BrainTrust Query: Loyalty 360 Weighs in on 12 Key Loyalty Marketing Trends for 2010
Commentary
by Mark Johnson, President and CEO, Loyalty 360
Through
a special arrangement, presented here for discussion is a summary of a
current article from the Loyalty Marketing 360 blog.
Engagement.
Collaboration. Sustainability. ROI. Some may call these buzzwords, but
I predict these are bottom-line concepts that will drive loyalty marketing
in 2010.
Overall,
12 key trends will dominate the Loyalty Marketing Industry in 2010:
- Engagement
is the goal. Most
organizations don’t know how to define engagement, how to incorporate
it into their marketing strategies, and most importantly how to measure,
monitor, increase and sustain it. - There is
a keen focus on sustainability. Given
customers’ confusion over "greenwashing" and often higher prices for
green products, brands that claim to be environmentally responsible
need to be authentic and transparent in their marketing efforts in
order to achieve true commitment. - Loyalty
programs will become more collaborative. Merchants
and banks want to work with the other’s members to create unique communities
that can provide value, behavioral information and insight they cannot
get in the market. - The need
for metrics and quantifiable ROI is profound. The
market wants to know what types of return they should be achieving,
yet benchmarks are not to be found. - There is
a vast dichotomy between old school and new school incentive programs. The
market is moving toward adopting the new school mindset, which is focused
on data, insight, and sustainable behavioral change. - Customers
are dissatisfied with old school "what has my customer done for me
lately" loyalty programs. Brands
need to implement loyalty programs that respond to this opportunity. - Focus is
on "voice of the customer" to drive bottom line results. Those
who engage in a true "voice of the customer" approach within their
loyalty, engagement, and customer experience initiatives will continue
to increase their market share, profitability and brand equity. - Brands,
CPGs, and channel program providers have been dis-intermediated from
their customers. Merchants
want to develop programs that will give them more access and insight
to their customers and dialogue with them directly. - Changes
in the funding for credit card loyalty programs are shifting costs,
which impacts how the programs are implemented and run. Banks are looking for more engaging loyalty/incentive/engagement marketing
programs with different costs models that can prove unique and provide
measureable behavioral change. The interest in open forums and communities
to address these opportunities continues to grow. - Large retailers
are trying to leverage their brands. They
want to expand the control, impact and overall direction of their customer
experience, loyalty, and engagement marketing initiatives. - There is
a large and growing interest in social, mobile, and emerging media. Yet
the responses we are seeing suggest that there is still confusion over
how to implement these programs. The "vanguard" and the "visionary"
leaders in this market at times seem to be more interested in "chest
thumping" instead of listening to market opportunities and solving
problems. - The interest
in webinars, case studies, and best practices is more and more important
to the market. The
market wants to leverage those organizations, which have completed
these processes (case studies), understand practical market based solutions
(best practices), and have presented them in an ongoing learning process
(webinars).
Discussion
Questions: What overall trends do you see driving loyalty marketing in
2010? Which theme mentioned in the article do you think is most important?
Discussion Questions
Poll
Sorry, there are no polls available at the moment.
I agree. The problem with retail loyalty programs is that they are one-sided in favor of the retailer. Any of the “trends” identified here could be successful in driving loyalty–but the devil, as always, is in the details. Customers need to clearly find their “presence” mirrored in a loyalty program–that is–there needs to be a sense that the program is responding to them as individuals.
Personalization and customer service will drive loyalty in 2010.
Consumers don’t want one-size-fits-all loyalty programs and retailers must respond in kind. This means that retailers must jump into social media to target individual consumers with attractive offers, as this is the most cost-effective option to deliver tailored offers.
Consumers want a great shopping experience, whether in-store or online. Retailers that meet or exceed consumer expectations will build a loyal following and generate significant word of mouth.
I like this topic. We would love your definition of engagement.
Thanks!
While I tend to agree with most of the noted trends, I still struggle with the notion of customer loyalty. Customers can be loyal to their families, church, alma mater, etc. But using the term customer loyalty when interacting with marketers makes little sense to me. For marketers looking for loyalty in life, I suggest that they get a dog.
However, I think the concept of developing an enhanced relationship with customers is sound. Discount cards and unwanted rewards do little to enhance this relationship and even less to encourage continuity of purchase.
The key going forward is to identify the needs of customers who spend considerable sums of money in their stores or on their products, that the marketer can uniquely satisfy. Achieving this, we allow the relationship, whatever it is called, to flourish.
I’ll throw another trend into the mix:
13. *Democratization.* Managing loyalty programs and the purchase data underlying them will move away from being a siloed function within a company. Instead, customer insights and data will begin to flow throughout the organization and even outside the organization to its partners. (In the case of retail, these would be the brands that sell through the retailer; in the case of credit card companies, these might be the affiliate organizations in the rewards program.) Technology will allow everyone to take a more customer-centric view, to measure performance as it relates to different and changing customer segments, and to deliver more relevant marketing, promotions, and communication to each and every shopper.
