Leader's Vision: #1 Loyalty Driver for the Modern Brand

The top loyalty jobs are tough.

Why so?

Every CEO waxes lyrical about the importance of loyalty. Every CFO knows a loyal customer is many times more profitable than others.

That ought to make your job easier.

And yet, many loyalty programs are run like barnacles on the side of a business: battling for budget, rather than being nurtured as the core way to engage customers via every channel and touchpoint.

This is disappointing, but understandable. Rewards programs have not, historically, earned consistent loyalty across all customer segments. Instead, they have only really locked in those most frequent customers who were fairly loyal anyway.

Instead, the greatest loyalty in the last two decades has been earned by new, highly differentiated forms of customer value – usually thanks to the visionary leadership of a founder or CEO.

The obvious example would be somebody such as Steve Jobs, whose Apple products have created a worldwide cult of evangelists. Annual surveys of iPhone users show that customer retention is often above 90%.

Or, Jeff Bezos’ Amazon. A 2019 survey published on Business Insider found that the online marketplace was America’s favourite brand.

Those may seem tough acts to follow, but there are actually dozens of other brands that have carved out unique propositions that created enormous enterprise value from the loyalty of their customers.

In the modern business landscape there is ample opportunity for your own visionary leadership to achieve the same.

This (almost certainly) won’t be by creating the next iPhone.

It may not even be through conventional loyalty marketing. Points alone don’t earn much loyalty. Bear in mind, the next brand on the Business Insider’s list with a significant loyalty program is Target – way down in 15th place.

The key is to make your brand joyous to do business with.

That boils down to providing consistently good customer experiences, while delivering value for money – because loyalty primarily comes from the customer’s cumulative experience with the brand and their overall perception of value.

Of course, your customers’ values and needs are not static, but ever-changing. And so you must shape and reshape your whole set value propositions dynamically and, ideally, ahead of customer trends.

You can do this by harnessing the new possibilities of agile, digital enterprise, so that your own clear and compelling vision, for what compelling customer value will look like over the next three to five years, may be translated into noticeable, meaningful improvements.

And if you do operate a loyalty rewards program, you’re in luck.

The loyalty tools, that enable your systems architecture, have evolved rapidly in recent years, and can now enable the pursuit of customer affinity to influence desirable behaviors at a very low operating cost.

In their modern guise, loyalty tools can also be the glue that binds together every data set and brand touchpoint, as well as show demonstrable progress and improvements to every stakeholder in the program: staff, CEOs, partners, and customers alike.

I hope the following questions and observations help you reflect on what you are doing well and what needs to be done to weather the transformation now taking place in loyalty marketing.

But mostly, I challenge you as a leader, to reposition your loyalty program as an indispensable strategic asset in the long-term success of your company.

Leadership and management: steady progress towards building real customer loyalty

When President Kennedy said, in 1961, ‘we are going to the moon by the end of the decade’, it was a compelling vision that galvanized everyone to work together.

People forget that the mission that finally landed on the moon in 1969 was Apollo 11. There were ten Apollo missions before that; each one bringing the ‘enterprise’ of many collaborators one step closer to taking that first step on the moon.

Similarly in modern loyalty (and modern business in general): ‘everyone’ includes a lot of collaborators, working on a lot of moving parts.

Really knowing 75% of your customers seems like a reasonable, primary goal for a business, but there is a huge gap between that potential reality and where most brands are today. To meet that goal – and ideally to know much more about your customers than what they buy from you – you will need to take account of many more customer touchpoints, data sources, partnerships and technologies than in the last decade, and keep track as they multiply.

You must also balance expectations and widely varying perspectives coming from many different stakeholders – making sure their input does not disrupt the day-to-day running of the program.

Management skills, which we will talk about in a minute, are not going to get you from where you are today – to where you need to be in three years’ time, in order to thrive in the marketplaces that are evolving.

It will take leadership.

The image below describes the difference between successful operating practices at the turn of the century, and those that are thriving today.

In only 20 years, the need to combine digital, physical, and agile business practices has been a huge shock to business structure and culture. Tremendous access to information, created by the internet and mobile revolution, has shifted the balance of power further in favor of the consumer.

On the heels of this change, AI, quantum computing, and myriad other enabling technologies will radically transform how businesses engage with their customers.

You may well have experienced this change as a chronic headache.

When a CEO or a board member enquires about one of these new technologies – or a new competitor, partner, new technology, or customer engagement method – you may feel that you need to seem like an expert, quickly.

For sure, you must have an opinion on all these things, to both guide your plans and credibly answer such inquiries. But if your vision and plan are well-considered, you will know when each one may impact your vision – and, importantly, which are distractions.

