Evolving customer behavior in recent years has highlighted the need for a future-driven approach while building a loyalty program. My company specializes in loyalty program management, as do many others. In this piece, I’ll draw from my experience to explain how changing consumer expectations are compelling global brands to transform their loyalty programs into data-driven, agile solutions.
While market predictions vary, at least one source predicts that the global loyalty management industry will grow from $8.2 billion in 2021 to $18.2 billion by 2026. This clearly reflects that loyalty programs are going to evolve and increase in importance in the coming years.
Today’s customers are empowered with technology and information. Companies must approach their loyalty programs to match customer expectations. Loyalty programs work best when the data, technology and strategy work in tandem.
Deep data analytics, a robust technology platform and a strategic loyalty approach are three essentials to make sure company loyalty programs are ready for the future. Let’s elaborate on the relevance and importance of these factors.
Transformation Essential No. 1: Data Analytics
Data has always been the cornerstone of loyalty programs. But, moving forward, the precision with which brands harness this data will define the success of loyalty programs.
Today, data is helping marketing leaders make informed decisions and get the maximum ROI from marketing campaigns. Everybody has the data, but not everyone has the data analytics infrastructure. Here are vital aspects of a next-generation loyalty program driven by data analytics.
- Initial Discovery: Identify the different customer touchpoints of your loyalty program. When you know where the data is coming from, it becomes easier to unify it. Furthermore, a unified data model means easy access to valuable insights for informed decision-making.
- Data-Driven Program Design: Understand the current customer behavior and their purchase journey. What behaviors are indicative of a higher lifetime value versus a customer who is about to leave you? How can you predict customer behavior and reward them accordingly? It is vital to have a deep understanding of your customer base for a loyalty program to be effective. Let data be the hero of the program, and you dramatically reduce the chances of failure.
- Financial Modeling: A loyalty program that is overly aggressive will cost you money, and an overly conservative program will leave money on the table. You need to find the “Goldilocks” model for your program to get it just right. Creating a financial model to understand the cost, expected benefits, breakage rate, liability and other factors is important to make sure your loyalty program doesn’t become a cost center.
- Metrics And KPI Benchmarking: Loyalty programs can help improve customer retention, purchase frequency, average order value, engagement, advocacy, lifetime value, etc. But first, you need to define your objectives. Then, identify the related key performance indicators (KPIs) and benchmark them. KPIs should be measurable, meaningful and strategically directed. Measure these KPIs obsessively to make sure your loyalty program is working as expected.
- Customer Segmentation And Personalization: Personalized rewards are the biggest catalysts for strong customer-brand relationships. Most loyalty programs treat all customers the same. This is a big mistake. You need to leverage machine learning models to identify various customer segments and customize the loyalty program to each segment.
Transformation Essential No. 2: Robust Technology Platform
Customers today expect seamless, real-time experiences from brands. Therefore, having a comprehensive set of features and a robust tech platform has become inevitable.
Future-ready loyalty programs should have the following features:
- Omnichannel Customer Experience: A customer finds the product online, buys it from the store, publishes reviews on the website, chats with brand representatives for support and talks about it with friends on social media—this has become a standard customer journey. Brands should strive to deliver a seamless rewards experience across all channels. Omnichannel marketing is not a luxury today; it’s a necessity.
- Architecture: Modern loyalty programs often go for headless architecture, which offers incredible flexibility to deliver a smooth customer experience by decoupling back-end layers from the front-end. In addition, APIs and integrations make loyalty programs easily accessible to customers.
- Customization And Scalability: Customers love to connect with brands that offer unique experiences. When you design your own loyalty program, your brand can create such customer-centric experiences. Customizability also allows brands to scale loyalty programs as needed.
- Privacy Concerns: Privacy regulations have been getting stricter across the globe. Customers are concerned about the use of their data. Brands need to win customers’ trust with clear communication about data privacy, assuring customers about the efforts taken to safeguard their data.
Transformation Essential No. 3: Strategic Approach
There is no universal playbook for loyalty programs with answers for every market scenario. The only way to success is to keep adapting and evolving. A strategic approach involves a holistic view of loyalty, spanning from transactional to emotional.
From setting goals and budgets to understanding the buying behavior of existing customers, your strategy lays the foundation for a world-class loyalty program.
- Launch Plan: The launch plan is an opportunity for a brand to refresh its relationship with customers. A good plan considers the market scenario, customer demographics and customer feedback as anchors for improvement.
- Best Practices: The literature is saturated with best practices and trends for loyalty programs, but these could be entirely irrelevant to your brand. A strategic perspective helps a brand navigate through the best practices that matter.
- Analysis And Insights: Analysis equips marketers with actionable insights for making decisions. These insights help identify the precise method for devising strategies.
Final Thoughts
To make loyalty programs for now, new and next experiences, brands should have a strategic approach built on an integrated technology platform and supported with real-time data intelligence. These key imperatives are the building blocks for the next wave of loyalty programs. In my 10+ years of empowering global brands to launch memorable loyalty programs, I have found these essentials consistent across all companies. It’s time to gear up and build strong customer relationships.
Source: Forbes.com
