Segmentation and Personalization Continue to Grow in Customer Loyalty

By segmenting customer data, companies are able to understand more about their end customers and their purchasing patterns. From there, it is easier to personalize loyalty programs down to an individual level to provide targeted communications, offerings and recommendations.

Loyalty360 spoke with supplier members to discuss the topic of segmentation and personalization, and the effects they have on customer loyalty.

Changing the Standard of Personalization in Customer Loyalty
Over the past several years, brands have witnessed the evolution of personalization in their loyalty efforts, and anticipate how they will further meet those challenges in the upcoming years. When it comes to personalization, customers are no longer satisfied with relevant communication - they expect their offers and rewards to be custom-tailored to their preferences.

At Iris, the company has seen smaller scale tailoring as accepted personalization, such as addressing a customer by name in email communications, though the aspiration to tailor content to specific interests has not changed. Says Dominik Von Jan, Executive Strategy Director, “As intentionally shared first-party data about users becomes richer over time, we will likely see closer, more specific matching of content and creative to audiences’ interests.”

Iris Director of Strategic Analytics, Jordan Hiller, adds, “Introduction of near-real-time CDPs have supported the growth of personalization through first-party data sources. Moving from third-party to first-party data to prepare for a cookie-less world has spearheaded the growth.”

Brands have moved from traditional direct response personalization, like email and SMS, and have expanded to digital experience personalization, connecting the end-to-end customer journey. Personalization is the expectation of a brand's digital experience. Consumers have allowed selection to occur through an algorithmic approach as analysis paralysis and time to choose have increased.

Tim Glomb, of Cheetah Digital, says, “Personalization wasn’t really living up to its definition until recently. Pulling a first name into an email or at the top corner of an app was nice, but the content and experience for many consumers were the same.”

Variations in messaging, offers and content are still delivered in bulk to a large number of people as a group and the truly dynamic delivery of personalized content on an individual level is growing, but not yet ubiquitous. The technology exists to deliver at a 1:1 level and consumers expect it today. Cheetah Digital’s Consumer Trends Index of 2022 noted that 74% of global consumers had a favorite brand because it treated them as an individual, which was a 110% increase from 2021 stats.

Antavo is seeing brands put more emphasis on personalized and experiential rewards, such as early access, members-only events and priority customer service. According to their research published in the Global Customer Loyalty Report 2022, 48.3% of brands confirmed that they plan to offer personalized rewards and offers in the next three years.

Adds Attila Kecsmar, CEO and Co-founder, of Antavo, “Personalization is already strongly represented in the current loyalty program landscape, but the trend will be even more prevalent in the future, as many current program owners plan to introduce personalization in the future.”

The Stages of Personalization are as Varied as the Brands
Personalization can be utilized by brands of all sizes to offer more customized programs to their customers, and the scale is as varied as the businesses themselves.

Cheetah Digital commissioned a study in early 2021 with 387 brand marketers to gauge their personalization capabilities. The data revealed that 48.3% agreed personalization was extremely important to their 2022 marketing efforts, yet 68% planned to only customize content, offers or ads to segments or groups of consumers. Furthermore, only 3.6% said they had the technology to truly personalize marketing efforts. 

Explains Cheetah Digital’s Tim Glomb, “Technology exists to do so, but adoption is the reason for lackluster brand experiences.”

Iris sees that the trend is dependent on the industry, with e-commerce being further ahead with 1:1 personalization due to the vast amounts of first-party shopping data available.

Says Hiller, “Personalization has been easier to achieve across all business sizes. Larger companies have invested in in-house analytics and data science teams, expanding personalization efforts utilizing first-party data sources. Small companies have been able to integrate personalization communications at scale through a la carte platforms that are tailored for SMBs budgets.”

Antavo states companies offering a loyalty program selected personalization as the most important investment in loyalty in the coming years. “In fact,” says Kecsmar, “according to our Global Customer Loyalty Report 2022  29.3% of respondents reported that personalization was their most important investment in the coming years.”

Despite this, most loyalty program owners are in an early stage of introducing a personalized experience. Some brands are ahead of the curve, while others are at the stage of laying down the foundation for the data strategy and segmentation necessary to execute personalization.

