In a crowded marketplace, brands are challenged to stand out and win brand love. Transforming customers into authentic brand advocates can be a challenging journey for many brands.
Phaedon helps clients move their customers toward becoming true advocates for the brand and business. It starts with awareness and understanding, then acquiring new customers and engaging with them in meaningful ways, which can, ultimately, lead them to become loyal customers who are true advocates for the brand. Through loyalty strategy consulting, program design and optimization, advanced analytics, and their proprietary loyalty technology, Tally®, Phaedon works with clients to create the experiences customers seek.
Mark Johnson, CEO of Loyalty360, spoke with Tom Madden, Executive Vice President, and Katie Berndt, Vice President, at Phaedon, about expected trends in 2024, challenges and opportunities for brands, and how listening to customers will determine loyalty program success.
Improving Customer Loyalty Efforts
In 2023, many brands sought to improve customer loyalty efforts and, in some cases, revamped their entire program — adding functionality and changing the program structure and benefits with an eye on their customer value proposition. Madden spoke to how Phaedon is working with clients to ensure that the value is in the right place for their customers.
“It’s one thing to offer something, but if that doesn’t mean anything to the members of the program, then it’s going to fall flat,” explains Madden. “We’re seeing brands add more non-transactional benefits through their programs and also add value through external partnerships with complementary brands to extend engagement by creating experiences with the brand or program on more of a day-to-day basis.”
Many customers do not engage in daily transactions with a brand — in some cases, perhaps transactions happen only occasionally. The challenge for those brands lies in how to continue engagement and offer value to loyalty program members between transactions. Partnerships can really help to extend engagement and deepen the relationship at all points along the journey.
Enhancements for 2024
Phaedon predicts a renewed focus on the utility of points where redemption options are expanded outside the existing ecosystem of the brand, and members can use program currency to make other purchases or earn points in other ways.
With economic challenges persisting, people are savvier when it comes to getting the most out of loyalty programs.
“If you think about points as a true currency,” begins Madden, “it helps you think through what you can do differently. It’s not just about the loyalty program itself but the entire CRM experience. For example, if you look at the customer journey, it helps us identify gaps where we can effectively engage with customers when they need attention.”
Madden suggests that when loyalty is considered over a longer period, there’s always a new “shiny object” to capture a brand marketer’s attention. Two years ago, non-fungible tokens (NFTs) were that shiny object, and now, fewer people are talking about using them. Phaedon works to keep brands focused and reduce the tendency to chase after the proverbial “Squirrel!” This allows the clients Phaedon partners with to improve their loyalty programs so that they are customer-centric and not distracted by fads.
Berndt agrees with Madden on the importance of point utility and adding more partnerships to enhance programs. She also believes that CRM is a huge topic that goes hand-in-hand with loyalty.
“We’ve had more conversations with clients around targeting and personalization and what that means at the segment or tier level,” says Berndt. “Ultimately, brands are striving for those one-to-one interactions to make the experience more personalized for their customers. That’s where the true relevance lives, and you can create more of those meaningful moments, establishing connections and driving emotional loyalty.”
Offering members special experiences and “surprise and delight” rewards are some ways brands are delivering standout experiential rewards to engage members and build loyalty. From early or special access to events and one-of-a-kind experiences outside the typical program, brands endeavor to foster emotional loyalty and cultivate brand love.
Measuring Success and a Sharp Eye on Liability
Point liability continues to grow, and brands want to ensure they’re not caught off guard. Phaedon sees an opportunity to lower liability through point utility. This can create a win-win for brands and program members. Brands benefit from reduced financial exposure on their books, and program members receive more value for engaging with the brand — feeling more connected and more appreciated.
People are familiar with brands releveling, reevaluating, or revaluing their programs. When this is done poorly, it can create a huge rift between the brand and its customers and potentially impact loyalty to the brand. But when it’s done right, brands can add more utility to program currency in ways that reflect customer preferences, helping members to feel the brand is looking out for them. This can increase trust and keep members feeling more connected and like they’re part of something.
“Incremental lift in enrollments, net sales, frequency, and retention rate are the big metrics for loyalty programs,” answers Berndt when asked about measuring success. “These are what our clients care about most and what we’re helping them actively track and measure.”
