Feature Article - May/June 2017

The Lowdown on Loyalty

Get Ahead of Evolving Strategies

By Rick Dandes

For some time now, there has been a paradigm shift in the way loyalty programs are conceived, designed, rolled out and assessed. This shift is a reflection of the changing landscape of brand loyalty over the past 10 years—changes and trends brought on by the forces of disruptive technology, data and analytical accessibility, and the undeniable influence of millennials.

This shift has been a long time coming. Loyalty programs started in the 1960s as supermarket and gas station "continuity programs," explained Ira Ozer, CEO and president of Engagement Partners, Chappaqua, N.Y. In these programs, he said, specific sets of plates, bowls and glasses were selected by the program sponsors and then a new plate was given each week with a purchase of a specified amount by the customers, with the proposition of collecting the whole set. Later on, these programs were overtaken by stamp programs, in which customers would be given trading stamps with each of their purchases, which they could then save in booklets to accumulate and trade in for merchandise from a printed catalog or in-store selection.

Over time, Ozer continued, these stamp programs and other ways of tracking incentive award points manually were overtaken by spreadsheets and computer database programs. Then, most print catalogs were replaced by dynamically updated online versions. There were many benefits of this, including increasing convenience and award choice for customers, improving customer segmentation, communications and data available for program improvements, while reducing costs for program sponsors.

The evolution in program design, as Ozer suggested, is trending to convenience, simplicity and personalization. Indeed, "people expect loyalty programs to be simple and available, whether those people are in a consumer loyalty program or a business-to-business, channel loyalty program," added Barry Kirk, vice president of Loyalty Solutions with Maritz Motivation Solutions, of Fenton, Mo. "Getting people to enroll in a rewards program can be relatively easy," Kirk said, "but ongoing involvement can be more difficult. There is something called 'the engagement cliff,' where we see a large percentage of those people who enrolled falling off in their engagement with the program."

A common reason for this, he said, "can be difficulty in accessing and using the program." Loyalty programs today must be accessible through mobile devices, and earning needs to be simple and as automatic as possible.

"This is especially true for loyalty programs that are primarily using what we call a 'mercenary' style of loyalty," Kirk said. "This is the traditional 'buy this, get that' points-based program, and it's a foundational form of loyalty. But we also see a trend for two deeper forms of loyalty: true loyalty, where customers want more of a personalized, two-way relationship with the brand through the program and are willing to invest a little more time and information to get that; and cult loyalty, where customers are also willing to advocate for the brand—make referrals and comment on social media."

For some time now, there has been a paradigm shift in the way loyalty programs are conceived, designed, rolled out and assessed.

"What we have seen," added Steve Taggert, content strategist, Loyalty360, of Cincinnati, Ohio, is a marked increase in brands engaging customers on an emotional level as opposed to transactional. "Where loyalty programs were once able to get away with simply offering discounts to retain shoppers," Taggert said, "they now find that once those discounts end, the more fickle modern customer simply moves to the next brand. Instead, companies are going the extra mile to try and make loyal customers feel valued and part of a club, as well as offering unique, tailored perks along the way."

That's right, said Susan Adams, senior director of engagement, Next Level Performance, a Dittman Company, New Brunswick, N.J., agreeing with Taggert. "It's all about engagement when it comes to loyalty, whether channel, customer or employee. The more the program participant feels that they are connected to the organization and its goals and mission," Adams said, "the greater the mindshare and the motivation. Clear, interesting and frequent communications are absolutely essential to stay front of mind and deliver the company message."

The Internet has made all that possible and easier, said Adams. Now with mobile apps and mobile responsive websites, loyalty programs can truly be taken on the go. Participants and representatives can check progress to goal while on the road. What's more, with push notifications, it's possible to reach the entire audience with timely updates and opportunities. While the program principles remain the same, it is much easier to keep the attention of a broader audience, and to refocus them on shifting priorities.