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GUEST COMMENT The evolution of customer loyalty schemes

Loyalty schemes are key to repeat sales and as such have evolved over time to become both more sophisticated and specific. The introduction of GDPR enables brands to increase their levels of personalisation, as the onus is now on the consumer to actually opt into what they’re interested in and specify how they want to be communicated with. In theory, this is ideal for personalised, rewarding experiences, but raises the question of what a good customer loyalty scheme looks like in today’s online retail environment.

Starting out

The first phase of any loyalty programme is typically a standard ‘earn and burn’ experience in which all customers get the same rewards. They spend, they earn points, and they all redeem them the same way and on the same things. Discounts, for example, or whatever the brand deems appropriate.

Unfortunately, this form of loyalty is easily forgotten. Customers don’t tend to remember how many loyalty points they have and what they’re able to spend them on. It’s also purely driven by transactions – customers are only rewarded once they’ve spent their money. But this is a very limited view of the modern approach to loyalty when you consider all the ways in which customers can interact with brands and the advocacy benefits that can be leveraged in return for rewards.

Yes, referral rewards are commonplace (“Intro a friend and receive…”) but why shouldn’t a customer earn points for promoting their favourite brand on social media, for example? A reward for retweets, loyalty points for likes…you get the idea.

More advanced loyalty programmes address this. They recognise the value of customer advocacy and are designed to unlock the potential of their customers’ online and offline social networks. They also reward customers and communicate with customers based on preferences to increase the chances of brand advocacy. These are tailored rewards based on what a customer likes and their current level in any given loyalty scheme, communicated in ways and at times that suit the customer, and therefore have a high probability of being received, read and redeemed.

Combined efforts

In order to reach the new gold standard of loyalty, brands need to work on two-way cross channel communications and their single customer view (SCV), while simultaneously rewarding for engagement and interaction.

Cross channel communications are about carrying the conversation on regardless of the channel. Offline purchase points being displayed in the brand’s app, for example, with the latest ways in which they can be spent. Or customer complaints on social being dealt with and then nullified with online rewards the next time the offended individual logs into their account.

Brands that crack cross channel loyalty, especially when the interaction starts on social, are able to deliver an incredibly rewarding experience that by its fairly rare nature encourages repeat business and high levels of advocacy.

Key to getting this right is the development of a SCV which requires the mixing of online and offline data buckets. This is a technical challenge, but customer data platforms (CDPs) are becoming more commonplace and help ease this headache. By their very nature, they also address the issue of data latency. A loyalty programme is only as good as its data and if it’s working with outdated information then it will struggle to provide the most appropriate rewards, or even calculate when and how a customer should receive loyalty benefits. Implementation of a CDP also means that if purchasing behaviour starts to change, both transactional and advocacy marketing efforts can keep up, enabling a brand to sell and reward as effectively as possible.

Rewarding for interaction is the final element of advanced loyalty programmes. Brands already reward for engagement – as discussed above, referrals and recommendations are recognised and commonly rewarded. Moving that on a step further involves differentiating rewards based on value or quantity of referrals.

However, rewarding for interaction is a non-transactional type of loyalty programme that high-end consumer brands like Abercrombie & Fitch are beginning to exploit. Interaction-focused loyalty programmes value customers’ time as much as their money and reward for behaviours like an interaction with a web property or an app for example. Other brands doing interaction loyalty well include cosmetic companies rewarding customers and/or prospects for completion of preference centre details: customers identify their favourite lipstick colour, hair dye and more, and are rewarded for their time and effort.

This works for everyone involved: the brand gets a fantastic marketing resource and their customers get personalised rewards in the shape of products and discounts that the company knows are perfect for them. This also fundamentally supports a brand’s loyalty efforts – without that kind of preference data your loyalty programme is typically reliant on transactional history. In a post-GDPR world, where it’s more difficult than ever to collect and store data in a compliant manner, brands need to recognise that exchange of personal data is in fact a transaction that should be rewarded.

Personalisation vs individualisation

Moving forward, with the increased adoption of CDPs in the retail sector, programmes will cease to be about personalisation and will instead focus on individualisation: instead of combining two or three data sets, individualisation will see SCVs consist of hundreds of data points, offered willingly by customers in return for personalised rewards – that’s the loyalty holy grail and the retail sector is leading the way.

Author: Jason Lark, managing director, Celerity

Image credit: Fotolia

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