BrainTrust Query: Changing Times in Loyalty

Discussion
Apr 12, 2012

Through a special arrangement, presented here for discussion is a summary of a current article from the Loyalty 360 blog.

As great as Loyalty Expo was this year, too much of the dialogue continued to focus on points, rewards, discounts and deals. There were relatively few exceptions to this theme, leading one conference newcomer (from one of the world’s top, customer-centric brands) to wonder, "Why does everyone here seem to equate loyalty with points and programs?"

Meanwhile, Amazon — without a standard points program — continues to maintain its position at the top of every list highlighting brands that engender loyalty and trust.

Amazon wins because they know how to use customer data and speak with — rather than to — customers individually. They use data for personalization, targeting and, especially, for relevance. They recognize customers — who they are, what they buy, when and how often. They know who is socially active and who posts reviews. Most importantly, Amazon uses this information to make it easier to purchase from them. As Lisa Utzschneider of Amazon said at the ad:tech keynote last week, "Our customers trust and they expect that Amazon will deliver relevant content to them."

The takeaways from Amazon and Loyalty Expo are clear. First, loyalty marketing must become much more than points and rewards. Relevance and soft benefits will continually trump hard benefits and discounts for relationship building. This means brands must create content, benefits and customer experiences that are unique to their brand promise, rather than a cookie-cutter points offering that runs on autopilot or through mass-email delivery.

Second, brands have no choice but to make using their customer data a priority or risk disengaging customers who have agreed to be part of the brand dialogue. This means brands must use data to create insights, implement personalization and create customization to become increasingly relevant throughout customer lifecycles and across each touch point.

So while times are good and potential is high for loyalty and relationship marketing, to quote Bob Dylan, "The times they are a-changin.’"

Discussion Questions: What lessons does Amazon offer around customer loyalty? To what degree do other retailers have a similar capacity to capitalize on customer data to drive loyalty?

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20 Comments on "BrainTrust Query: Changing Times in Loyalty"

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Bill Emerson
Guest
Bill Emerson
5 years 4 months ago

Phil offers some great points on using customer data effectively to enhance brand loyalty. Loyalty, however, is not something that is built on elegant applications and uses of data. Loyalty is built through consistently achieving and surpassing the brand proposition. This means that every part of the operating model (merchandising, operations, HR, logistics, customer service, finance) is primarily focused on one thing — pleasing the customer. Do this and you get loyal customers. Great uses of data is important, but it will not overcome shortfalls in other areas.

Steve Montgomery
BrainTrust

When loyalty programs started, I would ask any audience I was speaking with if they had a loyalty program and many said no. I would then point out that in fact they already did — it was called customer service. It might be a good program or a bad one, but it exists. Amazon has taken that one on one interaction from being based on human beings to being based on technology. Brick and motor retailers who want to can “revert” to the old basis for loyalty and build a good solid relationship with their customers.

We just returned from spending two days with a small format retailer where it like being in Cheers because they knew everyone’s name. They were clearly the dominate retailer in their market place with what was certainly not an outstanding physical platform. All built on a loyalty program called customer service.

Richard J. George, Ph.D.
BrainTrust

First, I do not agree with the concept of customer loyalty. People are loyal to their family, nation, school or religion. Loyalty to a retailer makes no sense. It is an exchange process. The customer provides money and the seller provides goods and/or services. If you are looking for loyalty in life, I recommend you get a dog.

Second, most current loyalty programs should better be called “continuity of purchase” programs. That is why points and deals have no “loyalty” attached to them. Instead of focusing on loyalty, focus on delighting customers, who in turn will reciprocate by buying more and more often. Learn the lesson from Amazon, who constantly and consistently delights its customers by customizing its offerings, websites, etc., to exceed expectations.

Ben Sprecher
Guest
Ben Sprecher
5 years 4 months ago

A card on a keychain does not equal loyalty, and a points balance does not equal engagement.

With the explosion of digital media, consumers are under sensory attack from every direction, and the ONLY way to achieve a lastingly loyal relationship and to earn the customer’s attention is to speak to them in a relevant, personalized way.

Of course, personalizing down to the individual consumer level (and I don’t just mean, “Dear [FirstName], blah, blah, blah…”) introduces exponentially greater complexity into your marketing programs, which requires what I have started calling a “retail-scale automated personalization platform.”

Amazon has done better than almost anyone in this regard, but we believe there’s even more a retailer can do. And, (shameless plug) we believe we have built a platform to make it possible.

