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Part 1: The Evolution of Loyalty

Today's 'always on, always connected' customers have become much savvier and discriminating. Unsurprisingly, they have lost their appetite for loyalty programs that deliver irrelevant offers and rewards via the same-old, tired propositions and experiences. Although the retail industry has generally graduated to 'loyalty 2.0' – more personalized communications, coupons, and channels based on data and segmentation science – the majority of loyalty programs are simply not keeping pace with the needs and expectations of today's shopper.

Customers now have much higher expectations of how rewards programs use of their gift of personal information – ever more valuable benefits and "hyper-relevant" experiences where and when the Customer wants it. Hence, the next (and long overdue) evolution of loyalty must no longer limit its focus to earning and redeeming, but also on continual and active Customer engagement. The 'program' must become a 'conversation' that creates interactions throughout the whole Customer journey to better demonstrate the retailer's loyalty to the Customer, and thereby winning incremental loyalty in return.

Customer Needs and Expectations Have Raised the Bar

Customers expect their experience with a retailer to be fully integrated and seamless across touch points. Whether they are searching for product information, checking reward status, making an online purchase or browsing in the store, they want to be recognized and have their needs understood and reflected in the retailer's offerings and the personalized service provided. Their lives are so busy, retailers who make shopping easier will be rewarded. Convenience and ease are key – whether it's making relevant suggestions and offers based on past purchases, making access to the rewards program fully digital, or offering an app that provides information, offers and payment options at their fingertips.

The following graphic illustrates how some of these expectations are playing out:

What This Means for Loyalty Programs Today and Tomorrow

The importance of a loyalty approach over a loyalty ‘program’

We live in an "attention economy" – Customers are attracted to offerings and retailers that win their attention in an otherwise cluttered and confusing multichannel world. Retail growth (and indeed, retail survival in a non-growth market) comes down to who best attracts meaningful attention. It's almost as if there are two choices that retailers face: win attention by being cheaper or by being more personally relevant (for Customers, this can be translated as better service, selection, convenience, etc.).

Arguably, in today's multichannel, post-recession world, the decision is binary and any middle position is short-lived and profit-starved. Being cheaper means competing in a continual race to the bottom against every type of price competitor and disruptor. Being more relevant means understanding Customers better than others, resulting in the ability to deliver an experience that Customers personally value. And, it means being more loyal to Customers than others are. In this way, a loyalty approach powers the growth strategy.

To earn loyalty rather than be given loyalty – to think of loyalty as a relationship earned through ever-relevant shopping experiences, offers, and conversations – is an important and powerful distinction with significant implications for any organisation in the multichannel world. One view puts the responsibility to change on the organization itself, while the other presumes that the Customer owns the change journey (from less loyal to more so). Only the former approach has been proven to drive sustainable growth, measured in organic, like-for-like terms.

Earning more loyalty means earning more sales – one more item, one more visit, one more customer, and so on.

Therefore, the essential question is around which type of loyalty program – points, discounts, surprise and delight, experiences, etc. – will best enable the practice of a loyalty approach? In our experience, the answer depends on how willing the business is to use data and insights to truly change the experience for its Customers.

Loyalty Trends and Best Practices

Customers have redefined what "relevance" means to them, rewarding retailers who deliver value and experiences that best meet both transactional and emotional needs. Clearly, today's customers are saying that points and discounts alone are insufficient. The most successful and appreciated loyalty propositions in practice today are focused on responding to the following Customer needs:

1) Sharing – Socially enabled and connected, local, advocacy and reviews, C2C and C2B. Customers expect propositions that listen more than talk, and marketing communications that speak with / on behalf of (not to) them. Think of propositions that help create communities, enable influence, ideas and reviews, and which enable Customers to gift their rewards.

2) Digital – Seamless omni-channel experiences, mobile enablers and connections. Customers expect programs that recognize them with or without a card and offers / status whenever and wherever they want. Integrate payment and 'discover' options.

