Beyond the box: Relationship marketing as loyalty

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Mar 18, 2015
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Through a special arrangement, presented here for discussion is a summary of a current article from the rDialogue blog.

Traditionally, loyalty has fit in a nice little box. It’s a program that you join, with steps you take to earn rewards, and then rewards you can redeem. In recent years, that box has gotten a little larger, with a few new bows on the outside. Brands like Walgreens and Kimpton are rewarding customers for purchasing and non-purchasing activities. North Face and Nordstrom have experiential rewards tied tightly to their brands. Programs like Steelers Nation Unite and Panera Rewards have surprise & delight components.

But there’s further to go. Loyalty should evolve beyond the box — to blur the line between loyalty vs. relationship marketing, and acquisition vs. customer marketing to simply become customer strategy and customer centricity. That’s a big vision, but a reasonable, attainable vision. Disney is one brand acting on this vision today, with fluid, data-driven engagement (rather than programs) via its Magic Band that gives the customer a voice in their brand journey.

Getting started requires thinking a bit outside the box:

Step 1: Mobilize your organization around the mission of an enhanced customer strategy. Executive ownership and support is critical.

Step 2: Create a broader definition of "customer" for your brand, not just someone who buys or even opts in. Your most loyal customer may buy aggressively in one channel, but only look like an opt-in in another.

Step 3: Create a broader definition of customer value, beyond purchasing. A customer that buys two times a year may be more loyal and will purchase for more years than someone who bought four times in one year.

Step 4: Get smart about your customers through segmentation that goes beyond the typical spend, demographics, psychographic analysis, to include how they buy, how they think, feel, make decisions, and what they like beyond your brand.

Step 5: Build journey maps for those segments that lead to purchases, engagement, habit, commitment, and loyalty. Recognize that the path to loyalty isn’t a linear process, so give your journey maps room to wander, just like consumers are likely to do.

Step 6: Create strategies and tactical marketing initiatives to act upon these. Start at the beginning of the relationship. Branding and anonymous marketing begin the relationship and should lead to opt-in that enables nurture campaigns — which leads to relationship marketing which leads to loyalty marketing and so on.

Looking out two to three years, we believe the line between loyalty and other marketing capabilities will blur, moving toward true, authentic customer marketing. Clearly, it’s more complex than a six-step program. The tools, data and technology are there for us to move on this vision now, to meet the customers where they are in their journey, nurturing and recognizing loyalty from their perspective. The loyalty leaders will move there.

Do you see loyalty becoming much less transactional (i.e., simply rewarding purchases) and shifting more towards relationship building? What challenges do you see in getting there? What step or hurdle may be missing from the article?

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18 Comments on "Beyond the box: Relationship marketing as loyalty"


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Max Goldberg
Guest
5 years 4 months ago

Why can’t loyalty programs reward purchases and build relationships? Companies are in business to make money. To accomplish that goal they need to build relationships with consumers. The deeper the relationship, the more loyal the customer. Relationships can be built on a brand promise, from experience interacting with the brand or making customers’ lives better. The hurdle most companies face is making their loyalty programs relevant to consumers’ lives. Too many loyalty programs are based on getting points that consumers rarely redeem. If retailers want loyalty, they must get personal.

Marge Laney
Guest
5 years 4 months ago

The omni-channel platform is the perfect stage for relationship-building loyalty programs. According to Accenture 88 percent of consumers do research online prior to going to a store to complete their purchase. Their online activity is loaded with information about their interests and preferences and ultimately tells the story of why they are in the store.

This important information should be available to store associates for them to serve the individual customer in a meaningful way. As an associate, there is no better way to engage and build loyalty than having information in their hands about why a customer has come to the store.

Tony Orlando
Guest
5 years 4 months ago
Loyalty programs can be simple or downright frustrating, and I choose simple for my customers. I have spoken to many of my customers this year, letting them know that we are increasing our social media program. Almost every person I spoke with told me to keep doing what I’m doing and always keep it simple, as they do no like jumping through hoops to save 10 cents. In my industry, savings on key items and stock up deals on meats are winners, and we give a $2 off coupon at the bottom of our receipt when anyone spends $50 on meats, which they can redeem on their next purchase of $50 in meats. Sounds simple but it works, and we will continue to offer great deals for everyone to get, without being a gold star or diamond star customer. I understand the personalization of offers for other retailers, and I am all for it, but every sector of retail needs to look at their customers in a way to attract as many of them back… Read more »
Kelly Tackett
Guest
5 years 4 months ago

For companies to truly reap the greatest rewards from loyalty programs, they must move away from only the transactional to incorporate shopper engagement. Most loyalty programs today have a price focus and aren’t a true loyalty driver with today’s promiscuous shoppers. Likewise, loyalty programs aren’t the only way to gain insight into shopper behavior (in-store and online) and purchase history, but they can be very complex and expensive to operate. From both an ROI and engagement perspective, loyalty programs must deliver instant value and relevant rewards in real time (e.g., personalized offers pinged to a shopper’s smartphone upon entering a store). The challenge to implementation, though, is real and requires collaboration across many teams (marketing, digital, customer insights) that in many cases currently work in silos.

