The Revolution Will Not Be Televised: Loyalty Marketing Needs to Grow Up

Recently, I attended two important Loyalty Marketing conferences: Loyalty 2012 in Berlin and Loyalty Expo in Orlando. Both were well attended, yet both echoed a familiar and similarly disappointing theme: “Loyalty marketing is finally evolving into what it should be, and that it’s about rewards, incentives and one-off promotions. Loyalty needs evolution, not revolution.” In Berlin, it was explicitly suggested that the industry only needs to evolve for it to continue in importance.

I completely disagree.

For loyalty marketing to be relevant in the C-suite and change how companies go to market, it needs a revolution.

The core raison d’être for loyalty marketing – identifying customers (via opt-in), understanding their current and potential value and then treating them differently still seems to be missing from most companies’ loyalty and relationship marketing practices.

While I’m not suggesting that traditional, published loyalty programs should go away, there has to be some fairly radical change within loyalty marketing for brands (and industry stakeholders) to realize their potential.

The time is right for an outright revolution.

Why Now? The maturation of the craft has been met with the tools – technology, applications, data management – to enable true customer loyalty and relationship marketing. However, the way we’re using those tools has created a status quo that doesn’t build brands or sustainable customer relationships.

Why do it at all? To retain and grow customers in an increasingly competitive environment. The economic benefits are well known, in terms of both lower costs of selling to existing customers and of course the economic leverage of improved retention.

Programs haven’t evolved.

While there have been sweeping changes in media, technology, consumer habits and behavior, most loyalty programs today are not fundamentally different than they were years ago. Core value propositions are built around hard benefits, usually relating to discounts and freebies. Soft benefits are still few and far between. Too often marketing relies on one-off promotions or messages, rather than a long-term strategy focused on growing customer value. Look around.It’s status quo.

Too much mass direct marketing. Not enough true relationship marketing.

In most categories, loyalty “programs” haven’t led to better use of data and marketing delivery. Most of the loyalty propositions are simply different textures of the same flavor. There’s very little depth or extension currently used in relationship marketing. Data management -- using data to yield better insights, decision making and marketing experiences -- remains the most pervasive challenge for marketers today.

Ultimately, it’s the relevance and the customer relationships that are the game changers, not rewards and discounts. Most brands stop short with published loyalty programs.

As an example, our work to refine one client’s email marketing from non-versioned mass mailings to segmented and personalized messaging increasing attributable revenue 120%.

Customers now have a real-time voice.

The impact of social media and the democratization of customer voices require a different approach to loyalty marketing. Social is the bright, shiny object within marketing for good reason. It’s integral to our world, customers, brands and marketers and competition.  In contrast to one-dimensional loyalty programs, social creates a dynamic, customer-differentiated experience that recognizes a range of interactions in a customer’s relationship with the brand. Meanwhile, loyalty remains stuck in the paradigm of a stop-and-go experience that rewards “spend” with “get”. Loyalty needs to catch up and replicate the social experience throughout and do so throughout the customer experience.

So what will the revolution, and the future, look like?

Loyalty “programs” will be increasingly invisible, with published programs on the wane. Published programs are not going away, but they will be increasingly overshadowed by what happens privately between brands and select customers. Unpublished marketing is not new. As loyalty strategies increase in number, it’s only natural to expect more cards face down on the table, as published programs are too easily matched.

Relationship marketing wins.The sustainable profit from loyalty comes not from the published program itself, but from the relationship marketing and promotion that it enables. This is a fundamental shift from mass discounting and mass marketing via channels like email (or worse, Groupon). Loyalty programs without relationship marketing are one-dimensional, static, and fail to engage, much less differentiate.

Customer experience should more consistently sync with the brand promise. A loyalty program won’t fix a bad customer experience, so it’s imperative that loyalty strategies extend beyond programs to include the customer experience. Customers have short memories and when brand experiences are overly transactional there’s very little emotional imprint. Every brand touch point is evaluated for consistency and whether the brain perceives it as a victory, or not. Too many misses and there is no loyalty, much less a valuable relationship. Emotion, which comes from experiences and relationships, trumps points and rewards.

How will it all come together? One example from our work for a leading retailer was an overhauled program based on identifying new high-value tiers and hidden churn within those tiers. With testing and segmentation, we determined the optimal mix of additional benefits and messaging by tier based on potential for incremental spend and refocused the program positioning to be more on brand. All of which resulted in, as stated by the client, surpassing “nearly every benchmark, including incremental spend and moving customers up the levels” of the program.

What happens next?

It’s taken three decades since the American Airlines AAdvantage launch for companies to place customer engagement and loyalty as a priority within business and marketing plans. It’s time for a new approach to loyalty to ensure these priorities remain central to marketing across channels, directly to customers, extending customer relationships and delivering real business impact.

Revolutionary loyalty “programs” will be:

  • Unpublished, real time and difficult to replicate
  • Built on proprietary data and insights
  • Able to recognize customers accordingly
  • Driven by customers not brands, in social as well as all channels
  • The largest organic growth engine available to a company

“The revolution will not be televised.The revolution...will be live.” – Gil Scott Heron