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Heading into 2023, brands are hoping to capitalize on upcoming trends in customer loyalty to differentiate themselves and stand out from the competition. Loyalty360 recently released its State of Customer Loyalty Report to provide insight into those trends, including the need for personalization, the importance of data, and the expansion of loyalty strategies beyond transactional programs. We reached out to Bakkt — a provider of crypto, loyalty, and commerce technology —to share its expectations for customer loyalty in 2023.
Loyalty360 spoke with Nancy Gordon, Chief Product Officer of Loyalty & Rewards with Bakkt, about upcoming trends and technologies in customer loyalty and recommendations she has for brands hoping to improve their loyalty programs and strategies in the new year.
As we saw in our Loyalty360 Brand Member Research | 2022 State of Customer Loyalty Report, almost 80% of brand respondents shared they have an interest in redoing, enhancing, or updating their customer loyalty offerings. Why should brands consider redoing their customer loyalty program in 2023?
Gordon: From my experience, there are many reasons brands redo their customer loyalty programs, which we are seeing a lot as of late. Some brands are redesigning their loyalty programs to match changes to their overarching value proposition. Loyalty has always been and remains a rich area for innovation, allowing brands to stimulate usage from current customers and attract new markets, segments, or demographics. One recent example is Target and Ulta Beauty’s loyalty partnership that supports their new and innovative “store within a store.” Digital transformation drives brands to redesign in order to stay competitive, fresh, and cutting edge. Some brands redesign to create more value for their highest tier customers or restrict value for economic reasons. For example, several airlines recently redid their loyalty programs because their premium tiers became too big overall, reflected in long waiting lines for their lounges and many travelers left without upgrades or other premium benefits.
Where do you see new trends in loyalty naturally emerge? How should brands incorporate these new trends into their existing loyalty strategies?
Gordon: In many cases, brands look for innovation and loyalty trends from best-in-class programs within and outside the geography and industry for which they compete. Inspiration for how to appeal to younger audiences, level-up impact, or increase the press-worthiness of their strategies can be found all around. Technology also plays a major role in innovation, as brands reach into emerging technologies to attract Gen Z and bring new features that increase activation and stickiness. Companies should always look at trends through the lens of their brand and incorporate ones that align.
A major relaunch is not always necessary as innovation can naturally emerge and be incorporated seamlessly. Brands can determine the need for a relaunch depending on where the innovation is on the curve of technology trends. If it’s a trend consumers may not be talking about or aware of, it may require marketing and education instead of a complete relaunch. For example, as we look at Bakkt’s launch of Crypto rewards in 2023, we know that education is required to excite consumers seeking to explore digital currencies with their banks and brands they love.
Collecting data from users and the segments they hope to attract can help brands incorporate trends. Brands can use this data to determine which trends are most relevant and prioritize when, where, and how a new innovation will launch. Bakkt has found that consumers want to participate when their favorite brands develop new products and services. Offering top tier users rewards for their feedback is a low-budget way to capitalize on this participation.
In our recent State of Customer Loyalty Research, many brands felt the industry is suffering from a “sea of sameness.” How should brands address the “sea of sameness” in a manner conducive to the brand?
Gordon: At an industry level, programs can certainly act and feel the same. For example, most retail programs involve cash back and in most travel programs you earn currency towards a free flight or hotel room. I like to use the analogy of a subway car: from first glance, everyone appears to be the same — a group of people on the way to their destination. However, when taking a closer look, one can see that each individual is unique. Similarly, brands have the power to bring their programs to life in different ways through experiences, brand personality, promotions, access, etc. I think it’s important that brands stay close to their DNA and ensure their program aligns with their brand personality in order to set them apart.
What do you see as the next “big thing” in customer loyalty?
Gordon: I believe connected loyalty ecosystems will continue to grow in relevance. Additionally, I expect we’ll see more collaborative partnerships between brands, helping them cater to new customer sets. Aligning with like-minded partners is a cost-effective way to deliver new program benefits and create differentiation.
There is a growing number of new technologies, such as NFTs, crypto, geo-location, etc. That are catching brands’ attention. Is there a new technology you think holds the most promise for 2023?
Gordon: In 2023, CDP and zero party data will be utilized more frequently to provide the data brands need to further personalize their programs. We’ll also see more crypto rewards being offered. Bakkt’s recent study reveals that current crypto owners and those who are crypto curious feel that acquiring crypto through a favorite brand’s loyalty program is more trustworthy than traditional crypto trading platforms and apps. As loyalty currency is already a digital currency, we believe it’s a pathway for more comfort in onboarding a crypto customer.
We’re also beginning to see NFTs being incorporated into brand programs, most recently Nike’s and Starbucks’. Although this may take more time to catch on, I think this is an area to watch, as more experimentation unfolds leading up to 2024.
Privacy, both from a growing number of states who are pressing legislation and from a corporate steward perspective , is gaining ground. How should brands consider their approach to privacy (state by state, region by region or the most restrictive covenants approach)?
Gordon: It’s important that brands obtain consent, as it provides customers with transparency, control, and choice over how their data is used. There should be no mystery around privacy and brands should be respectful of their customers’ personal information.
What challenges do you see with current customer loyalty offerings?
Gordon: The environment is changing at such a rapid pace and consumers are constantly being exposed to new technologies in their personal lives. As a practitioner, it can be hard to understand and differentiate what is worth applying versus what’s simply a technology fad.
Emerging out of COVID, the proliferation of loyalty program enrollment continued to grow. Overall management and value distribution has become more challenging. There are a lot of rewards to manage, and consumers are now demanding stacked promotions and offers on top of the base loyalty offerings. It’s challenging for brands to balance all of this in the marketing and investment mix.
Overall, it’s important to recognize that loyalty programs have to balance a number of sometimes competing factors. The good news is there are a number of ways to build your program and align it to multiple priorities.
There is a move to more “real-time interactions,” especially within some industries, but there are challenges with integrations and bringing together different technologies within the loyalty program. What advice would you give to brands who are considering this move to more real-time?
Gordon: Brands looking to incorporate real-time interactions should look toward their journey orchestrations. Data can offer the ability to sense what customers' objectives are and what they are intending to do on their journeys. This can help convert customers while nurturing them throughout the process.
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