Camille P. Schuster, PhD.
Guest
5 years 4 months ago

In terms of effectiveness, relationships are more effective for loyalty marketing. The hurdle? The work to get there. Collecting data across all channels, integrating it, associating all data across all channels with the same consumer and analyzing from different perspectives (amount of purchase, times of visit, seasonality of purchases, influence over others) is a huge challenge. Some companies will get there and find it to be very successful. When other companies see the value and decide to follow the approach, they will be shocked to find how long it takes to get there. Any company that thinks it would be a valuable approach or that has a competitor working toward this goal needs to get started today. The preparation will take several years.

Ed Rosenbaum
Guest
5 years 4 months ago

Retail thinking is like the old story about turning the Queen Elizabeth luxury liner around. It takes time. This is exactly that. Loyalty is a part of building relationships. In many ways, an important part. Loyalty has to be built and relationships can develop. Like a plant. relationships grow when the seeds are nourished. Once relationships are built trust is developed. Once trust is in place confidence is strong enough to know one can go to that retailer (maybe only that store) for any or all their needs. That makes the register ring.

Ryan Mathews
Guest
5 years 4 months ago

At this point it stops being about loyalty and starts being about engagement. I’d like us to purge the word “loyalty” from our retailer vocabularies since it’s so tied to discounting we may never be able to redeem it at this point.

To me, the real challenge centers around the notion of privacy.

How creeped out are consumers willing to get in order to have a better relationship with people trying to sell them? How many of their little secrets are they willing to share? I don’t know, and I suspect nobody really knows.

As privacy concerns increase will we see regulation to block the technological interfaces that give sellers the kind of information to build the brave new order of customer loyalty plans? That, for me, is the real question.

Kai Clarke
Guest
5 years 4 months ago

Becoming less transactional requires even more thinking “outside of the box,” since loyalty really requires a reward. The article seems to be missing out on the basics of what makes loyalty successful (i.e., bringing back the consumer for continued purchases) above all else. However, the article is spot on when it hints that we have the tools, data and technology all there, if we only decide to use them.

Francesca Nicasio
Guest
Francesca Nicasio
5 years 4 months ago

Loyalty programs are definitely moving away from the transactional “points for purchases” model. Forward-thinking retailers are learning that they need to implement initiatives that bring about genuine loyalty and foster real relationships. Such initiatives include surprising and delighting shoppers, offering experiential perks and most importantly, giving personalized rewards and experiences.

The challenge (for the third item in particular) lies in the implementation. In order to personalize the shopping experience of modern, omni-channel consumers, retailers must have a tightly-integrated system that allows them to gather data, track behavior and engage customers across various channels and devices. Retailers must be able to “remember” shoppers as they move about different channels and then tailor their approach accordingly.

There’s also the fact that cultivating great relationships takes time. It sounds trite, but relationships really are built on trust, and merchants must invest the necessary time and resources to get shoppers to know, like and trust them.

Robert Hilarides
Guest
5 years 4 months ago
Loyalty has always been the holy grail for marketers, and the source of extraordinary profitability. It’s easier said than done, however, and often marketers look to follow what’s working elsewhere. Too often the orientation of “thought leaders” is that the only way to achieve loyalty is by leveraging what’s new…big data, personalization, customer experience, etc. This is sexy stuff that makes us marketers feel like we’re on the leading edge. The reality is pretty simple, though, going back to Michael Porter and understanding your point of difference, who your customers are and how can and do fit into your their lives. For an upscale boutique, it may be all about service and making the customer feel beautiful, for Trader Joe’s it may be about discovery and the shopping experience, and for other retailers it may still be driven by price. There’s nothing wrong a price leadership positioning if you’ve got the cost infrastructure to support it. Just as one size didn’t fit all with the old grocery Frequent Shopper Card price discount programs, for many… Read more »
Martin Mehalchin
Guest
Martin Mehalchin
5 years 4 months ago

This shift is definitely happening. Disney is a good example and we have worked with T-Mobile on their integrated program. There are many challenges to deploying an effective integrated strategy. A few that we have seen brands encounter include:

  • Difficulty in accessing and structuring the data required to define customer value and construct meaningful segments
  • Personalizing experiences and content while also respecting privacy
  • Correctly calibrating the frequency and volume of messaging in an RM program

While these and other challenges are considerable, the payoff for surmounting them is well worth the effort. The high stakes here are why executive support and organization focus are so important to the success of a customer-centric strategy.

