Loyalty Is Dead, Long Live Loyalty

Much has been written about the death of loyalty – customer expectations are moving away from traditional rewards and brands are no longer reliant on costly investment in loyalty to access customer data.

But, many businesses obviously disagree. In fact, loyalty strategies and programmes continue to proliferate and remain a table stake in many categories, notably retail, utilities and travel. Yet much is changing and any business considering developing or reinventing a loyalty strategy needs to work out how to future-proof their efforts by taking the best of new and well-established thinking.

SO, WHAT’S NEW IN LOYALTY?

LOWER ENTRY COSTS

Many tech start-ups now offer simpler, lower cost plug-and play loyalty solutions. They challenge the notion that loyalty is an expensive enterprise only for the big players and make it accessible to businesses of all sizes.

GAINS FROM NEW TECH

From mobile, including location based targeting; to new forms of customer identification like facial scanning; to personalised in-store pricing using electronic displays – new tech offers a huge promise to transform our loyalty experiences, removing friction and enhancing relevance.

Personalisation can now be achieved at scale, in real time, so customers receive the right experience, message, offer or reward, no matter which channel they are engaging with. Data-driven services that can enhance the customer’s experience are becoming more of a reality and loyalty will become more about sticky services, not just rewards.

But much of the promise of new tech remains just that. While products like Yoyo Wallet, which integrate payment and loyalty into one digital wallet, have had some success, they are miles from mainstream. Some newer loyalty entrants have leapfrogged successfully straight to mobile – Harvey Nichols and Gap for instance – yet few of the major programmes have managed to turn habitual plastic loyalty card users on to new tech en masse. Contrast this with China, where millions of people use the seamless payment and loyalty integration of the WeChat messaging platform. Platform and payment fragmentation in the UK, and the maturity of the loyalty category, means businesses have to invest wisely and play the long game when it comes to tech.

FEWER POINTS, MORE EXPERIENCES

Recently, more loyalty programmes have been launched by businesses in low frequency categories – cue British Gas, Three and Sky. These programmes are not points based, they use rewards to add more value to customers and use tiering to recognise customer tenure or spend. These new programmes help to differentiate the brand, strengthen the value proposition and provide reasons to stay. We also see brands making good use of exclusive services and access, for example access to content with Sky and early access to sales with ASOS. The bottom line is, if you’ve got it, use it!

GREATER FLEXIBILITY

Within points-based programmes, businesses are now investing less in a fixed reward dividend and making more dynamic and flexible use of points. It allows for greater freedom to reward certain customer groups more than others, or to encourage specific behaviours. Better personalisation capabilities make this simpler to deliver and it should result in better performance and engagement, as long as the overall value exchange is strong.

 AND WHAT STILL HOLDS TRUE?

A STRONG VALUE EXCHANGE

A clear and compelling value exchange still lies at the heart of any effective loyalty programme. The biggest challenge now is not necessarily getting people to join – it’s how you keep them interested. Too many loyalty schemes really only motivate and benefit a small proportion of customers. A well thought-through programme will offer broader benefits to engage as many people as possible. As well as keeping things fresh over time, to maintain interest.

UNIVERSAL LOYALTY PRINCIPLES

There are some perennial things that matter to customers no matter who they are, what the brand or category is, or however clever the programme technology. These are: generosity, relevance, simplicity and ease. These factors act like counter-weights to each other in some circumstances. So, if something is incredibly easy to attain, it can be less generous; or if something is incredibly generous, it can be harder to attain. Or if something is very relevant, it can be less generous, etc.

THINK HUMAN

The best loyalty practitioners dedicate time and effort to listening to customers and understanding their needs – and deploy technology to provide real customer solutions, not just meet business needs. Customers also appreciate the human touch, as long as it is authentic. So businesses should consider how to enable their frontline staff to help deliver loyalty initiatives.

BUILD YOUR DISTINCTIVE BRAND

The most effective and enduring loyalty programmes always share the DNA of the brand and build its equity. As loyalty programmes proliferate, offering something that’s distinctive from (or better than) the competition is essential.

Loyalty strategies and programmes come in all shapes and sizes – what matters is finding what will work for the specific needs of your business. Technology has freed businesses from the heavy cost base and many of the constraints of ‘old’ loyalty and delivered amazing new capabilities. Yet, because it put the customer first, much of the hard-won knowledge from the early loyalty pioneers still holds good. Those businesses who know how to balance both will see that the future’s still bright for loyalty.