Mark Burr
Guest
5 years 4 months ago
Amazon is certainly not driving loyalty by this program or any other. What they are doing is driving sales. Sales and loyalty are two different things. It is a mistake to think that a program that uses customer data for suggestive selling has anything to do with whether or not a customer uses Amazon for that reason. Amazon has grown and continues to grow based on their offering and their ability to deliver an exceptional experience. Consumers continue to reward them for that. First they had to have what the consumer wants and they had to develop the ability to execute the delivery of that to the customer nearly flawlessly. They didn’t always do so. They continually improved to arrive at where they are today. Consumers return based on their experience. They choose Amazon based on that, over and over again. Consumers own their loyalty. Retailers continue to misuse the words “loyalty program.” What they are doing is nothing more than using data towards suggestive selling. It may incrementally increase sales and that is the real objective. It does not ensure or induce the consumer granting them their loyalty. The consumer’s experience once they do make a purchase does that.… Read more »
Ian Percy
BrainTrust

Richard and Ben nailed it.

I once read an article titled “Your Dog Has To Love You.” Of course the reference was that a dog is somehow genetically programmed for unconditional love — personally I think dogs are one of God’s greatest gifts to us.

Well customers aren’t programmed that way — certainly not in relationship to retailers. Yet even corporations want to be loved and they just so hope customers will love them. They’ll give us presents if we ‘love’ them — or at least pretend to! Many corporations are starting to look pathetic and needy in their quest for loyalty … and so misguided. It only takes the occasional “Dear ” email to be reminded what a crock so much of this is.

This isn’t about love and loyalty, it’s commerce. Customers are slutty in that way; someone offers a better gift and they’re gone.

Some day we’ll realize that relationships are built on mechanics.

Mel Kleiman
BrainTrust

Two old quotes come to mind.
1. It is not about how much you know it is about how much you care.
2. All things being equal, people deal with people they like. All things being unequal people deal with people they like.

It is all about true relationships.

Bob Phibbs
BrainTrust

Wake up retailers! Amazon is a deep-pocketed entity that skims off the work other retailers have done to build brands. What an average retailer does to market a product is much riskier than anything Amazon has to do to bring it to the shopper. Amazon isn’t about loyalty, it’s about burying competitors.

gordon arnold
Guest
When considering the purchase of new software for a business system, very little thought is put into the market reporting capabilities of the products being considered. Business accounting needs and ease of use are the first and primary want of the customer. When IT systems are audited, they are checked for security, business continuity and disaster recovery. The most common question business executives ask their MIS departments and the IT vendors when comparing their annual results to the market leaders is “Why can’t my system do that?” And the answer always present but never stated is that you never said you wanted it to, plain and simple. Smart companies like Amazon understand the difference between a necessary burden like accounting and a goal like sales. They realize from the beginning that it is the software a company uses to handle its sales that determines its success in any endeavor. Today, as in the past, 85-90% of IT managements are working in platform dependent infrastructures forcing massive budget expenditures just to keep up with their customer base. They spend fortunes finding out where they were relative to the market last quarter and who their customers were last year, while the industry… Read more »
Lisa Bradner
Guest
Lisa Bradner
5 years 4 months ago

There’s one element of Amazon no one has mentioned yet — price. Amazon consistently delivers low price and through Amazon prime has eliminated the shipping sticker shock from many online purchases. Doesn’t mean price alone can do it all but I think it’s important to recognize one more challenge retailers face.

Lester Wunderman used the term “ophelimity” — doesn’t exactly roll off the tongue but its references “that which is pleasing to me.” Stepping back to understand what your brand specifically delivers that is pleasing and for whom is the first step toward developing relevant marketing that customers will embrace. Phil is absolutely right to talk about data and relevance but understanding your brand positioning is the only way to define what “relevance” means and which data really matters.

Ralph Jacobson
BrainTrust

We need to consider loyalty programs in all industries in order to determine what works and what doesn’t. Why do you try to fly the same airline? Stay at the same hotel? Etc. Non-food retailers have compelling reasons to shop their stores, offering services, like designer consultations, etc. So, why do food stores continue, with few exceptions, to give unwarranted mass discounts to people who’d buy the stuff regardless, and call that a “loyalty” program? It’s a frequent shopper discount, at best.

Yes, many retailers can emulate aspects of other retailers’ programs, both online and offline. The first step is to pull away from the “me too” discounts/perks and develop a unique offering to the marketplace.

Roy White
Guest
Roy White
5 years 4 months ago

The article’s theme is absolutely correct. Too many loyalty programs, especially those in the supermarket industry, have been allowed to degenerate into simply discount cards enabling the shopper to get lower prices on that shopping trip. A recent discussion question delved into the issue of generic card swiping for those customers who do not have their own card. The concentration on points and rewards referred to in this discussion question is an extension of the issue addressed in the earlier question. In an era in which there are plenty of choices for a consumer to shop, it is important that retailers lock them in by talking “with” and not simply offering a mechanistic points and rewards program.

Ken Lonyai
BrainTrust

Most responses here have followed a theme that this article misses – possibly due to its source. Loyalty is surely more than a program or even an attitude. It’s generated as was suggested before me, by user experience and that is generated from top to bottom throughout an organization.