Nobody can be certain what implications 5G, the circular economy, blockchain, the subscription model, virtual reality, micro-services, open-banking, Instagram, crypto-currencies, or AI will have on a brand’s loyalty program (and broader businesses) over the next two to three years, but you need to have a considered opinion.

Without the right focus, there’s a very real risk you may get swept along by this hailstorm of fast-moving change.

An obvious example of this phenomenon was the surge in proprietary mobile apps in the early ‘10s – before anyone had figured out why they needed one – and which were swiftly deleted by hordes of unimpressed customers.

More recently, the businesses that invested in ‘doing something with blockchain’ are now mostly recognizing that the timing was simply too early. Finextra reports:

Survey respondents on average expected a 24% return on investment on their early blockchain projects, but realised only a 10% return. Indeed, fully 59% of respondents said they had no confidence that the project would deliver a positive return on investment.

I am certain even the 10% return is overstated, in spite of the long-term promise of blockchain.

You can just imagine the boardroom meetings that opened the spending taps for these projects – and the frustration of people who knew how to create genuine customer value, by other, proven methods, if only they’d been allowed that budget.

Instead of getting sucked in by white-elephant trends, you should be skilfully selecting the opportunities -which will help you accomplish the long-term objectives – which you know must be met in order to survive.

So what are those fundamental long-term objectives that both leaders and managers must strive for?

Getting all your customer data into one enterprise CRM, for instance – a move that yielded over ￡15m in retained subscriptions for The Times newspaper group[i] is one.

Or, collaborating with complementary brands. In November 2019, Skift reported that, ‘Booking Holdings sees brand collaborations as key to restoring growth on steroids’. The OTA’s foothold with multiple experiential partners has allowed it to build an unprecedented stash of marketing data, and target offers accordingly[ii].

Those two objectives may not be particularly exciting, but they both created genuine customer value. Retaining focus on these proven pathways to loyalty is critical to the long-term health of your brand.

The right balance of leadership and management will help you through these difficult conversations.

Management is what many of us are good at: planning, staffing jobs, solving problems, measuring results, budgeting, structuring jobs and other well-defined processes. These help a company do what it knows how to do well: to produce products and services as you have promised, of consistent quality, on budget, day after day, week after week.

This consistency is vital for retaining loyal customers – so, management is crucial. We constantly underestimate how complex this task really is, especially if we are not in senior management jobs.

But most of us exist in over-managed and under-led organizations, which are increasingly vulnerable in a rapidly changing market.

A compelling leader’s vision keeps us focused on what a very large base of customers will want in 12-36 months, and finding opportunities to serve them.

Leadership ensures you maintain the management features that are delivering genuine value, and that you adopt the new technologies and tools that hold the promise of delivering genuine improvement.

By doing these things together, you’ll always be making steady progress toward your long-term vision of how best to serve customers to keep them loyal.

Keep your vision trained on customer value

Leadership, in modern business, is not about charisma or elegance. It is about behavior.

It is about getting people to buy in, and giving them sufficient authority to make decisions based on data and certainty about the desired end-goal.

Data is vital because there are many more decisions to make in the modern loyalty ecosystem.

Your old, monolithic loyalty ecosystem survived just fine on simple management. You nurtured a small, slow-moving target of your most frequent customers, using a defined set of loyalty tools within a prescribed team that hardly extended beyond the walls of your business.

Today, we have a different loyalty landscape. Facing a massive transformative wave of hyper-connected forces that will impact every business over the next 3-5 years, we must answer questions such as:

• Can your team and company sense what is going on in the marketplace right now, and how that compares with last month or last year? Can they articulate the differences and identify the causes of that change?
• Do our teams understand how to measure potential impact and apply resources in a measured way so medium-term results are optimized?
• How do you spot fraud and stop it quickly? How do you anticipate future forms of fraud? How do you decide which fraud will be permitted because the cost of stopping it is greater than the benefit?
• When we sense change, how do we respond? Are we able to respond in real time – such as when a Platinum member experiences a problem, or new customers cannot register for our programs? Are we able to quickly stop bad things from happening and return the business to normal, or contain the damage as much as possible?

This shows why that 3-5 year vision is so important.

Some loyalty leaders suffer pressure from a CEO, who may be very focused on delivering results this quarter, rather than maximizing customer lifetime value.

Short-term profits will probably be easiest to achieve by robbing the points piggybank, or through short-term discounting (which many businesses, including Coles and Woolworths in Australia, have found actually undermines trust in the brand).

But if the last three decades have taught us anything, it is that the majority of customers are won over by value (as opposed to simply the lowest price). This is a great observation for businesses of all types. The cost of goods and services needs to be ‘right’ based on the basket of characteristics purchased – but it doesn’t have to be the lowest.

