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Rick Ferguson, CLMP
Through a special arrangement, presented here for discussion is a summary of a current article from The Wise Marketer, a website and newsletter serving the global loyalty industry.
After all the hand-wringing over the gap between customer expectations of personalized experience versus the capacity to deliver, it’s both heartening and vexing to hear Neiman Marcus’ VP of customer insight and analytics, Jeff Rosenfeld, call personalization "the new loyalty.”
“Great personalization helps drives a virtuous cycle of loyalty in which the customer is engaged, provides data that improves the personalization further, which increases customer engagement, and so on,” Mr. Rosenfeld told CMO.
He’s also right in describing the traditional model of “spend-and-earn” loyalty programs as outdated in an era in which customers expect tailored experiences across every channel.
Mr. Rosenfeld added, “Traditional loyalty programs have gotten a bit stale. … Personalization improves the experience by making the entire journey, from initial exploration through post purchase, much easier. We like to call it ‘friction reduction.’”
Friction reduction to improve the customer experience: yes, please!
Yet without inferring too much, we could extrapolate this line of thinking to conclude that, once AI and machine learning are able to deliver personalization to every customer at scale, a formal loyalty program is no longer needed. Time is the new loyalty currency.
Yet the three foundational relationship elements in building loyalty are: Trust, Commitment and Reciprocity.
Personalization holds strong potential to engender commitment as well as trust — absent the security breaches.
Personalization alone, however, does not foster reciprocity. By providing the same level of personalization to every customer, you spread the cost of that personalization across your entire customer base, from your most valuable to your least valuable customers. If high-value or high-potential customers don’t perceive they’re getting something “extra” for their loyal behavior, there’s no incentive for them to change their behavior by buying more, shopping more often, and referring their friends — and all you’ve accomplished with your personalization efforts is to raise your cost of doing business.
For strong relationships to form, your best customers — those with the most current or potential value — must see reciprocity for their behavior in the form of economic rewards and recognition of their status as high-value customers.