The Increasing Value of Customer Loyalty

Over the past 18 months, many brands say that their loyalty and engagement practices were put to the test as their customer’s shopping habits and expectations changed.

Those brands which had strong loyalty and engagement efforts point to their ability to utilize those direct-to-consumer relationships to pivot quickly in maintaining those connections and retaining their best customers.

With the stronger, more direct connection loyalty provides with the consumer, several industry experts Loyalty360 spoke with say brands will need those loyalty and customer experience strategies just as much moving forward – future-proofing their relationships with customers and remain strong and viable going forward.

More Engagement in Loyalty Programs

Richard Jones, Chief Marketing Officer of Cheetah Digital, says 36% of consumers polled in research his firm conducted recently are more likely to engage in loyalty programs this year than last. Further, Jones says the research showed there was a big lift from the year before.

“There’s no question that it’s a great time to be in loyalty,” he says. “Consumer attitudes show that there’s support for greater participation in loyalty programs.”

Kim Welther, Vice President at Baesman, says strong loyalty and engagement efforts are absolutely critical to a brand’s success.

“We’ve talked about the success of the past year, and loyalty is really our one place to give that personalized customer experience, recognizing at an individual level and turning those new customers into those existing, retained customers,” she says.

Loyalty Programs – Building Resiliency for The Enterprise

Guy Cierzan, Managing Partner at ICF Next, says loyalty has proven to save brands several times over the last few decades, whether it was post-911 or after the financial crisis in 2008.

“Obviously, most recently with the pandemic, it has proven to be a very resilient and highly valuable strategic asset for the enterprise,” he says.

Kate Atty, the Vice President of Marketing at Clutch, says the pandemic has undoubtedly caused many businesses to rethink their customer strategy and how they’ll drive their businesses forward.

She points to a Gartner survey this year which says 79% of brands will look to existing markets to fuel growth.

“This approach will require companies to make use of the data they already have, or find ways to capture, update and use it for more effective marketing to existing customers,” Atty says.

Providing Ways to Capture Data

Loyalty programs can provide a way to capture data, but Atty says that’s just part of the equation. In order to provide a meaningful connection to customers, they must go beyond the signup and continue to personalize and add value to the individual customer, she says. Otherwise, they are simply another marketing tactic and not a long-term strategy.

“For a loyalty program to achieve its goal of driving intended behaviors, it must be fueled by data in order to automate relevant interactions that drive value to customers and to brands,” Atty says.

Loyalty is not going anywhere, says Manoj Agarwal, Co-Founder and Chief Product/Marketing Officer for XOXOday, who adds that it was important three decades ago, it is important today, and it will continue to be important in the times to come.

“Loyalty exists on a fundamental tenet that all customers are not created equal. In order to maximize returns from loyalty, a company must give its best value to its best customers,” Agarwal says. “For instance, the customers who generate superior profits for a company should enjoy the benefits of that value creation. Therefore, they become more loyal and hence more profitable.”

Rate of Change is Proportional to Context

Consumer preference changes are taking place throughout, Agarwal says, and it is the last year that has proven that the rate of change is directly proportional to the context we are in. In coming times as well, he says, the basic principles of loyalty will hold true and will continue to hold important strategic value for any growing business.

“The only key thing to consider here: is your loyalty program in line with the changing consumer behavior? Does it share the value that is perceived valuable for your most profitable customers?” Agarwal says. “Customers prefer programs that have redemption based on - relevance, choice, aspirational value, and convenience.”

Rachel Bicking, Chief Digital Officer at Tenerity, suggests that developing a stronger relationship with customers in a post-cookie and privacy-first world will also be vital for brands.  Bicking says the value shifts to strengthening direct-to-consumer relationships and channels, such as a loyalty program, will be key to establishing and utilizing zero-party and first-party data.

“There are two critical trends that are impacting the way consumers consider their connection to brands, and they are privacy awareness and digital transformation,” Bicking says. “While the latter will enable brands to develop the direct-to-consumer relationship, the perception of digital surveillance represents a tremendous obstacle that brands will need surpass.”

Primary Mechanism to Establish Value Exchange

Loyalty will be the primary mechanism to establish a value exchange for consumers that will enable a direct connection without privacy fears, Bicking says, and adds that it is worth stressing loyalty and value here.

“If a brand is asking for a customer to share their data, then they will need to genuinely offer something useful in return; more than the existing brand promise,” she says. “Offering ubiquitous rewards, discounts or offers will unlikely be compelling. Consumers are demanding more personal and engaging rewards that are meaningful to them.”

It’s this extended value that makes people feel more connected and dependent on the brand, Bicking says, which makes them engage more regularly and generates additional interactions for brands to gain deeper insights that ultimately allows brands to serve them better with more personal offerings.

“In effect, engagement and loyalty programs become the value exchange between a brand and their customer,” she says.

Value Exchange Needs to Deepen

Baesman’s Welther agrees wholeheartedly that the value exchange needs to deepen.

“If we do loyalty right, it really is going to be easy to accomplish those things,” she says. “But the metrics are going to be important. We really need to watch it early and catch it before these customers are lost and make any changes in season.”

ICF Next’s Cierzan points to the accelerated evolution of many aspects of loyalty and engagement programs over the past 18 months, as things they expected to maybe take another five to 10 years for brands to see – the attraction and adoption especially – have happened through the course of the pandemic.

“Things like the adoption of frictionless types of technology, the embracing of the frictionless user experience, and really understanding that expectation from consumers,” Cierzan says. “I want to see that in the digital realm and in the physical realm. I want to see it omnichannel, and that’s my expectation. I think for us, we continue to see that; loyalty gets more and more experiential.”

Building More Direct-To-Consumer Relationships

Cheetah Digital’s Jones says it is important to pay heed when the Interactive Advertising Bureau comes out stating that all marketers and organizations need to be building more direct-to-consumer relationships, as they did earlier this year. The IAB also pointed to the need for marketers to think of a value exchange for the consumer, to incentivize the long-term sharing of data, long-term engagement, as well as long-term transactions.

“They have three pillars of what value exchange means, and loyalty programs are one of them,” Jones says. “There’s no question about it: loyalty is going to be the framework for that value exchange that every advertiser, every brand needs in order to build those direct-to-consumer engagements and relationships over time.”

He says privacy disruption means if brands don’t have that direct data relationship, they are going to be shut out of a lot of personalization they have been able to execute on in the past.

“It’s such a super important time to invest in loyalty,” Jones says.
Thank you to our Expert Panel:
Richard Jones is CMO at Cheetah Digital
Kim Welther is Vice President at Baesman
Guy Cierzan is Managing Partner at ICF Next
Kate Atty is VP of Marketing at Clutch
Rachel Bicking is Chief Digital Officer at Tenerity
Manoj Agarwal is Co-Founder and Chief Product/Marketing Officer at XOXOday

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