Iris states that the scale of advanced vs early stage personalization is wide, from responding to publicly available data (e.g. name and address) to digitally tracked behaviors (e.g. web and social visits) to multi-source shopping behaviors (e.g. purchases at multiple stores) to addressing psychological preferences (colors, tonality, mental state).

Says Von Jan, “I see most brands still in the first third of personalization, leveraging public data and digital behaviors, due to the easier availability of that data. Cross-referencing data points and connecting multiple data sources and formats are still a rarity.”
Data Can’t Just Be Collected, It Must be Used Effectively
Zero and first-party data are essential for understanding customers’ needs and preferences on a personal level. In order to collect that data, however, brands needs to use a different approach than with second or third-part data.

Says Kecsmar, “To rise to this challenge, you need to gear your loyalty program towards not just collecting data, but also building your strategy around it.”

Von Jan agrees, stating that brands need to understand the different customer value levels and profile differences within their audience, and then evaluate the impact of different engagement treatments for the different audience cohorts. He adds, “Personalizing to every last individual is often not economical; therefore, finding that sweet spot of where personalization cost outweighs personalization benefits is crucial.”

Glomb suggests finding a supplier partner that can activate and maximize the use of data across the entire customer lifecycle and across multiple channels, saying, “Every seasoned brand marketer knows that a cobbled-together collection of vendors and technologies takes forever to implement and even more time to optimize. Talk to vendors that can deliver your CDP, ESP and Loyalty solution needs in one single platform first, and you’ll be well on your way to successfully building stronger relationships with your target audience.”

Adds Hiller, “Align personalization efforts to business outcomes. Test personalized experiences to determine the lift before a full rollout. Assess through a cost befits analysis to determine if the personalization was impactful enough for a full rollout.”

Moving to 1:1 personalization requires a deeper level of customer data that can be leveraged for experience targeting and personalization efforts. Companies should leverage deeper levels within data sets to find patterns at the customer level. An example would be utilizing Google Big Query to analyze Google Analytics data vs. using aggregated views in Google Analytics. By creating a personalization roadmap, brands can determine what can be completed tomorrow and what can be accomplished in a longer time period as business datasets mature.

Today’s Customer Loyalty Efforts Dependent on Personalization
Brand members stress that personalization and segmentation should play a significant role in today’s customer loyalty efforts.
Glomb agrees, sayingYou can’t foster loyalty when you treat an individual and their interactions with your brand as a group. Top-of-the-funnel marketing can still get away with segment and mass marketing tactics, but true loyalty must be recognized and rewarded at the individual level. Being able to communicate and reward someone based on their particular actions is how human interactions flourish, whether at work, school or in the home. Relationships are built one action at a time. This behavior and mentality is what loyalty strategies have to adopt to succeed against today’s consumer expectations.”
Stats from the Cheetah Digital Consumer Trends Index 2022 show that 74% of consumers want to be treated as an individual.
Cheetah Digital points out brands doing surprise and delight as well as added-value loyalty offerings, including American Airlines and retailers Salling, Bilka and Netto in Denmark.
Rob Fagnani, Co-Founder, at Formation says, “
Rather than thinking of personalization as a one-off tool to purchase, brands need to think holistically about how to personalize every interaction for their customers.
Fagnani adds, “Start with the most critical point first, and start building out a roadmap of how you’ll build a relationship with your customers via personalized offers and experiences. For example, a large omni-channel retailer that sells apparel moved from a traditional RFM segmentation to building audiences focused on key customer journey points, such as driving a second purchase and category activation in a high propensity category. By focusing on personalization and segmentation around specific journey points that drive value -- figuring out the optimal spend/reward to generate that second purchase or the optimal category and reward to entice activation -- the retailer was able to drive greater engagement and conversion versus traditionally built segments.”
At Iris, they believe personalization makes loyalty programs smarter in a near real-time fashion. Allowing to tailor offers, rewards, and digital experiences allows a brand opportunity to nudge its customer to drive incremental revenue, visits, etc.
Von Jan explains that a brand’s communications and efforts should be different for less loyal or infrequent customers than it is for highly loyal and frequent shoppers. For the former, brands need to deepen the relationship and build a steady level of interaction that isn’t overwhelming. For the latter, brands should start to capitalize on the relationship by incentivizing them to become ambassadors, while taking them onto the next level of interaction frequency.
Antavo says companies can create different segments based on a big and layered database. These segmented audiences can then be targeted with personalized communications and offered tailored rewards and experiences.

