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What is the difference between a loyalty program and a loyalty experience and why is it important to loyalty marketers?
That is a topic that Loyalty360 discussed with Barry Kirk, VP, Loyalty Solutions, Maritz Motivation Solutions.
Can you talk about the need for an industry shift from a “loyalty program” to a “loyalty experience”?
Kirk: The challenge with thinking in terms of a loyalty “program” is we have a very fixed image of what that means. Specifically, a customer offering that is highly transactional and focused on a financial quid pro quo between the brand and customer. That model served us well literally for decades, but it is showing signs of fatigue for several reasons.
First, its easily copied by a competitor. Second, if you need to up the ante, the only real lever you have to pull is by increasing the offer. And, finally, a transaction-based program has very little “memory halo.” This is our term for the degree to which the interaction fixes itself in the brain and is remembered positively at some future point. So, its imperative that we break out of that fixed mindset, and the best way to do that is to look at loyalty through a new lens. The lens of “experience” rather than “program.”
Why is experience such an integral piece of the customer loyalty puzzle now?
Kirk: Experiences are what consumers now demand out of brands, not just products or compelling offers. It’s become so easy to comparison shop that it’s very hard to stand out just on price or features any longer. But an experience is something that can be truly unique to your brand, especially when its ever evolving and is something that is designed and reserved just for your best and high potential customers. In fact, a recent Harris study showed that three in four Millennials would prefer to spend money on an experience or event versus a hard good. I think this is largely because the most powerful experiences are both social–social has a huge impact on the memory halo−and have some element of “selfie value.” That is, they confer status on the participant when shared through social media. If you want to retain your best customers, you need to understand that it’s that sort of experience that they are looking for you to deliver.
How should loyalty marketers consider expanding loyalty solutions beyond points and rewards?
Kirk: Points and rewards tend to fall into a category we call “Mercenary Loyalty.” That simply means loyalty that is focused on optimizing a reward or offer. For a long time, we’ve been stuck in assuming that is the only earnable type of customer loyalty. In fact, there are at least two others, both of which require more focus something beyond the reward.
One option is “True Loyalty,” wherein you put more emphasis on the quality of the overall brand experience. This could include incorporating techniques like gamification, highly exclusive status-based interactions, and predictable randomness–anything to make the experience feel special and at times unexpected. The other option is “Cult Loyalty,” where the focus is on aligning at a values level and connecting your brand tribe. This type of loyalty requires creating shared experiences that can range from point-pooling (members joining together to redeem a collective reward), or members-only events where best customers can meet in person. None of these approaches necessarily replace points and rewards but, rather, build on top of them to enable a multi-loyalty strategy.
How will aligning loyalty strategies more closely to CX strategies impact brands?
Kirk: The two are clearly closely related, but with a significant difference. As a discipline, CX is generally focused on all (or, at least, most) customers and the quality of their interactions with the brand. Loyalty strategies, on the other hand, are most effective when focused on a subset of best and high potential customers–generally those account for about 25 percent or less of your total customer base. So, when thinking about the interplay of loyalty and CX, we think it’s helpful to redefine the term “loyalty.”
Rather than look at it simply as a tool to impact CX, it’s better to definite it as the CX of your best customers. This will lead you to seeing the importance of optimizing the entire brand experience for those customers, not just the loyalty program experience.
Can you talk about the importance of using insights from behavior science to create more memorable interactions with best customers?
Kirk: There is no question that data is king today in any serious loyalty strategy. Or that artificial intelligence and machine learning will soon drive most of our loyalty decisions and interactions. But we should not lose sight of the fact that consumers are human beings first. Our loyalty strategies are not aimed at statistical representations of people; they are aimed at people themselves. If we truly want to engage them, we need to understand not just what they do, but why they do it. That “why” is where behavior science is critical.
Do you want to build the best loyalty experience possible? Then you need to understand that humans are individual and social, but mostly social. That they are emotional and rational, but mostly emotional. And that we react best to experiences that involve multiple motivators. All of those insights come out of behavioral science. Analytics can only complete half the puzzle. We need that deep understanding of human behavior to complete the picture.
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