Over the last 3 decades in the Customer Loyalty business, I have been asked multiple times, “Are Loyalty programs still relevant?”.
This is a worthy question to ask after decades from the first loyalty program. Here’s my take on why Loyalty programs remain relevant over multiple decades, and it can be summed up in one statement: Loyalty programs are just not a marketing tactic or tool, they are a comprehensive customer-oriented strategy for business.
The foundation of loyalty program purpose and success can be tied to a philosophy and belief mentioned by Peter Drucker, “the purpose of business is to create and keep a customer,” and customers are an inherent stakeholder of the business through their patronage.
So, let’s dive into the benefits of loyalty programs and why the different elements of strategy that make them continuously important and relevant.
Customer Identification
It begins by knowing who your customers are, recognizing their behavior and value to you as a brand. The early days of loyalty programs were days of disconnected POS, Customer desks, distributed databases, etc. and Loyalty Program membership cards. Taken together, they provided a simple physical way of telling the counter staff and service delivery the value of the customer they are interacting with.
Later, technology, connectivity and data integrated, physical membership cards became mobile numbers, apps, sometimes using Bluetooth, biometrics, and RFID technology to help frontline staff to identify customers. As we get more automated, we’ll surely see Robots and Ai come into play.
Customer behavior, Insight, and forecasting
Points as a mechanism began with recognizing and rewarding past behavior as the main benefit for customers, but points work as a deeper gaming strategy, it makes the customer an invested stakeholder in the relationship.
As an invested stakeholder the customer shares personal data, transaction data and sometimes even more, ensuring integrity of the data captured. This makes loyalty data one of the most integral and valuable sources of consumer behavior. Clean and integral data are truly a BIG asset for the corporation. The behavioral data serves reporting, analytical and predictive needs of organizations, helping strategy, audit, and research functions.
Data Privacy
As data concerns increase across nations, here again customer loyalty data provides organizations with the best possible data source and provides protection with Zero party data access with permission based, opt-in modes of data capture. This benefit to organizations today provides one of the most valuable benefits. Customer assets are today the single most valuable asset of organizations.
Marketing Effectiveness
Customer Loyalty programs are often a CFO’s best friend simply because they provide measurable metrics for the effectiveness of marketing spends. As we move to the granularity of measuring customer profitability, Customer Loyalty programs are most adept in measuring customer-wise LTV, Customer ROI, Campaign Responses, objective attribution and lowering of marketing costs through points promotions, by Consumer segment.
Besides these, testing and new product launches can be driven by Product-wise consumption behavior. These are just some of the many benefits that make marketers and financial professionals have meaningful conversations.
Partnerships & collaborations:
The currency & technology in loyalty makes it easy for brands to work collaborations and partnerships with significant cost benefits in acquisition of common interest consumer segments (e.g., business travel, leisure holidays, other communities).
Not only do partnerships help reduce costs of acquisition they also increase the value proposition to the consumer. In a day and age where customer acquisition costs are growing astronomically, collaborating marketing with clear data ownership and access rules are problems that have been solved.
Relevance in communication
Today, the insight provided by loyalty programs allows for super-personalisation and creativity in communication. While Amazon offered every individual a customized page when they logged in based on their customization patterns many moons ago, today sending every individual a customized offer based on past behavior with AI tools makes all of this even more relevant to the consumer, reducing spam scores for those investing in building relationships.
Sustainability
Our changing world of consumer habits and consumer generations have grown even more conscious about social causes and our planet preservation. Loyalty has addressed this by providing a socially conscious solution of channelizing points towards worthy causes.
Today many programs offer opportunities to members to donate or contribute their points towards social causes or green causes focused on our planet preservation.
Summary
These evolutions were probably not anticipated when the original Green Stamps program or American Airlines AAdvantage programs were conceived, but along the way many have contributed to the evolution of programs.
The entries I reviewed this year in my role as a judge for the International Loyalty Awards evidence the progress that continues to take place in the World of Loyalty.
Its strategic role in organizations is becoming increasingly critical as the world of technology and our environment evolves. Of course, the question remains whether organizations are leveraging these benefits adequately. I’ll talk about that aspect in my next article in this series.
Editor’s Note
Brian Almeida is a frequent contributor to The Wise Marketer. Brian is the Founder of Strategic Caravan and Points for Good, both Indian based organizations changing the way people think about customer loyalty. Brian is a CLMP, and Strategic Caravan is a certified training partner with The Loyalty Academy in India and Asia Pac regions.