One of the most startling findings in “State of the Customer Journey 2014,” was the dramatic gap that is emerging between marketers and the ever-changing connected consumer.
It seems brands and consumers are at complete odds when it comes to what these loyalty programs should be about. Specifically, a large majority (nearly three quarters) of consumers declared that loyalty programs should now be about how brands can show how loyal they are to them, as individual consumers. Any guess how the majority of marketing execs saw it? You guessed it. The majority (nearly 2/3) of marketers still believed that loyalty programs should be the other way around – a way for consumers to show the brand how loyal they are to them. In today’s “Age of the Customer,” you already know which side of this battle will win.
In our world of infinite options, increased commoditization and desire for immediate gratification, can consumers truly be loyal to a “brand?” Considering this dramatic gap in the perception of “brand loyalty,” let us introduce: “categorical loyalty.” Are consumers really loyal to Whole Foods, or devoted rather to natural, organic food as a category? To Tesla Motors as a brand, or rather to the concept of a 100% electric vehicle that has long enough range to replace their petrol based vehicle? Loyal to Zappos, or rather to a brand that can make it finally easy to shop for “hard to fit” items via the Internet with great return policy and customer service? Each of these examples are often confused with brand loyalty, but in many cases consumer are focused on the attributes, experience or category of offering.
These examples are ripe for disruption. As brand and categorical options continue to grow, traditional loyalty program strategies become more challenging than ever. Consider the downfall of the UK’s Tesco, long-standing example of the market’s successful loyalty program example, now in turmoil.
Gartner’s Jake Sorofman said it perfectly in his recent blog, inspired by this same research report, “Most loyalty programs are a bit of a misnomer when you consider their actual intent. More often than not, they’re structured to reward a consumer’s transactional loyalty to a business or a brand—not to demonstrate loyalty to the customer.”
In 2015, fewer and fewer consumers will be loyal to “brands.” Instead, to win their attention (and wallets), brands will need to shift their strategy to show their most valued consumers how loyal they can be to THEM, as a consumer.
So how exactly can a brand show loyalty to its customers? One of the most successful tactics in 2015 will be “surprise and delight” efforts- rewarding consumers with unexpected moments of experience. This is more than points-for-purchase.
Consider the frequent bakery shopper that is offered a free cup of coffee with their order, just for being a great customer. Consider the airline that provides its flyer with a surprise upgrade (remember when that used to happen with airlines?), the happy anniversary email that is sent to the owner of a car one year following the purchase, with a QR code for a free car wash to get it looking brand new again. The major bottling company that produces personalized bottle packaging to its greatest social advocates. These are all inexpensive experiences to craft and create for the brands’ most valued customers that demonstrate the brands’ unique appreciation to them as a consumer.
Marketers, this is a wake up call. Consumers have told us exactly what perspective we will need to win their attention in 2015. Good luck on your own journey to demonstrating this new generation of brand loyalty.
Thank you for making some excellent points; as long ago as 2003, we published an article titled, “Why companies should be loyal to you.” Today more than ever, the marketers that win loyalty will be those who solve problems for consumers and enable a seamless, engaging customer experience.
When marketers understand that, there are huge opportunities to build loyalty, by using data-enabled insights to deliver individually relevant and valuable offers, communications and experiences, in the consumer’s preferred channels.
Loyalty is, as you note, much more than points-for-purchase. While surprise and delight can play a key role in providing experiences that foster loyalty, S-and-D should not be expected to move the needle alone. S-and-D should be part of a broader strategy to identify consumers with potential for incrementally profitable behavior, and cost-effectively motivate and reward such behavior.
Jeff,
I totally agree with you. Most so-called “loyalty programs” are really repeat-purchase reward programs that bribe customers in to buying more. It is time for companies to think about a two-way relationship and demonstrate their loyalty to customers.
I wrote a similar post some time ago illustrating it with a specific example http://theadaptivemarketer.com/2012/01/29/is-your-loyalty-program-demonstrating-your-loyalty/
Would love your thoughts on it
-Gerardo
Agreed. There’s a powerful and disturbing argument made by major consulting organizations that most loyalty, or frequency marketing, programs are commoditized and can actually undermine brand performance: http://www.targetmarketingmag.com/blog/mckinsey-thinks-bland-generic-loyalty-programs-are-killing-business
A great commentary here. Howard, I believe you are “spot in” in your notion here that S&D techniques must be part of an encompassing strategy toward motivating incremental and profitable behavior. S&D techniques alone are not enough. Gerardo, you provide a great example in your AA airline case, where the airline has quite deliberately chosen to ignore long term loyalty in lieu for in some sense, a short term penalty for a lack of loyalty. Just plain the wrong way around – and it has cost them. Michael, I loved your notion in your article regarding the increasing “commoditization” of these programs somehow an “if you build it they will come” mentality.” It is in fact the commoditization of both the brand offerings and their associated loyalty programs that are making the implications of these findings so very important.
