Think about most of the loyalty programs you belong to for a moment. What do they have in common?
If you said they are simply points or punch card-based, you’re correct.
So many loyalty programs – whether they are physical or digital – fall down by focusing only on the transaction: make a purchase, track your spend. However, with the onset of digital – and more recently mobility – brands have new opportunities to define what loyalty means. It should not solely be about the transaction, but rather the ability to establish an emotional relationship with the consumer: my feeling of connectedness to the brand, my perception of how much the brand understands me and its knowledge of what I want from it before I do. That’s what loyalty means today.
Data Driven Loyalty, Not Transaction Based
Let’s consider one industry where the punch card-based loyalty program is very rote and routine: quick service restaurants (QSRs). Buy nine burritos, get the tenth free. It’s very easy to track how many meals customers have purchased – just punch a card and when the customer turns in a fully punched card, provide the free meal. It’s simple to execute, but that’s about it. The restaurant doesn’t get any data from it, meaning, it doesn’t know anything about the customer who is buying the food or visiting the restaurant. Another missed opportunity is leveraging that data to inform communication with the consumer. The transaction doesn’t even come close to telling the whole story.
A big reason companies, QSRs, retail and the like have traditionally taken a transaction-based approach is because they likely are dealing with siloed systems, such as an e-commerce channel, multiple POS systems, social networks, third-party data, CRM and more. If a consumer buys on a company’s e-commerce site and then they buy in-store, the disparate systems don’t connect the dots, resulting in the consumer being treated as two independent consumers, rather than one consumer that shops across channels. This can have a negative impact on the customer experience, giving the (realistic) impression that the brand doesn’t really know who the individual consumer is.
Loyalty today is about everything leading up to and expanding beyond the transaction itself. The transaction event is almost meaningless within the new construct of loyalty. Loyalty is tied closely to the customer’s experience. It’s not just about punch card-based rewards and giving them something, it’s developing a relationship throughout the experience. On every step of the path to purchase, every interaction helps to build loyalty.
The digital age has allowed loyalty to meet its potential. We now have access to every possible touch point where the consumer could be. This requires a digital interface and a sophisticated data warehouse running behind the scenes to enable the kind of personalization ultimately catalyzing that feeling of connectedness. It’s new, but it’s here.
By centralizing all those data sources and synthesizing it to get a holistic view of the customer, the brand is then in a position to identify its best customers and develop campaigns that are personalized to the individual – based on where they shop, when they shop, what SKU’s they may buy and more.
The more personalized the brand is to its customers, the more it is able to increase spend and frequency. These are two of the KPI’s that are most impacted by a data-driven approach to loyalty. Others include decreased time between visits, increased social advocacy, channel behavior (do I spend more online, but shop more frequently in-store?), SKU preference, social activity by channel, sentiment, influence, and customer lifetime value. This data is important not just for historical analysis, but more importantly to alter customers’ behavior going forward. Understanding that data helps measure future performance to determine what’s working and what’s not working.
Another critical component is customer segmentation. It’s not just segmenting by demographic or purchasing frequency, but rather having a system that can understand all the obscure correlations that exist within the data to programmatically create new, more granular segments of customers and manage personalized campaigns for each one.
Going back to the question I used to open this article, what does an average consumer’s loyalty programs have in common? In the new era of data-driven loyalty, the ideal answer should be, “nothing, they’re all unique.”