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Points are Passé: How Loyalty Programs Should Be Evolving to Better Delight Customers – Part 2


Part 2: Foundational principles for developing a brilliant loyalty strategy. View part 1 here.

The Evolution of Loyalty: Loyalty Programs are already changing

Technology has driven fundamental changes in Customer behavior and how they shop. Today, Customers search for products, seek thoughts and opinions of other Customers, and increasingly order and pay for items online and via apps. Customers are also commenting on social media and even playing online games to earn virtual rewards. Thus, retailers have increased opportunities to listen to Customers and connect with them to deliver added value and help meet their needs at every touch point. For example, we can recognize our loyal Customers and drive engagement by providing advice on wine pairings, for example, or thanking them for posting a review and surprising them with a personalized offer while they are shopping online. By tracking and rewarding interactions beyond spend, we obtain a deeper understanding of our Customers to build stronger relationships. It's about creating lasting connections through relevant rewards and experiences where and when Customers want them.

The evolution is already underway, and the 'table stakes' have changed, as illustrated in this chart:

Foundational principles for developing a brilliant loyalty strategy

Below are principles to follow to develop a successful loyalty strategy:

What to Avoid

Although loyalty programs have been around a long time, many of them still have fundamental limitations.For some consumers the rewards are not worth the effort to participate in the program. For others, the requirements of participating are inconvenient, such as showing your card to earn points or getting paper versus digital rewards. If the proposition is too complex, busy Customers will just opt out. If reward thresholds are too high, it may take too long to earn a reward so Customers may just stop give up.Below are program pitfalls to avoid:

  • Low relevance for Customers
  • Low perception of generosity
  • Barriers across the Customer experience
  • Reward/tier thresholds that are too high
  • Developing a complex proposition which is difficult to understand
  • Treating the program just as a promotional tool
  • Having partners lack appeal or relevance
  • Requiring too much effort for the Customer to participate

A Look to the Future

Programs designed today should consider emerging trends to be relevant into the future. Below are my thoughts on what to expect:"Digital" and "omni-channel" are outdated termsBoth have been buzzwords in recent years, and with good reason. Customers own an average of 3.4 devices, and think of themselves, of course, as one person who just naturally integrates several modes of connection. Retailers and brands must recognize and interact with their Customers across all channels cohesively; 53% of Customers expect this right now, an expectation that grows exponentially every digital moment.Accordingly, a separate 'digital' or 'omni-channel' strategy is meaninglessBoth are elements of a larger Customer strategy, or as simple communication channels / executions within the loyalty or marketing strategy. Companies who have separate initiatives or departments focusing on digital or omni-channel are already almost hopelessly behind the curve. If your digital marketing strategy is different than your brand marketing strategy or your Customer Strategy, you are in big trouble.Also becoming outdated are "points"Points are becoming increasingly implicit within loyalty programs. Programs' messages should focus more on the actions and rewards, rather than the point process within the program. Lately, best practices are really recognition and engagement programs that use 'softer' or implicit points within a loyalty proposition. As members make purchases within these type of programs, they receive more interactions, benefits, offers, and insider access, and those are the desired payoffs.Companies are targeting Generation Z as they become more active CustomersGen Z is coming into the spending picture more now at ages 12-23. The interesting thing about this age group is that they have never known a world without technology, mobile, and social. They are more tech-savvy and tech-demanding than other age groups. This will advance the mobile trends we have already seen in recent years, and require companies to pay even closer attention to their behaviors as they define their shopping identities.Customers want companies to demonstrate a commitment to doing goodAlthough not typically viewed as a component of loyalty programs, consumers are increasingly aware of companies' corporate social responsibility and it influences their opinions of brands. Corporate responsibility and philanthropy are nothing new, but it is now being incorporated into loyalty programs. Many programs today include charitable actions in their messaging, and more importantly to directly impact Customers, are offering opportunities for Customers to participate in charitable elements.. One example, members can choose donations to a relevant cause as a reward option.Customers co-create their own experiencesPerhaps the most exciting and interesting concept, and one that Customers truly appreciate, is the opportunity for Customers to create their own experiences. Tesco's former BuyaPowa proposition put Customers in the role of pricing managers – the more wine they encouraged their friends to buy, the cheaper the price was per bottle for everyone. Walmart enlists Customers to be new product developers and then category managers, driving innovation in new products. Canadian Tire's Customer-driven 'Tested' panel are de facto quality control experts. Even the constitution of Iceland was rewritten by its citizens, who contributed their thoughts for a better society in a social media campaign.

