These are all questions that we expect to be answering during the year.

Discussion Questions:

Which of the three themes mentioned in the article will be most significant for loyalty marketing in 2014: disruption, (in)security or context? Are there other trends that you think are as or more important?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Which of the three themes mentioned in the article will be most significant for loyalty marketing in 2014?

Comments:

Consumers are less likely to provide personal information to become loyal customers in 2014 due to the recent breaches. That would make Context the more important theme for the consumer, in other words, what the value add is for the consumer. If it is or is perceived to be of value to the consumer, they will embrace it.

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Frank Riso, Principal, Frank Riso Associates, LLC

I can see how Bill's insights relate to "marketing"...but I'm not sure how it relates to "loyalty." Unless, that is, if he thinks that ALL marketing is "loyalty marketing" which may the best insight of them all.

There's another word that's been on my mind of late re technology I'm working on - and that's the word "adaptive." Seems to me that it may be the "umbrella" word over disruption, (in)security and context.

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Ian Percy, President, The Ian Percy Corporation

Everything we knew about retail in 1980 is out the window, with the exception of "the customer is always right." There's an epic scramble in the industry to provide better relevance and sync a plethora of systems. Customer expectations have never been higher, and your customers will be happy to take their business to new entrants who can surprise and delight. The customer wins in this environment!

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Cathy Hotka, Principal, Cathy Hotka & Associates

None of the three are going to be the deciding factor. The key has been and always will be positive customer relations fueled by great customer service, fueled by great employee customer interaction. You cannot have great loyalty until you have great people relationships. All things being equal, people do business with people they like. All things being unequal, people do business with people they like.

Until you get the people thing right, nothing else is going to matter.

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Mel Kleiman, President, Humetrics

I would add value and ease to the points described above. One size fits all loyalty programs are, or should be, a thing of the past. Retailers need to understand what motivates each consumer and deliver rewards that are truly motivating. In doing this retailers justify the need to gather information about consumers.

These programs must be delivered and redeemed easily. Retailers should use the technology that is available to quickly and simply keep consumers involved in their loyalty programs.

Most retailer loyalty programs are stuck in the 20th century. It's time to move forward or shut them down.

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Max Goldberg, President, Max Goldberg & Associates

Context and relevance will be a significant driver for loyalty programs in 2014 and beyond. With the data that retailers have access to at a customer level, shoppers will expect more personalized and relevant loyalty programs. Delivering these programs through integrated touchpoints (mobile/online/social and in-store mobile devices) will be the norm and expectation.

Security will continue to play a role in shoppers' behavior and expectations for retailers, especially as it relates to payment.

There will be an increasing expectation from shoppers for retailers to use data analytics for influencing their offer and message strategy, integrating this approach into the retailer loyalty program.

Michelle Marian, Retail Vertical Lead, Motorola Solutions

Shopper loyalty is complicated. So much of "loyalty" has been built around points, discounts, special offers, etc. Whenever I think of loyalty programs, I think mercenary programs. Loyalty cannot be bought. Loyalty must be EARNED.

As I write this, I am sitting in the restaurant of a Whole Foods, a retailer who enjoys probably the MOST loyal customer base of any retailer, save The Apple Stores. Whole Foods has no coupons, no loyalty program, yet shoppers have flocked to this store from the day it opened as if it were giving away money. How did they achieve this status without a loyalty program?

Both Trader Joe's and Aldi have extremely loyal customers, and I do not believe either has a loyalty program. (Someone correct me if I am wrong.) By the way, Aldi's customers wouldn't be "caught dead" in a Trader Joe's and visa versa.

These stores have FANS, not customers. The objective should be for companies, both retailers and manufactures to develop a FAN base which is achieved through a combination of marketing, product, service and connection.

Fans are developed by appealing to specific consumers and building a relationship with those consumers by offering something they cannot get anywhere else. It is a significant challenge for most retailers to stand out from their competition because they cannot offer much product differentiation, but marketing, service and connection can set them apart.

So in answer to the question of which of the three words define "Loyalty Marketing" in 2014, my answer is Context. Going one step further, I would say Context is the most important word in marketing.

Martin Amadio, President, Inity InStore

I have a formula for loyalty:

Great Customer Service + Confidence = Loyalty

The three themes mentioned in this article fall into service and confidence.

Disruption is about delivering more value and creating better customer service and experience.

Context is about how easy you are to do business and the value you create with your program. That also falls into the service/experience area.

Security falls into confidence. Is the customer confident that the system you have in place will protect their credit card and identity information. Consumers used to think the security was more about online purchasing, but they are quickly learning it can be any type of business that handles a customer's financial information.

