Over the past 3+ years there has been a massive resurgence in loyalty interest from B2C brands. They are finally starting to acknowledge the incredible untapped value that lives within their existing customer base and are now actively striving to bring the same level of sophistication to retention marketing as they do to acquisition. Historically, brands have defined loyalty programs as point banks or punch card programs, but for those that have made the transition they are capitalizing big time. Loyalty isn’t about punches or points, it’s about data, it’s about leveraging a unique identifier across all channels, finally giving brands the ability quantify cross channel customer value. Without this value and understanding of what customer success really means, brands are completely handicapped in their ability to drive, measure, and justify retention budget allocation.
A great example is Starbucks. Initially, Starbucks was a poor excuse for loyalty as their previous program was punch based. Every time you bought a Starbucks item, you'd earn a star (a punch). Even at the gold level, their highest status, you earned 12 stars and received an "item" - let's call it coffee. Let's face it, if I'm going to buy 12 cups of coffee, I was probably going to buy the 13th. Now they've changed their program from punch to a 'spend and get' model. The biggest change is that they are clearly capturing and leveraging all transaction data to inform their campaign strategy. This means that, as a consumer, I can now go down a number of different paths that will determine how I am marketed to. If I buy coffee, maybe I’m more likely to buy an egg white wrap or a scone. If I buy a berry iced tea, maybe I'm more likely to buy a cake pop-- the proof is in the data. The point is Starbucks can now market to me based on my potential and invest in me with rewarding, campaigning, and communication that is designed to increase my value in context of who I am to the brand. Starbucks recognized the opportunity that loyalty presented, pivoted and are now executing a much more successful program.
Many brands have still been leaning on either the unsophisticated loyalty "giants" or worse - they cheap out and go with the little guys that haven't quite figured it out. Both David and Goliath are missing the mark by promoting two common loyalty snafu's: one-dimensional points or punch based programs and programs that are one-size-fits-all.
Points/punches for dollars only
As a loyalty provider, seeing spend through all channels (point-of-sale, ecom, mobile, etc) is a necessity as we issue points, punches, virtual currency, and rewards that are applied and managed through the transaction. For many loyalty providers, program design starts and ends there. But the reality is that all this does is erode margin and reward mediocre behavior. It doesn't actually change consumer behavior, or increase customer value in any way. It’s a cost center. The issue here is still the fact that every customer that enters this program design is still treated the exactly the same way. This brings us to our next big loyalty shortcoming.
Many brands fall victim to this concept of a single published program. This methodology is inferring that every customer wants to be treated the same way, which is clearly not the case. Consumers today are way too sophisticated for this school of thought and expect some level of relevance and personalization from the brand. The reality is that just because you and I are in the same program does not mean that we are going to be motivated by the same triggers, discounts, methods of communication, etc. We are inherently going to have different habits, patterns, behaviors and values. Loyalty should be earned and based on the unique value that each independent customer brings to the brand.
The reason why loyalty is typically deployed in the aforementioned scenarios is because brands haven't had the tools to understand true cross channel customer value. Their data is everywhere! It's in the POS, it's online, it's on social, it’s in a CRM in ERP, it's on Mobile, etc. If you don't have the ability track each unique customer as they shop across all channels or worse - the ability to differentiate between them - then how on earth could you treat them uniquely?
This is where a company like Clutch comes in. We deploy omni-channel loyalty under the guise of customer understanding. We give brands the tools to measure their cross channel customer value, leveraging loyalty as a unique omni-channel identifier. We provide the tools to then segment between their unique customer value types and then allow targeting specifically through automated marketing with the aim of treating them and people like them with a level of personalization and relevance designed to spring board their customer journey.
The result is a level of campaigning and communication that represents the highest level of personalization and relevance. All communication is deployed in real-time in the exact method that is most likely to convert the consumer, whether email, push/beacon, text, social, and even personalized on-demand direct mail. The point is that brands need to be where the customer is. They also need to be targeting their customer base in relation to who they are to the brand; what they buy, when they buy, what channels they shop, their demographic, average spend and much more. If these data points are harnessed and leveraged properly the outcome is true relevance and personalization. The type of communication that makes the customer feel like they have a one to one relationship with brand while generating the emotional connection necessary to incite genuine loyalty.
So throw out your one-size-fits-all programs and your point banks! In fact, our data shows that brands with points banks actually grow 11% slower than brands that have no program at all. Make sure you're working with a loyalty provider that sees loyalty for what is truly is - one tactic in a much broader customer retention strategy.
This article was written by Jenna Flateman Posner, VP of Strategic Partnerships, Clutch