3 Pillars of a Modern Loyalty Program

In Featured on App, Loyalty & CRM by Vaughn Highfield

three pillars

Retail and restaurant brands have employed points-based loyalty programs since the early 1980s.

They are so prevalent that the average consumer is enrolled in over a dozen of them. Unfortunately, they’ve become so lacklustre that most “members” utilize less than five of the programs they’ve joined and say that only one or two actually inform their purchase decisions.

Cult helps companies re-think the concept of loyalty. We don’t build decade-old, ‘me-too’ loyalty constructs so commonplace today. Rather, we architect programs that integrate online and offline channels, blend social and mobile media with more experiential rewards better aligned to core brand attributes, and more closely linked to business objectives.

We forge deep, personal connections between consumer and brand that persuade and reward desired behaviour instead of incentivizing existing behaviour.

We don’t call this loyalty. We call this customer engagement.

Increased frequency of visit, larger basket size, higher customer lifetime value – these are worthwhile goals but no longer the result of traditional loyalty/rewards programs.

Although often-times calculated, coordinated and strategic in their attempt to motivate and reward intended customer behaviours, traditional plastic cards with their collectable points or two-tier prices are so typical they’ve become white noise in the sea of businesses clamouring for increased customer attention.

So how should modern brands encourage and reward patronage to build more meaningful and sustained relationships?

From Loyalty Programs to Customer Engagement Platforms

Brand loyalty in the 21st century is has changed since most brands launched their loyalty initiatives. Technology, consumer demographics and macro-economic trends have changed consumer behaviour, and Cult has been pioneering how marketers adapt. Whereas the CRM team or a ‘special projects’ task force has historically managed loyalty efforts, it now requires a fully integrated enterprise approach to engaging customers by harvesting intelligence that creates opportunities for greater intimacy and personalized experiences, which in turn motivate a measurable response and advocacy from individual customers.

Real relationships grow and change over time, and they don’t just take place at the point-of-sale. They are nurtured across an integrated spectrum of touch points, both online and off, which serves to remind customers of the value of the relationship daily.

Effective Engagement Begets True Loyalty

A modern “loyalty program” blends the traditional incentive-response-reward model with highly personalized experiences that take place in-store, online and on the go. The true incentive and value to the customer is derived not just from price discounts, but also from higher intimacy (you know me and what I like), greater convenience (“you know how and where I like to buy”) and more engaging experiences (“you know how to communicate with me and give me something I value”).

As evidenced by the success of Starbucks’ mobile apps, consumers are readily embracing new loyalty solutions. Starbucks has transformed their customer engagement offerings with social media and mobile commerce at point-of-sale – and by blending incentive with entertainment, and reward with convenience.

Fusing High-Tech with High-Touch

The opportunity lies in fusing the high-tech of customer relationship management with the high-touch of using intimate customer knowledge to deliver engaging, personalized brand and buying experiences. Starbucks has taken steps in the right direction with a mobile app that affords customers the speed and convenience of quick checkouts and reward-points collection via their smartphone. Other cafés likePeet’s Coffee & Tea have followed suit with their own mobile rewards programs, and even QSR chains like Dunkin’ Donuts are leveraging online as part of their loyalty strategy.

Social and mobile media are also effective ways of engaging customers with interactive brand experiences that motivate word-of-mouth and encourage brand advocacy. Consider the added entertainment value of the Starbucks Cup Magic App released for the holiday 2011 season as an example of giving customers another reason to emotionally connect with their brand beyond their everyday product and service.

Rewards are Key to Loyalty; But Ongoing Engagement is the Key to Success

Loyalty is something that’s expected. It’s about customers obediently following signals that reward desired behavior with compelling (and ideally personalized) perks. But if done incorrectly, you’ve led customers down a path of never-ending, richer and deeper discounts that eventually are difficult to justify.

Engagement is something that’s fostered through intimate relationships. It involves learning about customers’ individual preferences and applying that insight to personalize marketing and fulfillment in ways that forge a stronger bond over time. It rewards desired response instead of existing behavior. Ultimately this will result in higher customer lifetime value and a uniquely fortified competitive position.

Engagement is about enrolling customers in an idea that plays out in their daily lives and through their brand interactions and buying experiences. It’s an ongoing dialogue. It’s a friend with fringe benefits.

3 Pillars to a Holistic Customer Engagement Plan

1. Value Proposition

This pillar defines what’s in it for the customer — what benefits does the customer receive by participating in a dialogue with your brand? Answers are based on consumer research and business intelligence, and guided by the strategic objectives behind the initiative and the alignment with the overall brand. Specifically, we seek to define:

  • Above the water benefits: Are rich offers made up-front to enroll customers en masse or are they saved for the most desirable members to be attracted?
  • Below the water benefits: What kinds of incentives or rewards do members receive that non-members or lower value customers don’t receive, and is the perceived value high enough to compel?

2. Infrastructure Requirements

This pillar defines the requirements needed to execute and implement the program – what tools and infrastructure is needed to pull it off? These elements of the program could be:

  • Core elements, including: Member website and mobile app, a call center, POS presence, member database and a loyalty engine.
  • Optional elements: Social media management tools, digital marketing engagement platforms and analytics dashboards, or mobile applications.

3. Maximizing Program Benefits

This pillar defines how to best leverage the program through:

  • Meaningful customer intelligence that informs all enterprise decisions. Analytic insights that inform operations and marketing, pricing strategy, new product offerings – knowing your customer better is the Holy Grail that makes everything better.
  • CRM: Intelligence must inform a shift in the media mix towards tailored communications to individual customers that motivate desired behavior. We seek to build good one-to-one markets.

This post originally appeared on marketing engagement blog, CULT, and was written by Rob Howard.

[Image: holmwoodm – Flickr]