Mike Menzer, Head of International at Acxiom, shares some lessons from the pandemic about loyalty programmes.
How consumer behaviour and loyalty has changed during the pandemic
Consumer behaviours and preferences changed significantly during the pandemic; it's been estimated that 80 to 90% of people changed where they shop, how they shop, and what they buy. They also engaged in more digital and mobile shopping, with a greater focus on essentials than on luxury items.
However, the pandemic also had different effects on different customer cohorts; ‘baby boomers’ were not as badly impacted financially, so their behaviours didn't really change. On the other hand, millennials and gen-Z experienced some major effects; financially and professionally. Lastly, women were impacted differently than men, and given that women influence 70 to 80% of the buying decisions across all categories of goods, this is something brands should focus intently on.
Being personally relevant – show me you know me
Consumers have become more aware of the ways in which their data can be curated and used. For some, this led to a focus on privacy and a hesitation about allowing brands to collect their data without getting significant value in exchange. Others understood that brands could use their data to provide a better, more targeted service, combined with more personalised (and relevant) benefits from their loyalty programs.
However, there was so much change in consumer behaviour during the pandemic that a great reset took place and brands needed to reinvent its personalization approach. During the pandemic, brands saw changing patterns in the data, for example, the correlations between website engagement, email engagement, and subsequent purchase. Creating insights from these patterns allowed brands to make smarter choices about how to support customers along the purchase path and create longer-term, more valuable relationships.
At the same time, many brands had to reconsider how to build or rebuild their loyalty programmes for a post-pandemic world, especially as many customers were unable to either earn or redeem loyalty points, which made some of them question the underlying value proposition.
In addition, customer expectations have risen, and they have started to demand ‘show me you know me, you know that I’m a loyal customer; I want you to respect my choices and my preferences, show me you know me in a way that benefits me significantly’.
To do so requires establishing a dialogue with customers, taking the time to understand them and what they want, understanding their attitudes, motivations, and behaviours.
It also requires a recognition, knowing your customers in a way where a brand can start to develop the value propositions that will underpin its next generation loyalty program. They do so in the full knowledge that a relevant loyalty programme is an important part of the customer value equation.
Brands should therefore ask themselves ‘what knowledge and insights does the loyalty programme bring into the business? What will we learn about our customers that we wouldn't know without it?’ This then begs the following question: ‘how will these insights inform our strategy and tactics? How do they enable us to serve our customers better?’
In answering the above questions, brands can begin to differentiate themselves based on the value that they can add to the customer. Indeed, many surveys have concluded that people are willing to pay a premium price in exchange for a more personalised, relevant experience.
Helping people find their brands
As customers switched to online and mobile, there was a significant impact on the businesses that served them:
Firstly, there was an obvious shift in volume from physical channels to digital. Within banking, for example, 73% of consumers in the UK are using digital banking channels weekly, with a sharp rise in monthly use from 52 to 57% of people between H2 2019 and H1 2020, according to research from RFi Group. Not all businesses were as prepared as others; in many cases, the customer experience suffered, especially when compared to brands that were well established and polished in the digital sphere.
Secondly, these ‘new’ customers were joining the digital platforms for different reasons than their predecessors; perhaps not by choice, but by necessity. This meant that their expectations and behaviour was different to the existing online customers.
Thirdly, the digital marketplace is bigger, with global competitors, and to be found by search engines, brands had to describe themselves in generic terms; the same terms used by all their competitors. This leads to greater ‘commoditisation’ within a sector and fewer ways for brands to differentiate themselves.
However, businesses were able to capture and use new information about customers who they may have hitherto known very little about; in retail, for example, the previously in-store shoppers who were not members of a loyalty scheme. With an explosion of first-party data, with new loyalty members available, marketers started to seek ways to build knowledge and create new insights to become more relevant to customers and foster differentiation.
Brands also examined what their values and their ‘brand promise’ meant to customers at the individual level; what resonated with them, what they valued, and what role should the next generation loyalty programme play; for example, in rewarding customers for sharing their data with the brand. Customers too were looking for something more, such as ways to be part of a community, one where they see more personal alignment and value.
As we enter the ‘next normal’ there has never been a better time to update and modernise loyalty programmes. Customers know that the world changed, it changed for them personally, and they know that the world has changed for businesses too. Now is the time to experiment with, learn from, and prototype new drivers of loyalty by identifying the things that matter to customers.
Putting the Customer back into Customer Relationship Marketing
Goods and services are still the fundamental drivers of why people are shopping with some brands; they are looking for the goods they want and a simple effortless shopping experience. However, in a drive to remove effort (‘friction’) from shopping, it has often also meant losing ‘traction’; those moments of differentiation that engage and excite customers and form an important part of building loyalty.
This doesn’t mean that friction needs to be artificially reintroduced into the shopping experience. Brands should make the most of those moments where they are in a value-adding engagement (for example during the shipping journey or in dialogue with a chatbot) and of the mutual value a well-designed loyalty programme can bring.
No longer can brands rely on a simple ‘points mean prizes mechanism; rather they should be creating and building upon brand aspirations, the value-add, the sense of gaining a quality or exclusive product. For example, some brands offer great limited-edition products only for their loyal customers, they create clubs and communities so loyal customers can be part of that ‘get early access to a new, exclusive product’ experience. Compare this to a new customer acquisition-focused campaign, where the best deals are reserved for new customers and loyal customers often feel overlooked or taken for granted.
Another technique that can prove valuable is ‘gamification’; for example, using leader boards as a tactic to help create a sense of community, excitement, engagement, and accomplishment. Gamification can also generate additional insights into the customer mindset; what are their preferences and what rewards motivate them.
Marketers often talk about customer relationship marketing (CRM), particularly within the world of loyalty, and especially focussing on the relationship in CRM. There is a good reason for this; a brand’s relationship with its customers is impossible to reverse engineer or duplicate; it is built up over time and founded on the trust and value customers place on the brand. It is a valuable, but often underused asset that the brand already owns.
But there is also a need to think about the customer themselves and how to rebuild disenfranchised or lost relationships; to really think about how to create genuine empathy in communications that goes beyond the automation that martech routinely provides and how to put the customer back in the centre of the value equation.
Being ‘relevant’ means different things to different organisations, but here are four recommendations that brands should consider improving:
- Know your customer and recognise them across all the touchpoints, interactions, and buyer journey stages – for which multi-channel identity resolution and management are critically important.
- Build contextual relevance – knowledge and advanced insights created from new data types; for example, a loyalty programme can give another insight into what a customer cares about that can scale and support a better overall customer experience.
- Engage appropriately - across all communications and interactions, including the web experience, the app, the customer service centre, the store, the supply chain, even the loyalty programme benefits structure. This will require having and enacting a comprehensive customer engagement strategy
- Break down the silos - all too often even good loyalty programs fail to deliver their full potential value because the insights don’t travel across organizational barriers.
It is impossible to know a customer too well; or have too much information shared by them if it helps improve the value that each side gains from the relationship
Recently, Acxiom, together with Antavo and MullenLowe Profero held a panel discussion comparing the differences and similarities between the retail sectors in the UK and USA. Three industry leading experts covered how brands, retailers, and retail organisations could earn customer loyalty by developing new loyalty programmes or re-launching existing ones; programs that go far beyond just rewarding transactions with points and coupons.