You have to look to loyalty in every industry to find best practices. Don’t be too proud to “share” great ideas from the hospitality, airline and automotive businesses. They are among the best at true loyalty, rather than just frequent shopper, unwarranted discounts. You only fly that one airline whenever possible, right? Ditto for hotels. You really have a personal attachment to a car brand, perhaps? Take elements of those brand loyalty programs and translate them to retail. Apple does. Remember, just because you have 98% penetration on your program, it doesn’t mean you have ANY loyalty. The customer probably is a member of all local programs. Giving unwarranted discounts, that is, “surprises” at the POS, is just giving revenue and margin away. They have already made their purchase decision at that point.
If you want your customers to be loyal you must get personal. That’s not to say that you need to know everything about them and their buying habits, you already have that information. What I mean is that both online and brick and mortar retailers need to focus on connecting with their customers person to person in a positive and meaningful way. Customer service is personal. Once a customer walks into your well appointed, well stocked store their experience rides on the good, bad, or indifferent interaction that they have with your sales associates. These are the moments of pain or delight that get filed in the mind of your customers for use the next time they need what you offer. Whether it’s the paint department at the hardware store, the fitting room in the apparel store, the checkout, etc, the personal interaction can make or break the sale and the likelihood that the customer will return to your store in the future.
These, of course, are brick and mortar examples, but online offers similar illustrations. Zappos didn’t get to be known for the best customer service online simply by offering a fabulous website and an extensive product line or the easiest and most lenient return policies. Their success comes from their unique ability to merge an efficient online experience with an exceptional personal experience that produces mostly moments of delight for their customers.
The brick and mortar store or the website is the stage upon which the retailer displays their offerings. It is the customer service associates that make it retail theater; good or bad.
Credible efforts to drive sustainability are both profitable and build brand goodwill among consumers. However, that is not the core of a loyalty strategy–that is about retention and growth of a segment–consumers that understand sustainability.
Retailers with the RFS (Recency and Frequency of Spend) mindset missed the cluetrain–you need to be engaged in a clear, transparent dialog with customers, listening to them as much as targeting them.
Conversations with CIOs reveal that while retailers would like to move beyond discounts as the only loyalty incentive, they’re just not good at creating other kinds of loyalty value for themselves and the customer. If retailers had Chief Customer Officers responsible for driving real progress, this might change.
Remember the great line “Where’s the beef”? It had meaning to the public because a big part of the value of a hamburger was the beef. The same thing goes for loyalty; where’s the beef? You can usually find value for the retailer but where is the value to the customer? For a burger to be successful there has to be a minimum amount of beef. For a loyalty program there must also be a minimum amount of value to the customer.
I like what Max Goldberg pointed out. Customer Service (experience) will be a major driver in 2010. Post recession consumers are purchasing less, spending only what they have (keeping debt to a minimum) and watching prices. The one item I would add to what Max pointed out is a focus on Private Label. I have mentioned it in the past, but it is worth using the example again. Trader Joe’s has great customer service, competitive prices and over 90% of what they carry is Private Label. If you like Trader Joe’s coffee the only place to purchase it is Trader Joe’s. That is a great barrier to entry that builds loyalty.
During the last 4 weeks I have had the opportunity to meet with 6 large and midsized retailers. They are all looking for ways to increase loyalty and at the end of each meeting we agree driving Private Brands can help create a barrier to competitors (Walmart) while building consumer loyalty. The challenge is funding.
Just because there is an opportunity to build Private Brands in 2010 does not mean National Brands can’t leverage that trend and create a win win for both parties. National Brands need to really stretch themselves this year and find unique ways to work with their retail partners.
Turn a perceived threat into an opportunity this year and watch what happens.
Consumers want to be heard. That requires interaction and listening not just sending messages. That is a new paradigm for most companies. Those that are developing this capability find that it profoundly changes their marketing program. This is not a “tweak” or a one-time project.
Great insights above. Yet I still think that we treat things like “loyalty” as though it was a mechanistic or economic strategy. The truth is that loyalty is a spiritual, energetic or ecological phenomenon. It’s as much about ‘being’ as it is about ‘doing’. And that is territory we still haven’t learned how to talk about. If we’re going to talk today about what we’ll be talking about tomorrow this is something we need to learn. What is incredibly encouraging is that many organizations are opening themselves up to that very exploration. Yup…even in retail!
All of these are going to be important and I only have one wish: that companies would apply these same points of engagement to employees that they do to customers. It would give them an even greater return. Engaged employees are the key to creating engaged customers.
Judging by the quantity and passionate level of responses to the article, we can at least all agree that creating customer loyalty is important for any business.