Measuring the Success of Loyalty Programs

There are many ways to measure loyalty programs– diagnostic measures that evaluate how well the program is being executed. Do you have awareness, appeal, and participation? Is the program driving engagement and increased loyalty among members? Stay tuned for Part 3: Measuring the Success of Loyalty Programs.

This is the ninth in a series of LinkedIn articles from David Ciancio, advocating the voice of the customer in the highly competitive food-retail industry.

white and blue magnetic card

Photo by Avery Evans on Unsplash

Most companies attempting to drive customer loyalty fail miserably—and few so-called customer-centric companies generate sustainable customer loyalty that drives measurable business results. Why? Because they get three key principles completely wrong, right from the start:

  1. Loyalty is about the company acting loyally to its customers, not vice versa.
  2. It is about a loyalty approach, not a loyalty program.
  3. Loyalty is about the store, not only about the CRM.
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[This is the fourth in a series of articles advocating the voice of the Customer in the highly competitive food-retail industry. David Ciancio is Global Customer Strategist for dunnhumby, a pioneer in Customer data science, serving the world's most Customer-centric brands in a number of industries, including retail. David has 48 years experience in retail, 25 of which were in Store Management. He can be reached at].

Treating Customers differently based on their 'profitability' is counter-productive to building loyalty and toward creating a healthy retail Customer Experience.

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At the beginning of September – three months on from the previous wave and with supply chains stable and the changing nature of lockdowns – we wanted to revisit the Customer Pulse to see what, if anything, had changed. Below are some of the standout findings from this fourth tranche of research.

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In the decade since Richard Thaler and Cass Sunstein's Nudge: Improving Decisions About Health, Wealth and Happiness was published, nudge theory has enjoyed unprecedented success.

Predicated on the idea that individuals respond better to indirect suggestion than outright commands, nudge theory is commonly used as a way of subtly influencing our behaviour towards positive choices. The idea has gained such traction, in fact, that many governments around the world have created "nudge units" in a bid to tackle thorny issues like obesity and the climate emergency.

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Are you looking to increase your contactable Customer base? How much money are you losing on incorrectly identified Customer communications? Throughout our 30 years of big data experience working with clients across industries around the globe, we have found that maintaining contact through relevant Customer engagement is a crucial component of putting the Customer First.

Essential to preserving contact data is ensuring that you have the most up-to-date information from your Customers; not an easy task. On average, people in the United States will move an average of 12 times in their lifetime. United States Postal Service data indicates 14% of the population change addresses annually. As email contact has grown, it's important to note that, on average, 30% of people change their email addresses each year. This is driven by ISP or job changes, or just to stop being spammed. As people move away from home phones to primarily mobile devices, phone numbers are stabilizing as consumers maintain the same numbers through physical moves.

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Photo by Alex Motoc on Unsplash

Last March, when we realized the potential impact that COVID-19 might have on all aspects of our lives, dunnhumby launched a survey to understand how the virus would affect consumers food shopping habits. It was designed to help our clients better meet the needs of their Customers by seeing the impact of the virus through their customers eyes.

Little did we know at the time that one year later we would still be dealing with the impact Covid-19. This study presents the results of the sixth global wave of the study and the seventh wave for the United States. Other waves were conducted in March, April, May, July, September and November of 2020. This wave was conducted in February 2021.

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Retail leaders must objectively understand how their business currently considers Customers before trying to set a more Customer-centric direction and focus. There are some formal assessment methodologies, like dunnhumby's Retail Preference Index (RPI) and Customer Centricity Assessment (CCA), which offer detailed evaluations of a business' capabilities, strengths and weaknesses based on Customer perceptions (RPI) or global best practices (CCA).

The approach outlined below is not intended to replace these formal tools; rather, these observations are intended as a kind of 'toe in the water' to help retail leaders form early hypotheses and points of views. These are rules of thumb, heuristics culled from global experience. Later, leaders might use these observations to informally check progress from time to time as a way of assessing whether the "program in the stores matches the program in our heads".

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In the first episode of Customer First Radio, Dave Clements, Global Head of Retail for dunnhumbyand David Ciancio, Global Head of Grocery for dunnhumby kick off the series by discussing what it means to be a truly Customer First business, share which retailers and brands today embody a Customer First mindset, and examine how Customer First materialized during the pandemic with retailers.