What strikes me about the findings is the stark difference between the perspectives of consumers and their marketer counterparts. Consumers are utterly clear in their perspective with 3/4 placing the loyalty onus upon the brand — yet somehow, the majority of marketing execs (2/3) still have their heads in the sand with “me-centric”, outdated beliefs on what this whole thing is now all about. Consumers are telling marketers precisely what they need to do to solve the problem. Now let’s see which brands actually hear the call!
Some interesting points above. Not sure I agree with all of them. One of the things that we see at Loyalty360, as we have the privilege of speaking to brands on a daily basis, and the #1 challenge they have is understanding their customers (you are correct – yet part of that is the inherent irrationality of the human mind and the conflicting studies / data / technologies they are faced with).
You know what the #2 challenge they have, is knowing which technologies, process, data, platform they should use, implement. They realize that “big picture” loyalty is very important and growing more so, yet to say that ALL LOYALTY programs do not work; well….. We are going through a renaissance.
Brands are hit by acronym jungle, new technologies, process and idea. They are beat to death with big data, small data, structured data, unstructured, etc. We had over 200 brand respond to the Loyalty Landscape last year and have more than that already in a couple of weeks. In as much as brands may not listen to their irrational customers (as all customers are), yet technology providers are not listening to or creating value for their clients / brand. Their is a HUGE cauldron call for simplicity and efficacy!
Brands are tired of being “SOLD” programs that do not work, that under deliver 60+ % of the time, and even if they did perform, they are challenged as they do not have the resources to administer the programs as needed. It is challenging to be a brand today, they read one study one day, a sales pitch the next and see little if any results. They want “trusted” advisors; they are challenged to find them.
In addition to the challenges associated with making loyalty programs relevant and personally valuable to consumers, there is another issue. Namely, when faced with “fight or flight”, i.e. make better use of loyalty programs through focused design and execution, there has been a trend among retailers to abandon them completely: http://www.targetmarketingmag.com/blog/marketers-loyalty-programs-we-don-t-need-no-stinkin-loyalty-programs As noted in my blog from about a year ago, Cerberus purchased Safeway last Spring, and merged it with Albertson’s, dropping the loyalty program and closing stores as well.
Mark has wisely observed that, in addition to non-use of the data and insights loyalty programs can provide, many programs under-deliver where customer behavior is concerned. From my experience, the research techniques applied to help enhance the loyalty program’s value are pretty antiquated. We’ve been able to apply customer advocacy and brand passion research to help tailor and shape loyalty programs for significantly more positive, and financially contributory, performance http://www.slideshare.net/lowen42/market-probe-loyalty-programs-vs-loyalty-behavior-white-paper
I believe the industry has lost track of the original business goals of loyalty, turning the process into a monstrosity. In most loyalty conferences, there’s inevitably a moment where debates start over the meaning of “loyalty” seemingly stuck in the emotional connotations of the word.
Social media is high on the radar for CRM and loyalty specialists and an IBM study in 2011, “From Social Media to Social CRM”, discovered significant gaps between what businesses thing consumers care about and what consumers say they want from their social media interactions with companies. Consumers ranks discounts as the main reason for liking a business on Facebook, whereas businesses rank discounts as the least likely reason consumers interact again. This perception gap is quickly being bridged, creating an increasing desire for businesses to find new ways to reward their fans on Facebook.
There’s a lot of ‘buzz’ stating the future of loyalty is social. One of them, a Cranfield University survey of 200 frequent flyers found that 72% would join an airline social loyalty program. Now you’ll find lots of examples of companies linking Facebook and Twitter to their loyalty programs. All of the original complexity remains, with an additional layer added on top. Loyalty experts add social media to their programs in the same way that 19th century engineers added combustion engines to existing carriages – we’re failing to understand the new possibilities of the new paradigm.
How about a new paradigm – where any merchant can have their own loyalty program, as powerful as most commercial programs without any of those costs or implementation challenges? One where consumers can join a membership program simply by clicking ‘like’. Most loyalty solution providers won’t take that additional step because that would eliminate a good chunk of their systems. But what if consumers and businesses love it because it’s a big step towards massive simplification. Throw in some analytics on customer behavior, demographics, to learn what their interests are and offer a loyalty reward similar to what Jeff mentions.
Welcome to Social WiFi Loyalty programs. Early results are exciting – 5x increase in repeat business, up to 7x increase in fan acquisition rates and 10x increase with word of mouth.
Simple to implement, even simpler for the consumer. Your fans aka loyal customers get recognized and rewarded for being a Fan and businesses are rewarded with repeat visits driving higher revenues.
Isn’t that the essence of loyalty?