3) Experiential – Experiences that are entertaining, fun, interactive, disruptive (the concept of gamification fits here), and priceless. Customers expect rewards for activities above just dollars spent and authentic 'thank you' messaging. Think of experiences that gratify instantly, are priceless and disruptive, personalizing and human.

4) Control – Of the offer, of time, of promotions and privileges. Customers expect transparency, simplicity, and curated choice. Think of experiences that are easier to enjoy and eliminate hoops.

Stay tuned for Part 2 coming soon: Foundational principles for developing a brilliant loyalty strategy

This is the eighth 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.

1. Loyal to Customers

We start to act loyally to customers when we understand them to a level of detail that ensures that we remain responsive to changes in their behavior, relevant to ever-changing customer needs and rewarding in the way we treat customers.

Acting loyally is about adopting a loyalty mind set of managing customer segments as strategic business units (aligning with how we think about a category management strategy as managing categories as strategic business units). This context demands change that is both incremental and transformational—evolution, but with a bit of manageable revolution.

What customer loyalty is, and is not:

  • Acting loyally (responsive, relevant, rewarding) to our customers; not about customers being loyal to us
  • An overall approach throughout our business; not a proposition or program
  • Earning customer loyalty; not thinking that customers should become loyal
  • Collaborative partnerships to win customers together; not tolerant of internal conflict between areas of the business or with suppliers
  • Transparent; not opaque
  • Driving sales and cash margin; not customers being responsible for percent margin

2. Loyalty Approach vs. Loyalty Program

We demonstrate loyalty to our customers by taking a loyalty approach wherein we commit to rewarding and delighting our customers with products and experiences that meet their wants and needs.

  • We call this putting customers first—when we decide on priorities and actions based on insights from our customer data.
  • By doing so, a retailer becomes an even more prominent choice in the customer's consideration set. This is not a tactic; it is a long-term strategy that makes the customer the focal point of our business decisions and objectives.

The loyalty program is an important element within a loyalty approach, as the key source of the data that enables customer intelligence, and as the channel that enables us to talk to our customers personally. I call the loyalty program the "little l" in loyalty, with the loyalty approach as the "big L."

But a loyalty program is not required to act in a loyal way to customers. Here's how to think of "big L" loyalty:

A loyalty approach, simply put, embeds customer insight throughout the retail organization to enable better, faster decisions and thereby increase sales and profit sustainably. Best-in-class practitioners have seen an incremental sales uplift in the early stages of a loyalty approach of between 1% and 2% and later stages between 3% and 4%, quarter over quarter and year over year.

3. Loyalty Is About the Store, Not Just the CRM

As I used to say to my retail colleagues, "If the store is lousy but we deliver brilliant targeted CRM, the store will still be lousy."

Even if the personalized CRM is perfect, customers need to perceive that tangible changes have been made in the store itself before they will respond by giving more of their custom. We must put customer insights into action within the "hardwiring" of retail practices—pricing, promotion, assortment, adjacencies, new products, the checkout experience and so on.

In a previous article, I shared several examples of being loyal to customers in store by simply making the shopping experience easier—setting the yogurt section by customer need rather than by brand blocks, for example, and by setting product adjacencies according to how customers shop, rather than by how items are sourced in the supply chain.

3 Ways to Activate a True Loyalty Approach

  1. Make better business decision by putting the customer first. Everything is better when you start with the customer. Start with the data you hold on customers—understanding how they shop and behave, what is important to them and how they engage with your business. This insight will identify a number of opportunities for better decisions using the data.
  2. Improve the customer experience by using data-driven insights to improve your retail offering, such as assortment, pricing and promotions. Use insights to connect you to your customer through the store. Think of the mantra "data to insights to actions"—this is how improved like-for-like sales growth and customer loyalty is delivered.
  3. Transform the organization using customer-driven insight to help you better understand, anticipate, measure and continually respond to your customers. This is realized through empowering, aligning and equipping your people with relevant insights, values, goals, strategies and actions.

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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].

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