If you can answer questions like those above – and find enough resources and time to do so properly – you will be building genuine customer value into your proposition, and safeguarding the long-term survival and health of your brand.

Continuous learning: include every employee

What percentage of your time do you spend focused on the short term versus the long term?

The best leaders spend about 50% on each, while the best managers still find 10-15% of their time to think deeply about the longer-term.

The most fortunate loyalty professionals work for great company leaders, and are blessed with quite a lot of latitude to work on transformative objectives.

You must be one of those leaders: balancing the need for consistent management, with a visionary focus on transformational change.

Most people on your team would probably love to be assigned to work on the long-term vision, but that is a waste of resources for most. They may eagerly attend meetings, but are not going to bring many new ideas to the table. Most people do not think like leaders.

Just the same, everyone needs to be part of the process and have the opportunity to contribute, or we risk alienating the employees that are crucial to making the transformation real.

As an effective visionary leader, you must always be asking:

• does your business empathize with employee aspirations and the future of learning?
• does our company learn, and do the many individuals who make it up? Do we measure success and failure? Do we teach team members based on past efforts and results? Do people feel accountable to help their colleagues learn and be prepared?
• do you reward experimentation? In my experience, the C-level talks about innovation all the time, but the moment it reaches managers, everything comes to a halt. This is in part because people naturally resist change, but I believe it is also because the incentives in place for senior executives and the rest of the organization are very different.
• Do we only teach new hires as part of the orientation process, or do people across the whole organization feel inspired to continue developing their professional skills and knowledge?

What I really like about these questions is the emphasis on observable, responsive & continuous learning.

And with continuous learning in your organizations, you are also laying foundations for continuous teaching.

If we are sensing, responding, learning, and teaching, then we should have a solid foundation on which we can scale at speed.

That will enable us to mass-customize services and products for customers, whom we shall know better as they increase engagement and reveal more about their preferences.

Open culture can let your vision flourish

Of course, an organization with 1,000+ people has more challenges to adapt to changing business requirements than a startup.

And in a loyalty program, with 50+ people on the team, dozens (of not hundreds) of collaborators, myriad tools and touchpoints, and mountains of data to contend with, the challenges may seem all the greater.

But with the right vision and culture, mountains can be moved.

First, organizations must adopt the principle of ‘commander’s intent’.

Commander’s intent took prominence in warfare after WWII. The D-day forces ran into many unexpected situations, but because troops understood their primary objectives, they dealt with all types of chaos and achieved the vision for the mission. Commander’s intent is now how effective military units achieve goals.

It is also how business leaders and managers should guide their teams, so people have the autonomy yet authority to do what is right for the company, customer, environment, investors, and other stakeholders (not necessarily in that order).

A great recent example of commander’s intent, in modern business, is the story of how Amazon launched Amazon Prime. The article on Vox is really worth a read, as it shows how a great idea, initially bandied around between a few different stakeholders, ended up becoming an incredibly profitable new customer proposition.

Michael Dearing, who at the time worked for eBay, adds this useful comment:

‘when you look back at those Amazon shareholder letters… you look back at the tolerance they had for low gross margins, for a low stock price, for just grinding it out and investing and investing and investing, and trusting that if you do right for the buyer, everything else takes care of itself.’

Second, businesses must embrace agile working in order to allow that vision to manifest as meaningful change.

I’m not talking about the IT department building software with agile methodologies; I’m asking if your organization can easily adapt.

This will partly mean implementing the microservice-based technical architectures that enable technology services to be agile – but it also must happen at a human level.

Nearly every loyalty program that I’m active in responds to nearly any situation with the same basic boilerplate answers. This frustrates me, because the people supposedly serving me have been taught which button to push when something goes wrong, as opposed to active listening to my comments and responding appropriately.

For what it’s worth, that also happens with TransferWise, Network Solutions, and Telefonica, so it’s not unique to the loyalty department.

This rigid behavior is frustrating – and, I’m certain, unprofitable for the enterprise, because it involves some effort, but produces no positive result.

Beyond customer service, nearly every colleague must be empowered to innovate and learn, within a structured setting that allows their learnings to be captured and disseminated, while containing the fallout from inevitable mistakes as they occur.

Third, you must adopt an open culture, so that your leader’s vision can flourish beyond the walls of your own loyalty team, and influence your wider business, and the wider loyalty ecosystem.

In fact, I would argue that building customer loyalty must be a core objective of every business function – not isolated to the loyalty department to try and influence other departments.

The days of being a fortress unto yourself are over.