So, which is more important? It's a trick question. All are important, but if I had to choose one, I'd go with context. Disruption (or lack of it) isn't necessarily going to break your business. Security is a given. If you don't have it you risk losing the confidence of the customer. Even if you do have it, you risk a breach because no system is perfect. That leaves context. Are we engaging the customer at the right times, and is the value we create with our program strong enough to keep a customer loyal?

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

A trend Altimeter's Brian Solis talks about is the "ultimate moment of truth," where consumers develop and share content about a product consumption or shopping experience that becomes an indicator of loyalty, affinity, referral and recommendation, etc.

In terms of disruption, an interesting thing to look for are progressive retailers attempting to facilitate this brand of loyalty program where it's consumer generated content that becomes the targeted behavior of rewards incentives, as much as pure purchasing behavior. This is certainly something already happening among some CPG companies but retailers might embrace the idea too.

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Gib Bassett, Global Program Director for Consumer Goods, Teradata Corp.

Here's a trend that should be most significant - experience! Yes, it is more important than any of the three mentioned.

The reason retailers struggle with so called "Loyalty Marketing" is that there really isn't such a thing!

These types of programs are simply gimmicks and games that simply distract the retailer from where their attention is most deserved - customer experience.

I don't know if Zappos has a "Loyalty Marketing Program. I really don't care if they do. Nevertheless, when I think of a retailer that wins my loyalty, they come first to mind. If they have a so called "Loyalty Marketing Program," I don't need it. They simply deliver what they have better than anyone whether it be bricks or clicks.

Whether it is buying, returning, or delivering, I've never had a better experience. Their folks are great no matter if it via phone or email. I've had a blast 'tweeting' with their customer service people on Twitter. If you haven't followed them, try it.

So, as the consultants and marketing departments wring their hands over these types of things, the retailers that simply deliver on the experience factor understand that customers own their loyalty.

'Scanner'

If we equate loyalty to a personal relationship then loyalty marketing today asks the question: How big a heart should I give my significant other for Valentine's Day? Or maybe chocolate?

We need to take this game up a few levels - superficial thinking will not sustain relationships and context, while a good start (think of Valentine's Day as a start) is a far cry from meaning.

Vahe Katros, Consultant, Plan B

Context will certainly be the most relevant. As retailers continue to face challenges with breaking through the clutter, increased competition, and attempting to target the right customer with the right message through the right channel, loyalty programs will need to be focused greatly on context.

Retailers can actually use loyalty programs to their advantage, not simply as a marketing tool, but as a way to gain rich customer insights, create personalized targeted promotions, and communicate with customers in the right way. By implementing an omnichannel loyalty program, retailers have the opportunity to deliver this context in a successful way.

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Jesse Karp, Omnichannel Consulting Manager & Loyalty Practice Lead, Cognizant Business Consulting

Ian Percy mentioned the word, "adaptive." I have heard a lot about "agile" or "agility." I think Ian is on the right track. As technologies (social, mobile, cloud, analytics, security, etc.) evolve by the minute, CPG brands and retailers need to be agile and adapt faster to these new capabilities.

Are these words mentioned in the article important? Yes. Are there more? Absolutely. "Loyalty" is only driven by compelling reasons to associate with a brand, be it CPG, retail or otherwise. If those compelling reasons don't continue to evolve, then loyalty will drop.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

I'm sticking with my three R's of loyalty marketing:

  • Rewards (hard benefits)
  • Recognition (soft benefits)
  • Relevance (using customer data to improve marketing)

And for B2B marketers, I'll ad a fourth R for Relationships, as many B2B relationships are via sales reps.

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Bryan Pearson, President and CEO, LoyaltyOne

Sounds like "brand" should have received an honorable mention here somewhere, to Martin's point. The key to building and maintaining the faith with customers is having a consistent commitment to them and then living up to it. Part of that brand could include the variety of loyalty devices mentioned, but it all needs to fit together. But to the question posed, I think security is going to at some point become a huge issue. Someone somewhere is going to make a bad mistake by exposing something related to personal data that they acquired, and go well beyond creepy. The backlash that follows is going to create a huge cry for privacy.

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Peter J. Charness, SVP America, Global CMO, TXT Group

Disruption would be my choice. Each will have impact and that's why it is a three word list, rather than just one!

That said, I think the disruption by newer technology providers as well as the shifting needs of consumers will keep us all on our toes this year.

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Bill Hanifin, Managing Director, Hanifin Loyalty LLC

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