Is loyalty an outdated notion? Is it passé?

There has been considerable debate on this topic. In fact some even go so far as to say today’s consumers are incapable of being loyal. Empowered by a plethora of choice, emboldened by immediate price comparisons and user ratings, today’s consumers hunt for the best deal, with little affinity to a brand.

There is no question consumers have the power today. Forrester Research is right on target with their description of this new business era as the Age of the Customer (https://solutions.forrester.com/age-of-the-customer). In my opinion, however, this simply means the bar to gain, maintain and deepen loyalty is much higher. It requires new, dynamic approaches to engaging with your consumers, and a laser focus on the objective: delivering valuable and memorable customer experiences

Loyalty is deeply ingrained in our culture and psyche. Consider your loyalty to your alma mater, listen to the fervor of political debates between party loyalists, or watch the emotion on people’s faces when they sing the national anthem. Sports fans embody the ideal loyal customer. Why else would I, like so many loyal Boston Red Sox fans, continue for decades, year after year, cheering on a losing team that seemed incapable of breaking its curse? Because we are loyal and we are appreciated for that loyalty. It is a bond.

So what is the problem with loyalty marketing today?

Consumers’ and fans’ expectations are high, technology continues to change the way we interact, communication is instantaneous, and yet as marketers we haven’t evolved our approach to loyalty fast or far enough.

McKinsey summarized it perfectly (http://www.forbes.com/sites/mckinsey/2011/12/01/loyalty-is-it-really-working-for-you/):

“Everyone values loyalty – presidents, generals, friends. That’s no less true for corporations. US companies spend $50 billion a year on loyalty programs. And when done right, loyalty programs can generate as much as 20 percent of a company’s profits.

So you’d think that, given those stakes, companies would have carefully developed loyalty programs. In our experience, however, it’s surprisingly rare.

In too many cases, companies have built “me too” commodity programs – how many points and rewards programs are you a member of? – that often don’t drive value. They are easy to copy and don’t take real advantage of the latest capabilities (e.g., social networking) available to consumers today.

In addition, companies often take a “set it and forget it” attitude to programs that don’t keep up with the changes in the marketplace. Loyalty programs often just innovate at the margins. This is a lost opportunity since our research into the customer decision journey has shown that creating a customer loyalty loop is critical to spur both sales and brand advocacy.

Most disturbing, poorly designed and implemented programs can actually destroy value. We’ve seen it with plenty of our clients.”

What does it take to do loyalty right and achieve the results McKinsey cited?

First, it takes loyalty engagement.

There are 3 fundamental principles I recommend every loyalty marketing program embrace:

1. Be human: Communicate in a personalized manner. Use the information you have about your known loyal customers – their profile data, preferences, purchasing history — and make every interaction relevant.

2. Be respectful: Engage with your fans and customers in a manner that shows you respect them. Do not spam them with daily, generic emails. Less is more. Map to their individual journeys, understand when, why and how they want to interact.

3. Be smart: Take advantage of technology to help you segment and tailor your communications. Use location-aware services to be timely and in the moment. Differentiate your marketing and surprise and delight your fans and customers.

Second, it takes a well-defined strategy and measurable outcomes.

To evolve and stay ahead of your customers and fans, you need to map your current and desired state. Recognize where you are in the loyalty engagement continuum. Think about your business strategy and how loyalty engagement can contribute to improving the bottom line. Far too often we see loyalty programs implemented without any metrics or clear performance goals.

At Stellar Loyalty, we work with our clients to build strategies based on profitable engagement

Lastly, it takes modern technology.

As McKinsey noted, too often companies adopt a “set-and-forget” approach to their loyalty programs. This is true not only for the approach, but for the enabling technology. Program success is frequently limited by outdated technology that is not designed to capture billions of customer data signals in real time. Marketers cannot get updated customer profile and purchasing history to slice and dice, segment and create purposeful, timely, cross-channel communications. And without analytics built-in, performance impact and key performance indicators are after-the-fact and irrelevant.

At Stellar Loyalty we believe loyalty engagement requires systems of engagement where the mobile experience is front and center, interactions are relevant to the customer / fan journey, and tailored to the channel of communication be it online or in-person.

The goal is to deliver valuable, memorable experiences, which result in customer advocates and profitable loyalty engagement.

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In my next blog I will expand on what we mean by modern loyalty technology, and share a few insights we learned from esteemed industry analyst, author and Managing Principal of Beagle Research Group, Denis Pombriant. Check out his recently published book Solve for the Customer (http://beagleresearch.com/sftc-is-here/).