Loyalty 360: 2017 State of the Industry Report

INTRODUCTION

The only constant in customer loyalty is its variability. With more technologies flooding the market than ever before, brands have been forced into investment strategies that require patience, mobility, and vast amounts of research in order to find the tools and partners necessary to provide customers with an engagement experience that serves as a foundation for future loyalty.

In the pursuit of just how the market stands at this moment, we went straight to the source: the esteemed members of Loyalty360, the association for customer loyalty.

From customer data, to internal alignment, to the ever-present challenge of measurability, the questions presented to our members exemplify some of the largest issues, conundrums, and opportunities faced in the market today. Through the responses of thought leaders across a variety of technology and service suppliers in the customer loyalty and CX industries, we’ve created a comprehensive snapshot of the ecosystem as it stands today.

Question 1:

How sophisticated are the customer experience and loyalty initiatives of brands today? From the beginning stages of considering a program, to the ability to assess and integrate an array of new technologies that create seamlessly connected programs, where do brands exist along this spectrum?

Brand sophistication ranges from very low or non existent, to very sophisticated when it comes to customer experience and loyalty. Some very large and well-known brands do not have a customer loyalty program that identifies high value versus low value customers. Historically their focus has been on broad based consumer marketing as opposed to developing information and programs for individual customers. These brands are having to shift dramatically due to the sophistication of their online-based competitors.

  • Halo Loyalty Thomas Patchin EVP, operations

 

Our research shows that brands have made great strides over the past year delivering on customer’s expectations in terms of integrating new technology. Specifically, our 2017 Mobile Loyalty Report found that 64 percent of brands reported an increase in loyalty program membership over the last year, and the majority cited the addition of mobile components as the biggest contributor to this increase.

  • 3Cinteractive Margie Kupfer VP, marketing

 

Rewards and incentives are a core part of most loyalty initiatives. For us, customer experience is also a priority when we develop our reward offerings, because that’s exactly what brands want for their target audiences.

Rewards and incentives should increase positive behaviors toward the brand and engagement and this means a user interface that equals a great experience. We’ve had great success integrating our technologies with the existing systems of our brand clients through our API, which allows clients to directly integrate and implement their application, loyalty platform, or procurement system without the disruption of existing system. This kind of seamless way to run loyalty programs is essential for brands to adequately track and implement initiatives along with all the other customer-facing outreach they are doing.

  • Virtual Incentives Jonathan Price CEO

 

The best programs and customer experiences contain communications that have an aha moment. That moment is when a brand is connecting emotionally with a customer, when a message resonates so completely with the needs and desires of a customer. Technology is table stakes, and most brands struggle with integration, which holds them back from breakthrough marketing. Without a clear understanding of customers, their needs, habits, and lifestyles, brands are merely guessing. Humans are bad at guessing. Beyond technology, there is a need for guided analysis such as segmentation, predictive technologies. The ability to interpret data in a way that guides the organization is critical.

The biggest constraint, however, is knowing what to do next. Personalization can be successful based on purchase habits and preferences, life stage events, lifestyles, and inferred needs. However, this type of marketing succeeds with lots of small wins, not many home runs. The industry today is not as sophisticated as it will be in five years as technology, learning, and creativity evolve.

  • Cogensia Brad Rukstales President & CEO

 

There are really varying degrees of sophistication when it comes to driving fully integrated experiences through the use of smart technology, personalized service, and relevant offers. At one end, there are brands that seek to be offer a full suite of products to keep pace with

marketplace expectations and generally encompass both offline and digital experiences. This me-too approach, while transactionally complete, may miss opportunities to provide seamless experiences, personalized offers, and relevant products. At the other end of the sophistication spectrum, you have brands striving to create holistic experiences across all channels, leveraging individual consumption patterns, real-time experience feedback, and intuition to propose offers that are highly relevant to the consumer.

In our experience, most brands are sensitive to the value personalized, highly relevant offers in their program but may have only partially optimized (against a channel or specific product). The short answer is that most brands currently operate somewhere along the spectrum between transactionally complete and fully optimized.

  • Montrose Travel Joe McClure President

There are some excellent loyalty initiatives. However, most companies are still struggling to put all the pieces together. They may have excellent communications but might not be able to segment their database effectively so that each segment gets the appropriate messaging. They may have

excellent segmenting but not the ability to offer the kinds of awards that each segment finds motivating. They may have put an excellent program in place five years ago but haven’t assessed or made any changes since it was introduced.

Customers today want it all…a great customer experience and a targeted loyalty program that rewards them with outstanding awards and valuable offers.