Kecsmar explains, “One of our clients launched its loyalty program with exclusivity and personalization in mind. The web experience they provide is unique for each customer: the available coupons for redemption change based on how many points members have. Email communication also depends on customer information: the higher a person’s tier, the more benefits they get in a birthday or brand anniversary email. The program uses data to personalize the customer experience both online and offline, as well as make communication more personalized and targeted. They use a machine learning algorithm that helps analyze loyalty member behavior and identify those at the risk of churning. They reach out, and try to re-engage them by offering benefits to get them back.”

Zero-Party Data, Gamification, Experiential Rewards Offer Significant Opportunities for Personalization
At Antavo, they see collecting zero-party data as key to a more relevant experience. With the help of a loyalty program, companies can grant loyalty points for zero-party while ensuring members receive experiential rewards in return. Modern customers love gamification because it breaks up the monotony of the digital experience they’ve come to know. Instead of asking a list of bland questions, gamified surveys present the questions in a more engaging manner, using visuals, sliders, and a more personal tone.

Kecsmar adds, “The future of loyalty programs seems to be well-defined. Besides continuous improvement, customer experience will be mostly focused on personalization. Personalization is or will be related both to well-known offer targeting as well as the targeting of inspirations. In particular, the second application is expected by customers and, if executed well, will play a major role in driving loyalty and developing customer habits.”

Hill states the significance of understanding the customer through a first-party data mindset before expanding to third-party and cookie-based sources. Defining gaps in first-party data can help determine where data collection needs to be expanded or whether third-party data can be leveraged for data enrichments.

Formation suggests brands focus on the ROI of their customer data and personalization efforts, and then prioritize the highest value opportunities for their business.

“With customer acquisition costs rising due to data privacy changes and digital ad costs soaring,” says Fagnani, “brands are investing more heavily in their first-party data and utilizing offers as a conversion mechanism to drive customer behavior and lifetime value.”

BCG recently reported a $70 billion annual revenue opportunity for brands that shift from mass promotions to personalization offers over the next three years. Many brands are already on this journey to make personalization a strategic advantage for their business. The brands that do not make this shift will likely lose share of wallet and loyalty from their customers.

Glomb emphasizes the ripple effect from the smallest action of a high value customer. The Cheetah Digital Consumer Trends Index 2022 showed a 45% increase year over year in consumers who simply want to be recognized by their favorite brands. There was a 33% increase in those who wanted to participate in a community around their favorite brand.

Glomb adds, “Recognizing the small interactions with triggered email, SMS or in-app notes is a huge driver of long-term loyalty, but it takes technology and a strategy to make these sometimes seemingly fleeting moments matter.”

KPIs and Benchmarks Measured Vary by Brand, Industry and Level of Personalization
KPIs may vary based on industry vertical and differences in B2C and B2B. B2C brands may focus their efforts on direct conversion lifts in sales, whereas B2B brands may look at a longer view that impacts brand awareness. Success can be measured by incremental lift in conversion KPIs, Attitudinal Results and NPS.

Says Hiller, “Personalization should support fixing a problem with digital experience. Allowing for testing opportunities will help your brand determine how a new personalization helps drive a lift in KPI performance.”

Says Kecsmar, “Measuring KPI for loyalty programs is a tricky subject, especially if it involves personalization. What customers should definitely track is the response: for instance, are they seeing increased customer activity (both transactional and non-transactional) following a personalized message or offer, compared to a non-personalized one? In this sense, having a tech infrastructure with sophisticated A/B testing and reporting capabilities is essential.”

Glomb suggests that the KPI every marketer should be watching are action based metrics. “Whether it’s an email button clicked, an app swipe or a new page load, watch what actions are being taken, including negative actions.”

At Cheetah Digital, they see upwards of 50% click actions in truly personalized emails that contain a unique, personalized subject line topic along with dynamic content within the email body. Bringing content to life, and relevant offers based on individual customer data, is a key differentiator for brands who have adopted a truly personalized content experience.

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