As we head into 2023, brands are looking to experts to determine how to invest in customer loyalty effectively. Loyalty360 recently released their State of Customer Loyalty Report for 2023 and we asked Brierley — who designs and optimizes loyalty and engagement solutions — to provide their insights into what trends they expect to see this year.
Mark Johnson, CEO of Loyalty360, spoke with Don Smith, Executive Vice President and Chief Consulting Officer for Brierley about how to leverage customer data to effectively drive emotional loyalty and engagement.
Brands Should Revamp Their Loyalty Programs in 2023
Many brands are starting 2023 with established loyalty programs, that they haven’t changed in years. As a result, they lack both customer engagement and interest. Brierley spends a lot of time working with these kinds of programs, analyzing them, and figuring out how they can be revamped.
“There’s not a shortage of loyalty programs,” says Smith. “There is a shortage of differentiating, fun, experiential loyalty programs.”
To Brierley, programs that rely on do/get transactional solutions miss out on the potential of their programs. Without optimization, this kind of small incentive structure will either end up collecting dust or becoming obsolete.
Providing discount value through a points system is good for the consumer, but also provides the business with a significant amount of data on consumer behavior. Businesses need to revamp their loyalty programs to incorporate these data sets into personalized and differentiated experiences for their members. This kind of design allows businesses to build deeper relationships with the customers, inspiring loyalty beyond earning a discount.
Brierley helps businesses take this data and use it to determine what product or service they should be using and then lead them to those adjacent behaviors. In successful loyalty programs, the business’s relationship with its customers allows them to drive these behaviors in a way its members accept.
“Look at places where [members] stub their toe in the brand interaction, rise up to meet needs, anticipate what they need, or just delight them with something that’s really relevant,” says Smith.
To find this data, Brierley recommends engaging members beyond the transaction, providing rewards for browsing or trying products in store, sharing content, providing feedback on styles and style guides. Customers look for this kind of interaction, because they feel like their input is valued and they get rewarded for the engagement without spending anything. Younger customers especially engage with this kind of program, because the experiential rewards and differentiated perks feel exclusive.
Leaving the Sea of Sameness
When developing their own loyalty program, a business will often check what its competitors offer and match or exceed those offerings. Those are often the do/get programs that offer discounts for purchases, and this behavior results in the Sea of Sameness idea. Everyone is just copying each other but offering slightly different discounts.
Brierley believes there are two options for businesses swimming in the Sea of Sameness:
- Become the best deal.
- Take yourself out of the sea altogether.
The first option will distinguish a business from its competition but usually results in financial loss for the program. Because everyone is offering discounts, the best deal will have to be so much greater than its competition that, unless the financial mechanics are there, the business won’t be able to sustain the program.
“The other choice is to take my program out of the Sea of Sameness and project it into new waters,” says Smith. “Find features that are going to be hard for my competitors to copy, maybe leverage the unique assets of my brand in a way that will give me a competitive advantage.”
This advantage almost always comes from perks, experiences, or special statuses. For example, a department store has the ability to offer specialized services to its top tier of loyalty members. This could provide members with a service they never had access to before. The goal is an emotional connection with the customer, delighting them with early access to new products, specialized services, or other unique assets of the brand that competitors cannot offer.
The secret to leaving the Sea of Sameness is to move beyond transactional rewards, giving members things they will value that show authenticity. This is where leveraging the customer data comes into play. Businesses need to know the right move for each guest and member and that level of personalization only comes from managing data effectively.
“You always want to be moving on the continuum of fostering emotional loyalty and enhancing the member experience,” says Smith. “Not by giving more rewards.”
The Value of Perceived Cost
The main challenge is finding benefits, rewards, and other things with high perceived value but low cost. Often, it comes down to finding services or experiences the business already does and offering them to the customer as an exclusive perk.
Trying to launch a completely differentiated experience with all the bells and whistles on day one is not only an impossible task but presents its own cost and organizational problems. Brands need to build a progressive road map, outlining long-term growth of the program. This not only keeps the program cost low, but also keeps members interested and engaged.
“Programs need that next thing that gets injected,” says Smith. “Here’s the latest and greatest that keeps it fun and sexy.”
Staging out the functionality of a program gives it time to grow interest and value without a major overhead cost. By starting with high perceived cost, low actual cost offerings, brands generate excitement while providing space to optimize the program before progressively introducing new features.
Brands need to spend time statistically testing a constellation of benefits and then ranking them by which offer the most value to different segments of customers. Then, they need to take that list and juxtapose it against costs and build financial simulations to find the sweet spot of providing unique value without breaking the bank.
Part of this process is examining the technological capabilities of the brand. If the current technology can’t handle elements on the program roadmap, then those features need to be added to the brand’s development schedule. This allows the tech side of the program to be ready for future releases without the costs of rushed development.