  • Harco Bill Termini Strategy and business development

Question 2:

Many brands struggle to create alignment between their customer loyalty efforts and their brand promise. Should all brands aspire to be the next Apple, or is it more beneficial for brands to understand their own unique brand identity, and define objectives/processes that align with that niche?

Brand promises can be a bit misleading. It’s rare that a brand’s self-image matches up to the customer’s view of them. Brand promises often get hijacked to try and control the customer. You can’t control them, but you can understand them. Loyalty needs to focus heavily on their customer’s feedback, behavior, and transactions. That’s the first building block to great loyalty programs.

  • Baesman Evan Magliocca brand marketing manager

 

I can safely say from my experience that a brand should most definitely stay true to its own unique brand promise. More and more consumers are looking for products that align with their own values and sensibilities, as well as word- of-mouth recommendations, and they are not shopping by brand name alone. This makes it more vital than ever that brands are authentic and deliver on their own identity to make important connections with their target markets. From a reward delivery standpoint, a primary research study we did last fall showed that many brand attributes can be reinforced – or undermined, depending on the brand identity – simply by the way loyalty incentives are delivered and positioned. For example, personalization of rewards affected the individual’s perception of the brand – most said this approach made the brand seem smart, unique and caring. There is definitely a strong link between loyalty efforts and brand perception.

  • Virtual Incentives Jonathan Price CEO

 

Brands that best meet the needs and desires of their chosen market will succeed. Those who know who their best customers are, what motivates them, and how their behavior is changing will continue to lead the pack. Having loyalty programs and other data capture mechanisms will help brands collect the data needed to define their market and core customer.

  • Cogensia Brad Rukstales President & CEO

 

Brands should align with their customers first – always. They need to stay true to what the customer values them as. Not every customer wants their brand to be the next Apple. Brands need to stay current and relevant in terms of how the customer wants to interact and transact with them – but that doesn’t always mean the leading edge. We’ve seen many brands go down when they tried to change against their core values.

  • 3Cinteractive Margie Kupfer VP, marketing

 

If you’ve worked, studied, talked about, or even taken a cursory glance at the marketing world in the last few years, you’ve no doubt encountered the words Big Data and the implications it brings. Brands are being flooded with data, and many are finding themselves unable to keep up with it using existing technology. The challenge, therefore, comes not in collecting more data but rather taking the data brands already have and making it easier to manage, analyze, and leverage to create actionable insight.

Question 3:

There is so much focus on customer data and around creating actionable insight now. How should brands be managing data in a way that is less complex, easier to understand, and more impactful?

 

Data is complex, but we tend to think about data through the wrong lens. The issue isn’t reducing the data points, it’s that most loyalty providers look like a deer in headlights when it comes to analytics. Brands need to find loyalty partners, not providers. They need to find an agency that has resources devoted to finding actionable insights from their data. So, reducing data doesn’t really solve the issue. In fact, we need to dig deeper. Finding an experienced partner that knows how to cultivate data into insights and strategies is what can solve the data problem.

  • Baesman Evan Magliocca brand marketing manager

 

Brands today are collecting a plethora of data about their consumers from social, web interactions, purchases, and more, but this data often exists in siloes. Many brands lack a single view of the consumer, which denies them a deeper understanding of their customer and results in them missing the mark when trying to reach the right consumers at the right time. Getting a 360 view of your consumers doesn’t need to be a challenge. If you do not have a dedicated in-house resource, consider partnering with a loyalty solution provider and leveraging technology that allows you to capture data on your customers across all channels. Using this insight, you can group your customers into segments and leverage predictive analytics. From here you can create personalized outreach to engage customers in the right channel, with the right message, at the right time.

  • CrowdTwist Emily Rudin Chief Customer Officer

 

Marketers that are thinking about strategy, goal-setting, messaging, and personalization need to organize their thinking around the customer. In a strategic sense, brands must know the five or six types of behavioral customer segments they have and track if they are growing relationships through the lens of their customer segments. At a more tactical level, core behaviors, such as product category purchasing, frequency, channel, daypart, and marketing responsiveness can be used to customize and personalize communications. However, there needs to be common definitions and data consolidation to make this manageable.

– Cogensia Brad Rukstales President & CEO

 

It’s nearly impossible to talk personalization without acknowledging Jeff Bezos’s $500 billion elephant in the room, Amazon. The company’s success is owed in no small part to its ability to understand its customers and market directly to their personal tastes. The flipside of this impeccable customer experience is the shift it’s created in consumer expectations. Because so many shoppers have become accustomed to the personalized experience found at the e-tail behemoth, the bar has been raised for all other brands to a level that is often unattainable. Amazon has set the standard for customer personalization, and brands are scrambling to react in a way that both fulfills the demands created by the Amazon Effect, while also retaining a distinct company identity. Our members weighed in on the challenge and how a loyalty program can provide more personalized experiences.