Voice of Customer (VoC) should also be monitored and measured through a combination of customer satisfaction and Net Promoter Score (NPS) surveys, along with social listening and other topical research initiatives. While typically a secondary metric, Berndt recommends all brands use a feedback loop to track customer insights on an ongoing basis and apply key insights to their loyalty and CRM initiatives.
“Something like an NPS helps you develop a benchmark and watch it over time,” explains Berndt. “You can also specifically target your detractors — those giving you a poor rating — and know who your promoters are — those true advocates — to ensure they remain happy. Listening to these audiences can help you find gaps in the customer experience and fix them.”
Madden agrees with his colleague. “By understanding what customers are asking for and working toward that NPS, it ultimately feeds strategy and future changes, additions, and partnerships.”
In the case of Tally®, Phaedon’s proprietary loyalty platform, clients’ call center agents can access extensive information through the customer care app, giving them a 360-degree view of the customer. If a member calls about a problem that needs to be resolved, agents can see how the caller feels about the loyalty program and determine how best to resolve the issue and keep the customer feeling positive about the brand and actively engaged with the program.
Measuring Efficacy in Customer Loyalty
For Berndt, what’s driving frequency, regardless of industry, is typically the number one key performance indicator (KPI), followed by enrollment rate and revenue. Measuring not only month-over-month and year-over-year but also the incremental lift — especially when changes have been made to a program or testing new CRM activations — will give clients a full picture of the efficacy of the program.
“Enrollment rates by channel is also something to keep a close eye on,” says Berndt. “For example, a hotel loyalty program member could enroll online, through an app, through Wi-Fi while staying at the hotel, or when talking to someone at the front desk. Revenue is another key metric — how much you’re taking in and how much you’re spending to get people to enroll and participate in the program.”
Additionally, Berndt recommends that brands pay attention to redemption rates (of points, miles, stars, and other rewards) and be able to attribute that back to members who are actively engaged.
“Redemption is an important loyalty participation metric. You want people to redeem and get value out of the program,” says Berndt.
Participation is a subject that Phaedon discusses with clients, and this can lead to conversations around lifecycle targeting and understanding incrementality based on the promotions they’re running or modifications they’re making to their program. Program modifications could be related to new CRM activations being tested or loyalty program specific. From an analytics perspective, incrementality is one of the most important measurements when trying to understand what levers can be pulled at any given time to drive more impact.
Top Trends for Brands in 2024
Getting the program’s foundation right is key, and Phaedon advises brands not to react to every trend. Being on top of trends is important, but whether a new idea or technology is a match depends on the brand and the maturity of its loyalty and CRM program.
“Some of the trends we continue to see are personalization and being able to provide more flexibility and choice,” says Berndt. “It’s important to put your customer at the center of your flywheel, so to speak, and map and build the experience — whether it’s UX, CRM, loyalty benefits, or the functionality of the program around your customers, and let active program participants help you drive the enhancements.”
One of the best things a brand can do to add innovation to a program is to look across industries. Marketers for hospitality can keep a pulse on what’s happening in retail and restaurant loyalty and can bring interesting aspects of the member experience and weigh the feasibility of how to incorporate something similar in their own programs and vice versa. That kind of inspiration can guide innovation.
The Economy’s Impact on Retail Spending and Loyalty
With retail sales slowing in October, economic concerns are on the rise as brands move to add more value to their programs and differentiate their offerings.
Phaedon’s clients are focusing on a couple of key areas. Privacy is one — something they must focus on, as privacy and data regulations impact how data is collected, maintained, and leveraged. In terms of truly differentiating post-pandemic, brands are, first and foremost, working to understand the customers who aren’t in their programs today and what they must do to attract those customers and drive participation in their programs. Additionally, for customers already enrolled, brands need to determine where they can center the value most effectively. Once again, the VoC can offer guidance.
“If somebody has the propensity to shop at a retailer only once a year, spending a lot of your marketing or your rewards budget on that person is probably not the best return on investment,” advises Madden. “Whereas, if somebody is shopping with your brand a couple of times a year, but you know they’re shopping somewhere else 50 other times a year, that’s when you can choose to double down on efforts and explore what you need to do to increase attraction and encourage them to come to you more. Determine what they value, add more value, and move them toward loyalty.”