It’s all about planning for the long-term. The biggest mistake a brand can make when considering a loyalty program revamp is to look at the cost of the final product and expect all of the features on day one. Those are the programs where stakeholders determine the cost isn’t worth the ROI.
“You want to take a minimal winning proposition, get it into market, and let it work for you,” says Smith. “Then you continually reinvent, expand, and move it around.”
Overcoming Technology Challenges
Almost every brand Brierley works with has some degree of interest into emerging loyalty technologies like Customer Data Platforms (CDP) or the rewards potential of Web3, metaverse, and digital assets. However, the main challenge Brierley sees is not implementing these technologies, it's how to manage the data they produce.
The success of these new technologies is dependent on the success of the brand’s marketing efforts. Brands need to switch from using spray-and-pray messaging tactics to tailored marketing campaigns that incentivize consumers in an authentic way to make the next best decision for them. To do this, brands need to let the data lead decision-making.
“Brands aren’t doing enough with the data assets to be surgical in terms of how they’re speaking to each member and each guest, and that’s the real opportunity,” says Smith.
There are two trends Brierley sees making a big impact in 2023:
- Hyper personalization
- Clienteling
Of the two, Brierley is focused on Clienteling —putting data into the hands of associates with direct customer relationships and empowering them to personalize the experience for individual members with discounts and other perks. It’s about building the customer relationship so the sales associate can follow up with authentic communication and deals.
On the other hand, hyper personalization is when brands use technology like CDPs and AI to search the market and determine what to offer customers. These technologies are effective at finding personalized offers, but they don’t feel authentic to the customer. That’s why Brierley believes loyalty efforts need to tie back to the local personal touch level.
“It’s the synergy between those two trends that’s particularly impactful and where we see good loyalty strategy going into 2023 and beyond,” says Smith.
The Underrepresented Stakeholder: Customer-Facing Employees
Brierley advocates for having customer-facing employees involved in the planning process and throughout the implementation as equal stakeholders in the loyalty program. They offer insight into the areas where customers are most likely to engage, what kinds of perks they want, and what their pain points are in the program and overall experience.
When it comes to implementation of the new program or new features, employee buy-in is a major driving factor for the success of the launch. Brands need to get their customer-facing teams excited about the program. Successful programs depend on employee advocacy and training. Teams need to feel good about what they offer customers in order to drive participation.
“In every program, if there’s any way for the employee to participate, it should happen,” says Smith.
One of the bigger mistakes a brand can make is to keep employees from participating in the loyalty program because they get an employee discount. Instead, employees should be signed up for the loyalty program on the first day and have the employee discount. This lets them see the program in motion and the additional discount drives buy-in. This makes the employees experts, so they can easily speak to customers who may have questions about how the program works.
For brands with higher turnover rates, Brierley advises making loyalty part of the onboarding process. This involves providing employees with incentives to engage with the loyalty program, both as a user and in getting customers to sign up and interact.
“We want to acknowledge these people who are the program ambassadors and celebrate their accomplishments,” says Smith. “That could be acknowledging special awards, trips, or recognition, or even co-earning with points or other incentives.”
Making the employees part of the program is vital. Discounting the customer-facing teams in the program results in either resistance or mere compliance, both of which reduce the customer engagement and ROI of the program.
Employees get excited when they are able to engage with the rewards in real-time, being involved in giving customers their rewards. When a cashier can inform a customer of a reward on the spot and then help them pick it out, it builds the brand-customer relationship and gets the employee excited to continue doing their job.
“Those are the moments that build authenticity,” says Smith. “We have to find ways to make employees feel good about the program if it’s going to be successful.”
Making Customer Privacy an Asset
Brands should always err on the side of caution when it comes to compliance and privacy. Customers want to know they are in control of their information and anything that communicates otherwise will damage the relationship. Brands should never force any information sharing options onto a customer.
Instead, brands have a unique opportunity to build their customer relationship by asking for their information — called zero-party data — and providing some incentive in exchange, like points or discounts. Then, using the information they provide helps the brand to provide more effective communication, offering more customized product recommendations and reaching out at better times.
“If you’re going to take the information, you are obligated to tailor it and personalize it based on what that person shared with you,” says Smith.
When customers see that a brand is using their information responsibly and effectively, they feel better about sharing it. Collecting zero-party data also allows sites to stop collecting cookies, because the customers provide them with all the information they need.
Takeaways for 2023
Brierley believes the next big trend in loyalty is a combination of clienteling and zero-party data. Brands should take the data from hyper personalization and give it to the people who have customer interactions. Those employees should be empowered to take, enter, and record the zero-party data directly from customers.
The best way to integrate these trends into a brand’s current platform is to build a use-case map. Brands need to build out this plan so they can see what they will need for upcoming features and start the development process. Then they can launch the features in stages during development to limited audiences. This allows the brand to see what works, what’s well received, and which features to finish developing. As a result, brands don’t invest major costs into developing a program with low ROI.
“It’s really trying to prove [the program] out progressively that is most important in this process,” says Smith.