 

Question 4:

At the 2017 Loyalty Expo we heard a number of sessions reference the Amazon Effect in regard to personalization. What are the challenges and/or opportunities of creating this single view of the customer and building a more personalized experience for shoppers?

 

Amazon is a great example of the power of personalization. I’m sure many people, like me, have found and purchased great products in the Recommended for You section. Many loyalty programs have a tremendous amount of data from which they could also build similar forms of personalization. I expect that we’ll continue seeing more and more companies delivering customized offers that tie directly to individual customer preferences and desires. What we’re excited about is how a loyalty program can leverage to go one step further. Not only can they understand consumer preferences and desires, they can also quantify the future stream of revenue from members that take the offer. If you could accurately estimate the future revenue stream of each member over some horizon, it opens the door for more opportunities to invest in that member because you have a clearer view of what the payback could look like. This means better deals for the members, more loyalty, and a larger bottom line for the business.

– Willis Towers Watson Len Llaguno Senior consultant

 

The biggest challenges for a full customer view continue to be identity management (tracking someone through all channels, digital and offline), analytics, and creativity. Personalization today must go beyond the standard personalization engines that recommend products based on similar baskets or collaborative filtering and more into the underlying preferences that customers display in their relationship overall. The opportunities are huge when personalization is done right. We see increases of over 50 percent in open rates and click through rates with personalization, and in some cases a 5x increase in store purchases.

– Cogensia Brad Rukstales President & CEO

 

In our primary research study, we did quite a bit of digging into consumer perceptions surrounding personalization. One of the things we found was that among women (who still make 80 percent of household purchase decisions), personalized incentives increase perceptions that a company is ambitious, cool, caring, and informative. While this is a great way to stand out and engage consumers, there are also challenges. In our study, a small percentage also said that personalization did not resonate with them, so it is vital for brand’s to truly understand their target audience and their threshold levels for personalization. For our clients, we’ve had great success with personalization techniques in engaging and communicating with their audiences, whether they be consumers, employees, or even survey respondents.

– Virtual Incentives Jonathan Price CEO

 

“Personalization today must go beyond the standard personalization engines that recommend products based on similar baskets or collaborative filtering and more into the underlying preferences that customers display in their relationship overall”

 

As artificial intelligence (AI) continues to seep into nearly every part of our lives, it’s time for marketers to step back and explore how the technology can be leveraged within the context of customer experience and loyalty. Because of the consumer’s (and consequently, the industry’s) increasing demand for immediate convenience, AI may be the perfect solution for marketers to stay in lockstep with customer preferences and, in some cases, even anticipate future behavior.

Question 5:

What are some unique examples of how brands other than your own are leveraging new technologies like AI to drive customer experience/loyalty? How should brands be looking at AI in that regard, and how do you see the technology fitting into customer loyalty strategies moving forward?

 

Machine learning, AI, and predictive modeling are great ways to synthesize data into understanding a future potential outcome. This can be a big benefit, especially for complex brands with lots of products and variations. Understanding who is likely to do what is an advantage when building promotions as well. As data sources continue to grow, and integration is well managed through platforms, the companies that utilize this technology will see benefits, since the ability to anticipate customers’ needs will be stronger.

– Cogensia Brad Rukstales President & CEO

 

I’m seeing a lot of brands leveraging machine learning. Machine learning is a class of algorithms that learns from data over time and can make increasingly accurate predictions about the data sets. This helps brands go beyond what is possible for humans to detect, and find patterns and insights that were previously unknown. Marketers are applying this tactic to loyalty program data in order to make relevant offers and targeted promotions. Brands are using machine learning to optimize customers’ shopping cart experiences based on previous behaviors, map customer journeys that predict new shopper behaviors, and create look-alike audiences that resemble their best customer segments. Machine learning should be an integral component of any customer loyalty strategy moving forward. These algorithms can help to enhance the customer experience and build engagement by delivering personalized content and product recommendations which helps to boost customer satisfaction and drive sales.

– CrowdTwist Emily Rudin Chief Customer Officer

 

As data capture continues to get better and faster, machine learning will give us the ability to see new correlations between groups of data sets that we never could before, unearthing patterns and increasing our understanding of behaviors for significantly better customer experiences. We’ll be able to create a kind of recommendation engine based on past behavior instead of using artificially created sets of rules to determine program content and offers.

– Stellar Loyalty Narina Sippy CMO

 

Implementing a new tool, cracking a tough problem, or finally hearing positive reviews on a new marketing campaign is always encouraging for brands, but the reality is that without measurement, these improvements are little more than aimless blips on the timeline. Measurability is the key to spotting trends and plotting a roadmap moving forward. Our experts are in agreement that without solving the challenge of measurability, loyalty efforts lack a sense of direction.