We now live in a hyper-connected world, and customers have access to information and choice that allows them to optimize decisions.

Furthermore, switching costs have never been lower.

To stay competitive, brands must observe and embrace the wider ecosystems in which they operate and influence them to work to our advantage.

The healthiest ecosystems in the universe are biological, and businesses can learn a great deal about collaboration in an ecosystem by watching nature. Every organization should be optimizing the environment around them for their own self interests.

So how open is your business culture?

Is your business transparent? Do you let suppliers and customers understand how you operate? Do you share your environmental goals and actual results? When something goes wrong, do your people try to cover it up, or admit to mistakes and try to correct them?

Do we teach our partners – on all sides of our supply chain, distribution chain, and those that collaborate with us for marketing purposes? Can learning within our own organization help universities better prepare our future employees?

If you are a learning organization, your people will not send out canned responses.

If we are doing a good job teaching, then our ecosystem should flourish, and the market should improve for everyone.

Every stakeholder counts

I would argue that most large, successful loyalty programs have not changed much in 20+ years. They accomplished their initial goals and have evolved enough to remain relevant to frequent customers.

However, now that most brands have undifferentiated loyalty programs which all look about the same, they have become boring elements of a brand’s value proposition that only frequent customers passively participate in.

Those are the prime characteristics of a market that is sedentary and ripe for disruption.

When a competitor comes along that can gain scale, and is willing to operate on 25% margins – rather than the 300% margins that legacy programs earn when selling points to partners – they are going to be very disruptive.

I love that loyalty programs can make 300% margins. But those total margins need to come from a balanced ecosystem with reasonable contribution, earned at each stage of the customer’s journey, over the course of their lifetime engagement. They must not solely come from selling points to brands feeding of your customer base.

The question is whether incumbents will rise to the challenge to disrupt themselves, or become road-kill during this new decade as fierce, agile, new competitors enter your space.

The Head of Loyalty may only choose to introduce disruptive change if they intend to be around in three or four years, but the board and the CEO have a fiduciary responsibility to not allow that choice. They must motivate their people to embrace disruptive change now.

That pressure must not fall entirely on the Head of Loyalty.

Even if I was a layer or two down in the loyalty team, I would want to have impact and not simply observe my program’s atrophy.

Pursuing a journey to deliver good, consistent value to customers is a necessity (note that I did not say ‘great’ value or ‘excellent’ service. ‘Good’ is plenty – if delivered consistently).

Getting started requires some baby steps, but also the confidence and daring to be bold.

If you’re in it for the long haul, go back to the basics, and reconsider how better to serve customers. Sometimes it requires starting from scratch, but successful digital transformation, which creates genuine customer value, will more likely be made up of thousands of step changes over several years.

We are, effectively, talking about re-inventing how you serve customers – and loyalty marketing should be at the center of that transformation.

No professional athlete ever got to be a professional by simply saying they wanted to be a professional athlete. They had to train long hours over many years, almost always in collaboration with many other stakeholders (a top pro tennis player these days may have a 3-5 person coaching team), and they must make thousands of mistakes along the way. The successful professional athletes on teams may only win 40-60% of their games. Successful individuals may only win a competition 5% of the time.

But if they win at all, it’s only because they remain focused on that end-goal, and stay aligned with their teams on how to get there.

As a business, your team will have to execute hundreds of activities and 90% of them might fail, but if you hold your head high, not only will people respect you for it – they’ll also know exactly where you’re going, and fall in step.

Everybody can make a difference with the right objectives and incentives.

Those that do, will build customer loyalty through their competitiveness around value and the experience(s) they deliver to every type of customer.

A loyalty rewards program will no longer be enough to prop up an aging business model, but a loyalty strategy, at the heart of a company’s multi-channel service delivery competencies, will deliver ongoing improvements to customer lifetime value (LTV) for many years to come.

Only with the right leadership and vision, which is clearly communicated and adopted by every stakeholder in your loyalty ecosystem, can this be achieved.

The time is now for loyalty leaders to break out of the status quo and make their mark.

Turn your loyalty leadership vision in to reality

Currency Alliance can help.

Our loyalty platform enables rapid improvements in your loyalty program.

Whereas changes in your legacy technology may have taken months of integration time, our software can be applied to your existing system in as little as 3-5 days.

Measure customer data and quickly forge partnerships with your customer’s favourite brands, and build your own, highly-differentiated loyalty proposition.

Get in touch to find out more, or try Currency Alliance for free today.

References

[i] Loyalty Magazine, June 2019, p26

[ii] https://skift.com/2019/11/07/booking-holdings-sees-brand-collaborations-as-key-to-restoring-growth-on-steroids/