LOYALTY REIMAGINED (PART 1)

A Blueprint for Active Customer Engagement in Today’s Market

Loyalty programs must evolve to meet the needs of today’s more diverse, informed, and empowered customers. Having remained essentially unchanged since introduced almost 40 years ago, problems continue to mount that threaten program viability.

These problems have driven operating costs higher while member satisfaction continues spiraling downward. Equally concerning are recent increases in program liabilities associated with unredeemed points and miles, the result of complex and frustrating redemption processes. With US companies now spending over $2 billion annually to operate their loyalty programs, and with $150 billion in unredeemed loyalty points and miles, the economic pressure alone can crush current loyalty programs unless changes are made, and quickly.

The good news, according to the 2024 Antavo Global Customer Loyalty Report, is that 90% of companies plan to revamp their loyalty programs this year. To provide some direction, the following “10 Commandments,” or imperatives, can serve as a blueprint for next generation customer loyalty. The 10 are evenly split between strategic and operational imperatives, and given their scope, will be addressed in two parts. The five strategic imperatives are addressed in Part 1 below, with the five operational imperatives covered in Part 2, which will follow shortly.

STRATEGIC IMPERATIVES

While not an exhaustive list, the strategic imperatives that follow build upon each other so that their collective impact is far greater than the sum of what each can do individually. They combine new and original thinking to create an almost symbiotic framework that can immediately impact program performance while also ensuring effective evolution in the future:

1.?? Partnerships replace memberships

Today’s customers expect more from the brands they buy. ?According to the 2023 Edelman Trust Barometer, “The relationship between consumers and brands must evolve, as people feel more vulnerable, and their expectations of brands grow.”? Those expectations are what make a partnership the ideal working relationship, as it levels the playing field, aligns interests, and offers inherent reciprocity. More importantly, partnerships build trust by giving customers a “stake” in a brand’s performance. In tandem with program incentives that consistently reward customers for the value they add or create, a partnership can be mutually beneficial and take loyalty to new levels.

2.?? Ecosystems supplant single-brand programs

Single-brand programs are limited in the opportunities and benefits they can offer, especially as participation grows. An ecosystem offers a broader array of options and far more flexibility while enabling brands to leverage their strengths and cover areas of need. They also provide significant economic advantages, as complementary brands can reduce their operating costs by opting for a collaborative ecosystem. At the same time, ecosystems can increase customer satisfaction by creating more opportunities to engage, and earn, making it a win–win.

Ecosystems can take many forms. An ecosystem can be created by a single brand with a large customer base, like T-Mobile, with their marketing partners as participating brands. Large multi-brand retailers like Target or Home Depot can create an ecosystem from the brands they carry. Similarly, sports teams of all kinds can build productive and profitable ecosystems, connecting their inherently passionate fans to sponsors looking for more tangible value. Even small businesses that share a common local market can create an ecosystem that ensures area residents shop locally. the potential for ecosystems is almost unlimited.

3.?? Incentives push beyond purchase to drive active engagement

Customers today have proven they can provide tangible value beyond a purchase and intangible value beyond advocacy. Examples include sharing personal data, opting into key initiatives, providing feedback, posting verified reviews, and a variety of other activities proven to add value. These activities can be incentivized like purchases are today. Creating more opportunities for customers to engage addresses what recent research indicates is a strong desire for more and faster ways to earn, as well as greater ongoing engagement after purchase. Increasing active engagement also has obvious reciprocal brand benefits, which like partnerships and ecosystems represents another win-win.

4.?? Original equilibrium must be restored

Beyond their failure to evolve and adapt, loyalty programs have lost much of the balance that helped make them successful. The more unbalanced the program, the less effective it becomes, especially when it comes to:

• Rational and emotional bonding – Now more than ever, brands must engage customers rationally and emotionally. Only then can brands answer the two questions that ultimately determine brand choice,” What do I get” from the brand, and “How do I feel” about the brand (or “How does the brand make me feel”). Loyalty programs were designed to reinforce both via a balanced combination of rewards to strengthen tangible value, and recognition to address customers’ emotional needs. However, near-term pressures made rewards the primary focus, with recognition all but forgotten, creating a problem made worse by automated attendants, chatbots, and other technology that supplanted the need for human interaction. The resulting emotional void has weakened loyalty, making customers susceptible to competitors. After all, it is the emotional ties that bind, making a balanced combination critically important.

• Tangible and experiential benefits/incentives – What motivates customers has changed since loyalty programs were introduced. For some, points/miles may not have the motivational appeal they once did. Others may care more about exclusive access and inside information, which represents a potential new currency that “money can’t buy.” Still others may be driven by competition and the bragging rights that come with winning. Clearly, it is a combination of tangible and experiential options that will motivate customers to engage at a higher level and restore the equilibrium required to sustain it. The good news is that an ecosystem is more conducive to experiential options, as a collective is far more capable of creating unique experiences.
• Exclusivity and inclusion – Programs have lost some of their magic when it comes to the unique features and benefits available only to those who participate. As a result, programs have become more commoditized and less attractive. Restoring the mystique exclusivity offers is relatively simple and can add immediate value while also addressing customers’ emotional needs. It just requires some imagination. However, exclusivity should not be confused with exclusion, as too many loyalty platforms exclude customers who do not meet certain criteria. Given the many ways customers can add value today, programs must be inherently inclusive, allowing anyone willing to engage to participate. This can also help restore the equilibrium programs have lost over the years.

5.?? Personalization driven by personal data sustains commitment

While a partnership provides the ideal working relationship, it is the data sharing it facilitates that sustains it by fueling the commitment cycle critical to building and reinforcing loyalty. Data sharing also provides another win–win. With the right system, brands can offer customers more control over how and with whom they share personal data as well as safe and secure ways to monetize it. Brands benefit from access to actionable and compliant 360o personal data that extends beyond the brand, yielding insights not previously accessible. Those insights facilitate a level of personalization not previously possible, increasing relevance in a way that drives active engagement for maximum mutual benefit and value, as detailed below:

The resulting Partnership-Based Commitment Cycle helps forge stronger, more resilient, and sustainable personal relationships that strengthen the emotional bonds lost to technology. Further, it can unlock the latent brand-building potential of today’s customer, raising the standard for loyalty from advocacy to brand activism. After all, actions speak louder than words, especially in today’s market.

Moving Forward

Remember, the five strategic imperatives provide maximum value as a collective with every element reinforcing the others to forge the strongest and most sustainable customer relationships possible. However, it all starts with a partnership that fosters communication, collaboration, and trust.

Watch for Part 2 of Loyalty Reimagined, as it provides five critical and complementary operational imperatives that support the five strategic imperatives. The operational imperatives also add value by making customer participation in any loyalty initiative easier, more flexible, and far more rewarding, all with far less complexity.

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