Ralph Jacobson
Guest
5 years 4 months ago
Loyalty has already changed. The traditional supermarket mass, untargeted, frequent shopper cards are the furthest thing from loyalty. We are actually beyond loyalty, I believe, moving toward a very relational connection to brands. Drastically changing consumer behavior fueled by disruptive technology, media fragmentation and increased availability of quality substitutes are just some of the forces disrupting the state of loyalty for retail and CPG brands. Brand loyalty as we know it has changed. Companies need a new way of understanding consumers, taking into account the rapidly changing parameters of consumer-brand engagement. Now, brand enthusiasm is a more accurate way for brands to understand and cater to consumers. There are several type of brand-aligned consumers that have differing obstacles to overcome in order to capture their true loyalty. Brand Enthusiasts have a high emotional connection with brands and a higher willingness to pay for products with premium features (for example, greater health and wellness benefits). There are are consumers with overall positive views toward brands, but they are somewhat reluctant to engage. This obstacle can be… Read more »
Lee Kent
Guest
5 years 4 months ago

Today is my day to take on the word “Marketing.”

Loyalty is a result of providing customer touchpoint experiences that meet the customer’s expectations and encourages them to complete their path to purchase.

We start by throwing out the old segmentation approach. If you take a look at each consumers preferred path to purchase, one consumer no longer fits neatly into any one specific segment. Hey I’m a boomer, but I’m also a geek. Give me gadgets and let me interact with machines instead of people and I’m happy. (On my shopping journey, that is). How in the world can you try to treat me like a segment? Which one?

It’s path to purchase baby, and that means identifying touchpoints and creating interactions that keep me moving, not selling opportunities.

And that is my 2 cents!

James Tenser
Guest
5 years 4 months ago

Very glad to see frequency programs addressed here from varied perspectives appropriate to different types of retailing. Miles may work nicely for airlines and credit cards, but points don’t seem to apply for supermarkets. Experiential rewards seem like a great idea for an outdoor sports retailer, but discount offers may be more effective for a beverage superstore.

It’s worth remembering that the promise of benefits is the currency retailers use to persuade shoppers to opt in to the program. The relationship comes after numerous interactions that must be carefully designed to deliver useful value (monetary and service) and build interest and trust.

Like Ryan, I’d shed no tears if the word “loyalty” was purged from our vocabulary, but I think the privacy issue is more subtle. We willingly exchange some personal information for better value and service. That puts a great burden of responsibility on the retailer, however, to ensure proper use and protection of the accrued data. As in any true relationship, friends protect their friends.

Marc Millstein
Guest
Marc Millstein
5 years 4 months ago

Loyalty has to evolve well beyond a transitional system of rewards if that term is going to stand for better and longer lasting bonds (and sales/profits) with shoppers. What is so needed is engagement, better experience online and in the store, and execution on details so that all these factors shine a very positive light on the brand. A feeling. Retailers, I believe those attributes of a stronger shopping experience, combined with smarter reward programs, is the best way forward.

Joshua Tretakoff
Guest
Joshua Tretakoff
5 years 4 months ago
It’s funny to see the fear, uncertainty and doubt (FUD) expressed by so many companies on customer loyalty, and of all people, especially retailers. Retailers truly invented the idea of customer loyalty; long before we had the idea of “engagement” or “transactional,” the retailer focused on establishing a relationship with the customer, regardless whether he/she bought that day. Why? Simple math: customers had almost no barriers to spending their money for goods, so any retailer could sell them. It was simply if the products they like were there, and the price was reasonable. So, what we call engagement today became the differentiator. When looking at loyalty, the more that companies can move away from the tactical (“we need a points program”) and more toward the customer lifecycle, the less we focus on the word “loyalty” and more about the solid, foundational growth. Here’s a good way to see if your company’s loyalty focus is in alignment: who at your company is in charge of customer loyalty? Most companies can’t name that person, and if they… Read more »
Bill Hanifin
Guest
5 years 4 months ago

The article resonates with me as we have been describing what we do as being problem solvers for clients. Once we understand the goals and objectives at hand, we can work through a methodology to prepare a data-driven strategy to create what we like to call a “customer strategy.” So Phil is right on!

That customer strategy can take many forms in execution and a points based loyalty program is only one of the options. The debate about nomenclature is already a little tired, and smart thinkers like Phil and the people commenting on this string understand that a more holistic approach is required to help clients reach their goals and objectives, delighting customers in the process.

Interesting that today’s announcement of an Amex coalition program with Exxon Mobile, Macy’s, ATT and others is purely points and transaction based.

Bryan Pearson
Guest
5 years 4 months ago
Traditional, transaction based loyalty programs have enjoyed success with the “points and prizes” based model, however, recent data has shown that customers value experiences, expert sessions, and interactions with the brands as well. A recent LoyaltyOne survey indicated that a session with a chef or nutritionist would motivate 69% of consumers to shop more with a grocer offering the session. The same survey showed that millennials, in particular, are very interested in experiences. In fact, 84% of millennials said that an in-store session with a chef would prompt them to shop more with a favorite grocer. As the millennials segment comes into its full purchasing power, marketers will be wise to look to what millennials value most when structuring a program. Loyalty challenges that are most often overlooked by brands include the responsible use of data, and making sure offers are relevant to the target consumer. These are key parts of any successful program. As programs and technology change, marketers have access to a variety of data on their customers’ lifestyles. If this data is… Read more »
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