Madden notes that brands are also looking at different customer segments and questioning where to invest dollars to earn the best ROI.
Differentiate or Drown in a Sea of Sameness
Brands want to differentiate their offerings. And yet, this requires the balance of offering the right customer value proposition, aligning disparate technologies or investing in the right platforms to enable a more personalized experience, and driving ROI. A “sea of sameness” plagues many customer loyalty programs, and standing out is critical for success.
“Simplicity is still a guiding principle,” asserts Berndt. “No matter what maturity your program is in, when you try to stand out too much or stand out for the wrong reasons, it can absolutely backfire. Instead, focus on knowing your customers and what they want and expect. Then, deliver on that to the highest level possible in every channel that you interact with them.”
Berndt believes eliminating silos amongst your team can help facilitate approaching loyalty as a whole or outcome (versus only thinking of loyalty as a points program). Leveraging the data collected through loyalty programs can help improve CRM, the user experience, and personalization just by activating it.
Let Research and Strategic Plans Guide Decisions
Making big changes to a customer loyalty program without conducting proper research is a mistake, and brands that do this need to be ready to deal with the repercussions.
“Delta Airlines is probably the biggest case study from 2023,” says Berndt. “When they initially announced upcoming changes to their SkyMiles program, it quickly became a prime example of what not to do. They attempted to simplify, but instead, the trusted, best-in-class leader for loyalty created a firestorm. They broke the trust.”
Most people expect that brands will need to make changes to their programs over time, but communication is key when rolling out changes. Keeping a finger on the pulse of the customer while making small changes instead of massive ones that might draw significant criticism is vital.
“Investing the time and energy into a fully thought out ‘qual and quant research’ strategy before launching anything major is rule number one,” says Berndt.
“I think the biggest mistake is when brands aren’t looking at a long-term strategic plan and then working out their annual objectives and goals to help get to that plan,” adds Madden. “You always have to make adjustments to plans, but when you have an overriding strategic objective, it helps keep the noise at bay and the shiny objects out where they belong.”
Challenges for Brands in 2024
Madden recalls how data was limited in the past. Then, when data was accessible, loyalty-focused analytics were lacking. Now, the challenge is storytelling.
“We still don’t necessarily have the greatest storytelling going on in the industry,” says Madden. “For example, when a brand sends out an email every single day to you, it just becomes noise. You start to ignore it, even if offered something for free. You’re going to miss the offer because you get messages from the brand all the time.”
In some cases, the marketers sending those daily emails know they could be more effective with a more strategic approach, but their executive team may not understand. Sometimes, the decision is made to continue with the status quo rather than go with what the data suggests could bring a bigger return simply because that’s the way it has always been done.
Internal alignment is a big challenge as well. Madden cites a client case in which the brand brought various aspects of its marketing team together throughout discussions and the process of building out its loyalty program.
“While the loyalty team is driving the effort, they’re bringing in their media team, email marketing team, and all other teams that need to understand what’s going on and how they can be a part of it. Those teams must learn how they will benefit alongside the loyalty team and program members,” says Madden. “When a chief marketing officer looks at initiatives and realizes the impact across the organization, they will want to bring folks in early to partner in the efforts because a well-designed and well-executed plan embraced by all stakeholders is great for members and customers — and in turn for the brand.”
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Quick-fire Questions:
What is your favorite word?
Madden: Raconteur — a person who excels in telling anecdotes. I think that’s a great word for the day.
What is your least favorite word?
Madden: Bore, boring, or bored.
What excites you?
Madden: People!
What do you find tiresome?
Madden: Being home all day.
What brand do you think does customer loyalty well?
Madden: Any brand that has levels that address different segments of their base, from a base loyalty program to tiers with added value, subscription program add-ons, you name it.
What profession other than the one you’re currently in would you like to attempt?
Madden: I would love to own a little burger joint; that’d be fun.
Who inspired you to be the person you are today?
Madden: My extended family and my closest friends.
How do you want to be remembered by your friends and family?
Madden: Somebody who’s generous and is always there for them when they need me to be.