Amazon is somewhat a first to market company that also, has size/price advantages, excellent logistics, deep pockets, and the other (now common) consumer features.

Lose any one of those pieces and they would hemorrhage customers and “loyalty” quite quickly.

Jason Goldberg
BrainTrust

In many self-service shopping environments (online and off-line) customers only seek to talk to the business when something goes wrong or doesn’t deliver the experience the shopper expects.

Amazon’s great insight is that rather than provide good communication tools for frustrated self-service users, they should strive to create the right experience the first time so that customers never want to talk to them. As Jeff Bezos has famously said, “Our version of a perfect customer experience is one in which our customer doesn’t want to talk to us.” That philosophy is akin to trying to solve the root cause of quality problems, rather than simply putting a quality check at the very end of a process (as so many firms do).

A “Self-Service Only” strategy isn’t right for every business and every shopper mission, but where it does fit, there is real wisdom in the Amazon approach.

Dave Carlson
Guest
5 years 4 months ago

The essence of the article is in these sentences: “Amazon wins because they know how to use customer data and speak with — rather than to — customers individually. They use data for personalization, targeting and, especially, for relevance.”

Shopper-identified data used, as Amazon does, by brick and mortar retailers is a powerful competitive advantage waiting to be deployed, particularly in fast moving consumer goods. Safeway’s recently announced “just for U” program rollout sets the bar for others. To deliver an Amazon-like experience, the process must engage CPGs, but be managed by the retailer. The retailer best understands each customer’s needs and responsiveness. Retailers must pass along brands’ compelling offers, integrated with their own, in the form of highly personalized communication delivered consistently through all available channels.

Craig Sundstrom
Guest

My initial thought was “there’s a Loyalty Expo?! Wow….” But moving beyond that, I think Scanner summed it up very nicely: if you have what people want and execute well, people will keep coming back, whatever term you wish to apply to this. Everything else is just a gimmick.

Kenneth Leung
BrainTrust

Amazon is driving loyalty not through rewards, but through customer experience. Reward driven sales is not loyalty, it is incentive. My view is that loyalty is the bank of goodwill built with shoppers based on their shopping experience so when something goes wrong, they will still give you a chance and come back. Point systems drive repeated purchases, loyalty is driven by positive customer experience.

Martin Mehalchin
BrainTrust
I asked some colleagues from our loyalty practice for their opinions on this and here are our collective thoughts: Many companies and marketers define loyalty in terms of behaviors rather than attitudes. Behavioral loyalty is what this article focuses on, and it is easier — though still hard! — to develop. Amazon is indeed very good at this due to their personalization features as well as due to “stickiness” features like Prime shipping and ease-of-use features like one-click checkout. However, we believe that Amazon doesn’t score quite as high on attitudinal loyalty: having customers who *love* the company and are entrenched not just from a behavioral perspective but because of their emotional attachment to the company/brand. Starbucks does better on that measure, as do other company who focus on superb customer service and overall experience — think Nordstrom, Zappos (now Amazon owned of course). While attitudinal loyalty is much harder to develop and the ROI is much harder to establish, these companies have an edge over the ones with behaviorally loyal customers, as it is easier for competitors to match/mirror the enablers of behavioral loyalty than it is to match/mirror the attributes that capture customers’ hearts. Also, the ultimate “end… Read more »
Frank Riso
BrainTrust
I too agree that loyalty can be defined in terms of the shopping experience and customer service. We shop at certain stores because we like the selection, price, and service level we have experienced in the past. One great example of loyalty beyond points is the specialty retailers that offer a lifetime of a 15% discount after spending just $1,500 with them. I like that much more then carrying a bunch of key fobs just to get the sale pricing at the local supermarket. I would love to see the supermarkets take on loyalty points like the airlines. Can you just imagine using your supermarket gold card to jump to the head of the line at the deli department like we can do at the boarding gate? Maybe we can even get a red carpet to stand on while we wait for the order to be filled. Not likely to happen any time soon. Amazon has but one face with the customer, and that is the internet and it is the same face we see every time we shop there. A retailer has a very different face, that is it has any number of employees in everyone of their stores… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
5 years 4 months ago

I consider myself loyal to Amazon. Not to the extent that I would buy only from them, but to the extent that I always check with them first and, usually, last. And 90% of the time, I check with them only.

My Amazon purchases are about two items per week, so I joined their $80 “Prime” service. For a year I’ll receive free 2-day shipping, and I’ll make out like a bandit on that deal!

Amazon is also my preferred purchase site because I’m very familiar with their process, they record my wish list, they update me on prices for items on my wish list, they make suggestions based on my purchases and interests, and they retain my charging and delivery information so I can order with a single click.

And, Amazon texts me when my orders are delivered to my mailbox around the corner at the UPS Store. That’s pretty cool.

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