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11.29.16

Modernizing Loyalty Programs

by T3 Marketing

(Originally published on Loyalty360)

James Lanyon, director of strategy at T3, believes that loyalty has “a lot more runway now, meaning there are significantly more opportunities for brands that truly believe in it.”

Loyalty360 caught up with Lanyon to learn more about his thoughts about modernizing loyalty.

How have modern loyalty programs changed as we’ve entered a technology dominated/dependent society?

At the heart of every great revolution is a platform for everyone to build on. Loyalty lacked that platform for a long time, but now basically everything is connected—as much in business as in a consumer’s day-to-day life. Even the most outdated POS systems are integrated into some sort of network. The advent of mobile, cloud-based services, and microservices architectures is expanding that platform. So now, there’s really no excuse for brands not to have some form of loyalty system and the majority of consumers know that. They look at brands like Starbucks or DSW and wonder why other brands don’t offer the same sort of experience. And there’s a downside now for brands that don’t engage loyalty that previously didn’t exist. The complaints about cost and legacy systems and other headaches that executives may cite as a reason to not get involved don’t exist for the average customer, so the default customer takeaway becomes that the brand just doesn’t care enough about them to offer the experience they feel they deserve.

What are the differences between acquired loyalty and earned/organic loyalty and how can brands achieve each?

There has been a debate about this for a while now—acquired loyalty vs. organic and it’s a false dichotomy. Our view is that you have to deliver both and that they’re part of a larger customer experience. Acquired loyalty is an important part of a business’ overall design. You have to be able to create, account for, test, and measure a basic competitive element in loyalty the same way you do in advertising, retail distribution, CRM, etc. If loyalty in the form of points or punches is a base-level customer expectation (which it often is) then the business should recognize it, model it, and factor it into its financials and forward-looking discussions like any other business function. The challenge is to not stop there. Just look at Chili’s—it has Chili’s To Go, but that’s tied to a completely streamlined in-restaurant experience that includes loyalty, but also extends to mobile, tabletop re-ordering and games for the kids—all benefits for which people are willing to pay. It screams to the customer that Chili’s is thinking of them at every turn and that wins a lot of credit with the customer beyond standard competitive measures like menu innovation.

Is customer experience evolving at the same rate as modern loyalty programs?

It depends on how you define “modern” loyalty programs. Many loyalty programs are just getting off the ground and take time to grow into strong customer relationships. Some loyalty programs seem happy to merely check the loyalty box for the organization without any real vision. If by “modern” you mean typical loyalty programs, the answer is no. Consumer experience, generally, is evolving at a much faster pace than typical loyalty programs. And that’s creating a larger chasm between what customers expect and what brands typically offer. We see this measured through engagement rates. Most analysts will point out how consumers are trying more and more loyalty programs, but staying engaged in fewer. This is driven by a number of shortfalls, including a need for clarity in what they’re getting, more personalized rewards, and greater access to rewards beyond just a provider site. Acting on these needs and embracing more flexible technology platforms paves the way for a more “modern” loyalty program that meets the expectations of consumers.

What brands are leading the pack in the loyalty space and how are they using technology to improve customer experience?

Amazon isn’t just leading the pack, it’s redefining consumer expectations generally. The brands who are most successful are the brands that signal to customers how well they know them through their loyalty programs. I mentioned DSW before. DSW customers live for their rewards mailers and really feel the benefit of shopping there. Price and selection are a given and not necessarily a key component of the customer experience. When you couple the success of the rewards program with a positive e-commerce experience, generous return policies and smart associates, you start to see loyalty as the cornerstone of a really rich customer experience. The food and restaurant category has been white hot in loyalty growth and, as a result, we’re seeing some very interesting programs. Starbucks received some negative press for changing up its program scheme but that hasn’t held it back in terms of growth and customer engagement. Taco Bell’s loyalty program is another example. Its Explore program is well articulated, fun and shows the company knows who they’re doing business with. Loyalty success has a lot of moving parts, but technology is obviously critical as is overall program design. Plenti is probably the most influential innovation in recent memory, proving out the viability of the coalition approach. Creativity is also important and I believe it will be the real loyalty battlefield in the not too distant future.

What are the key concepts that brands should be implementing in modern loyalty programs to offer customers a more personalized, simpler, and accessible experience?

Embrace the balance between acquired and organic loyalty. Have senior management publicly embrace loyalty to rally the organization behind it. Push on your technology platform to be faster, more efficient, more cost-effective and ultimately more consumer experience driven. Create an experience roadmap that essentially transforms loyalty units from a low value commodity into a valuable currency. When your customers are afraid of losing their points and feel emotionally driven to stay at certain levels, you know you’re winning. You also know you’re offering real value. Understand that loyalty is a lot more effective when it’s part of a larger set of customer-focused initiatives that play off one another. Adopt more dynamic test and learn platforms that don’t rely on one or two base outcomes to determine program success or failure. If the organization is truly behind loyalty then it’s not a question of “Should we do this?” It’s more a question of “How do we do this right? Or better? Or more effectively?”