 

Question 6:

What is the biggest challenge that your clients face today in creating measurable experiences to drive customer loyalty? How do you recommend they measure efficacy?

 

Accurately measuring lift from loyalty initiatives is very challenging because it requires the ability to measure an unobservable event. That is, it requires you to know what your members would have done in the absence of the loyalty program. If you know this, then you can compare it to what they actually did, and clearly see the impact. Of course, it’s impossible to observe this. Therefore, the best you can do is to create a proxy for the concept of lift. This is often done with some form of look-alike analysis or hold out/control testing. But this also has it challenges due to selection biases inherent in members that opt to join the program vs. those that don’t, even if by all other metrics they look similar. It’s even more challenging if you’re not able to track non-program members in a meaningful and consistent way. Many companies we spoke to at the Loyalty Expo were in this boat. Lift is absolutely an important metric to monitor, but given its challenges, it’s useful to have an additional financial metric available. Virtually all programs have enough data to build models to predict expected future revenue from individual members, say over a 24-month horizon. This can be a powerful metric to monitor, because when it’s increasing you know you’re increasing expected customer loyalty.

– Willis Towers Watson Len Llaguno Senior consultant

 

The biggest challenge our clients face is becoming the disruptor and not the disrupted in their industries. Customers want convenience and frictionless experiences, so brands need to look at the whole customer process and make it as simple and high-value for the customer as possible. This requires collecting and using data the right way and putting in place the right technology to keep your customer engagement programs relevant and nimble. At the end of the day, the customer experience is what drives measurable loyalty. If your customers are happy interacting with you, they will visit you more, spend more, and recommend you to others more. The ultimate measure of efficacy is revenue. If your program is not driving lasting revenue gains, then you need to take a hard look at where the ball is getting dropped along the customer experience line.

 

– Stellar Loyalty Narina Sippy CMO

 

After challenging our panel of members to discuss some of the trickiest topics in customer loyalty, our final question asked them to practice addition by subtraction: of all the opportunities for brands in the customer loyalty space, what is the single one you would recommend? The answers were interesting in that they illuminated not only the potential opportunities for brands but also which ones are being given top priority by technology suppliers.

Question 7:

What are the biggest opportunities for brands and marketers today? If you could recommend one thing to a client (or prospective client), what would it be?

 

Data shows that less than 30 percent of marketing budgets are allocated to customer retention. If we could recommend one thing to a client it would be to rethink this balance and be bold in investing in CRM, loyalty, and engagement marketing. The reality is that customers want to be loyal to their preferred brands but they often feel those same brands don’t know them or return their loyalty. Being bold means speed to action, testing, refining, and continually optimizing. Listen to your customers, identify opportunities to make an impression, then test and measure, refine and optimize. It might be as simple as providing digital coupons to shoppers for just the right products at just the right moments or sending an SMS text to remind a customer their favorite restaurant is just around the corner. You have to have the determination to do what’s right for your customer regardless of the way things have traditionally been done. Market evolution is happening at breakneck speed. The time is now to invest in your customers.

– Stellar Loyalty Narina Sippy CMO

 

In order to attract new customers and keep existing ones engaged, I’d advise brands to invest in a multichannel approach in your loyalty program. Keeping consumers loyal today requires more than just a simplistic spend and get program. Your customers want more. You need to be where your customers are, listen to what they have to say and become a part of the conversation. This strategy can help brands with the foundational work of integrating disparate data to form a holistic, data-centric view of their customers. From here you can drive better engagement by providing personalized customer experiences.

– CrowdTwist Emily Rudin Chief customer officer

 

The biggest challenge continues to be making sense of the data being captured and integrated. Experienced analysts know the right questions to ask and how to get the right answers to maximize marketing’s performance. Don’t skimp here. Some clients struggle with the organizational constraints on them in terms of ability to impact change. I believe that this will evolve over time, however.

– Cogensia Brad Rukstales President & CEO

 

Loyalty is in a state of evolution today, but it’s happening in fits and starts. Data is the driving force of most gains in the last five years and it continues to be that catalyst. Yet what many brands are realizing is most vendors aren’t set up to support those needs—it’s often “here’s a cool platform with lots of bells and whistles; be on your way.” Meanwhile brands are barebones on resources, they don’t have the bandwidth to cultivate data-driven strategies. So, the biggest opportunity is for brands to find better partners to help them evolve from last-generation programs and to match heightened customer expectations.

– Baesman Evan Magliocca Brand marketing manager

 

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