For those arguing the semantical value of “Loyalty,” I would redefine what we are all talking about as using data as a foundation to create a value proposition that creates repeat business and brand preference among targeted groups of customers. The effect is temporary and needs to be reinforced with clear and relevant communications. Remember, even your dog will stop loving you if you fail to feed him for several days.
A few notes on the trends:
Customer Engagement – This is a term that is about to replace “Social Media” as buzzword of the year. Engagement is the first step in planning a successful execution of a loyalty program, but I am not sure it is a subject unto itself. Maybe the emphasis on engagement indicates that we can do a much better job in this stage of planning.
Sustainability – When I think of this, I think of metrics and demonstrating “sustainable” ROI to clients. Look at the back tracking that card issuers have made with their rewards programs during a tough economy and you might agree that sponsors need to plan ever so carefully to launch with rules we can live with.
New School/Old School – To me, the “New School” continues to be data driven, but incorporates a stronger dose of Voice of the Customer and embraces new communications channels such as social media tools. Have a look at how Tasti D-Lite has incorporated Twitter and Foursquare and you’ll get an idea: http://bit.ly/8RkBYG
My additional thought – developing true brand loyalty that translates into financial gain requires a more holistic approach than has occurred to date. As consumers become more knowledgeable and empowered, we are all realizing that we have to include the customer experience, customer support functions, and our data-driven marketing efforts to deliver on the brand promise.
What great points! I agree that employee integration is key to loyalty…ultimately, as much as I am dedicated to flying an airline or buying from a particular company because of points or benefits, I choose these merchants because of a positive customer experience I had with them–experiences where the person on the front-line was empowered to truly help me.
It’s an alternative business model: arm your company with staff on the customer service side that aren’t the lowest paid on the totem pole but are instead well compensated people that have the instincts and power to do the right thing by the customer.
I would add community involvement. I like to see retailers that make themselves deeply part of the local community and charities.
Great discussion on a topic that, as Bill Hannifin suggests above should be primary for any business: loyal marketing.
Unfortunately, Loyalty Marketing is often misunderstood and accordingly, either not embraced by executive leadership (always a death sentence) or not well thought out.
It takes leadership to properly focus on and invest in customer relationships, the essence of customer loyalty. Leadership in customer loyalty requires hard choices, a longer-term view and an integrated approach. Customer loyalty is the responsibility of everyone in an organization, not just those that touch customers or that is in the marketing department.
Beyond leadership, loyalty isn’t something that comes in a box, a technology platform, or even a program. Just like brands and advertising, loyalty is unique to each brand in each industry. It’s an extension of the brand proposition and the total customer experience. These elements need to be tied and packaged together in a coherent and consistently delivered value proposition.
At its core–again as Bill eloquently points out–is customer data. This is the Achilles heel of most companies, including retailers. Data is not an easy thing to collect or manage and yet it is the key ingredient to being relevant to customers. Understanding customers and delivering value to them accordingly–and differentially, is what drives customer loyalty.
So to add three trends to the discussion:
1) Companies are still struggling with customer data and are now accelerating investment in new technologies and propositions to make this easier.
2) With more and more companies investing in loyalty, there is an increasing realization that embracing a unique loyalty strategy (and program) is as fundamental as having a unique brand or selling proposition.
3) Accordingly, as companies have and are better able to use data, more and more loyalty initiatives will be unpublished, where loyalty “programs” are really just the tip of the iceberg (much of which is beneath the water’s surface).
The recession started the shakeout of the long-term winners and losers. The recovery is going to further separate the companies that (when it comes to customers) get it from those who don’t.
I would hope that the trends we see emerge in 2010 would begin with the honest pursuit of customer satisfaction by retailers. Retailers have been in search of a silver bullet for years now and nothing seems to work. If you have a crappy operation that is not putting the customer first, none of these quickie fixes will work in the long run.
Look at really successful retailers like Nordstrom and Publix Supermarkets. They long ago recognized that the key to customer satisfaction was their employees. They have built training programs and hiring practices that fill their stores with employees who know how important the consumer is–all consumers, not just the top 10%, 20%, etc. When retailers quit pursuing quick fixes and roll up their sleeves and do the real work of building a service driven company then we will begin to see real progress! Loyalty programs are an insult to consumers. Trying to fix a culture problem with a plastic card is like putting a band aid on a cut artery. Yeah, you did something but the patient is going to die!
I agree with Bill Hannifan and Phil Rubin. LOYALTY MARKETING IS THE MOST IMPORTANT FACET of any business. It is all of the touchpoints that create, engender, increase, measure and monitize relations from individuals to brands, products, ideas, employers, and retailers / banks. IT IS NOT JUST point based programs. It is understanding the preferences, ideas, and interested, making sure you use that information to create timely and engage communications / offers and in-store experiences for that customer.