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5 Top Trends for Customer Loyalty in 2018: Part 3

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By: Bill Hanifin, CLMP™ |

Posted on June 6, 2018

A Research based perspective on the future of Customer Loyalty

Wrapping up our 3-part series on the Top 5 Trends for Customer Loyalty in 2018, we continue today with Trends #4 & 5 covering the Rewards Landscape and Marketing Technology.

Trend #4. Consumers are creating their own Reward Utopia

Behavioral research tells us the favorite conversation topic for most people to talk about is themselves. In rewards lingo, this means that “What’s in it for me?” is the key consideration for most people when they become engaged in a loyalty program.  When the 2018 Loyalty Landscape report asked about the strongest motivators to join a loyalty program, 47 percent reported, not surprisingly, that earning rewards was at the top of the list.

This answer makes intuitive sense and highlights that Member perception of the quality, availability, and liquidity of rewards in loyalty programs are key elements of program success. Unfortunately, we believe the finding also supplements evidence that far too many loyalty programs continue to operate in a mercenary manner. “Do this, get that” has been the most common model for years, but as Trend #1 explained, it’s time for brands to think about how their loyalty strategy plays beyond this core approach.

A suggestion of weakness in today’s rewards offers was revealed by our research, as 25 percent of those queried said they could not remember the last reward they redeemed for in a loyalty program. 52 percent of respondents in the research said that “Cash” was their preferred benefit. Gift cards were next at 12 percent, so it’s clear that cash, including its liquid equivalents totaling 64 percent, is the most preferred reward option among this survey group.

Could the preponderance of cash-like rewards be a root cause for why Members don’t remember their last redemption experience? The trend to highly liquid rewards, treating points as cash, is taking hold, but brands who focus solely on cash rewards do so at the risk of placing too much reliance on a reward type whose value evaporates as quickly as a rain drop falling on a piping hot sidewalk.

Behavioral studies have validated that great experiences create emotional ripples that continue well past the experience itself. The impact of a memorable experience creates more enduring perceived value among the people who enjoy the experience. Is it time to balance the current emphasis on cash rewards with great experiences and other loyalty “currencies” that save Members time and money?

Our research helps to answer the question. The findings reported that 44 percent of Members said that “rewards are too hard to earn” and 41 percent who said they had quit a points-based program did so within the first 90 days from enrollment.

Is the reason for early program defection the result of the reward type offered or Earning Velocity, the rate at which the rewards can be earned? Members must be able to reach a rewards threshold in what they consider a “reasonable” amount of time, and from our research, it seems 90 days is the outside limiter as a “reasonable” time.

To counter-balance the concern about Earning Velocity, we uncovered a new finding indicating that not everyone wants to redeem rewards as quickly as they can earn them. Research reported that only 27 percent said they like to spend their points right away, while 73 percent preferred to save their points towards a specific reward on their wish list. Many brands assume that Members who are not redeeming with regularity are less engaged, but our data points to a very different possibility – that Members who aren’t redeeming, particularly those sitting on a lot of points, may simply be saving them toward a very specific redemption.

To sum it up, it’s important to consider not just WHAT Members are Redeeming for, but HOW.

  • Keep a fundamental eye on earning velocity. That will meet the needs of a growing segment of your membership.
  • At the same time, if you observe a significant segment of your membership exhibiting point-saving behavior, then the behavior should be encouraged, as it carries a significant pre-memory halo that can be leveraged to increase engagement and longer-term brand loyalty.

A final comment on WHAT members are redeeming for is that retailers may benefit from a “packaged” approach to loyalty. Amazon has done a wonderful job of bundling product offers and good prices, with convenient services and payments. Few retailers have the footprint to think about matching Amazon’s approach, but there are elements of Amazon’s model that any retailer can leverage.

Additional value can be delivered to Members through the “Packaged Loyalty” approach. Think about how your brand can deliver rewards that are constituted by “our stuff” or “our currency” or are delivered “on us” or via “our partners”.

The result of this thought process will reveal elements of your brand promise and customer shopping experience that delivers time savings, convenience, and helpful surprises that will differentiate your brand from competitors.

Trend #5. You don’t have to invest in Blockchain … yet.

Our final trend relates to marketing technology. Most commercial software packages that manage customer loyalty programs share a similar architecture. Some have bridged traditional structures to work in real-time and many solutions providers have invested heavily to achieve integration into multiple POS and electronic cashiering systems, making “real time” loyalty a reality.

The feverish rise in interest in Blockchain technology could represent a threat to the community of loyalty solutions providers operating in these traditionally architected software frameworks. The impact of the threat is painted by disruptor companies as a “replacement” for existing technology, not just an “improvement”. The Blockchain community is determined to become relevant to Loyalty Marketers, and my inbox is piling up with inquiries from startup companies advocating for their Blockchain based software solution as the “next new thing”.

We launched a series of reports hoping to find the intersection of Blockchain technology and customer loyalty here and future installments will be added over the next few weeks. At a high level, the perceived advantages of loyalty solutions built on Blockchain play on trust, security, lower cost, and rewards liquidity.

As a teaser, we’ll share two theories that continue to push to the top of news feeds, with a clarifying “reality check”.

#1. Blockchain will enable a universal loyalty point exchange, giving ultimate control to the consumer.

Reality check: The technology could make this free exchange of points and miles possible, however Blockchain advocates are overlooking that the brands who issue the universe of currencies are not necessarily ready to participate in this type of exchange.

Coalition programs have worked well throughout the world except in the US, though many are faltering around the globe today. The key fix needed is to figure out how to maintain the benefits of a true multi-partner loyalty model while communicating the power and value of each participating brand. The interests of multiple brands must be represented in a way that maintains a balanced playing field and presents a better value prop than mounting a sole-branded program.

#2. Blockchain will take cost out of the value chain and loyalty programs will be operated at much lower cost. 

Reality Check: We interviewed Charles Ehredt, CEO Currency Alliance on this specific question and he stated bluntly that while “people talk of blockchain transactions as if they’re free … it is a myth”. We will expand on this specific topic in our next installment about Blockchain and Customer Loyalty, but the quick synopsis from Mr. Ehredt is this: “Blockchains are notorious for consuming huge amounts of energy” which means the cost of processing entire transaction sets for large loyalty programs could be prohibitive.

What we are seeing in general is that Cryptocurrencies and Blockchain technologies will get lots of buzz in loyalty for the foreseeable future, but there’s just not enough demonstrated pain or gain at the moment for brands sponsoring loyalty programs to allocate much investment in this direction. Our research polling our CLMP and CSN communities tells us that the best investment loyalty providers can make in their solutions at this moment is to focus on better execution.

Software platforms are almost over-engineered today. There are more features and capabilities than most retail operators can put into play. It is highly advisable that solution providers hit the pause button on selling the magic of their capabilities and start selling the effectiveness of their solutions. Brands can help this process along when they begin to place less emphasis on the “shiny objects” of loyalty technology and instead insist on better execution from their supporting solutions providers.

Blockchain technology may eventually become the preferred means to build and execute customer loyalty programs, the time is just not yet arrived. Brands and Solution Providers will reap the greatest benefit for the future by educating themselves in this evolving aspect of their business in preparation for the day when technology replacement is a more clearly justifiable business case.

We hope you have enjoyed this 3-part series covering the Top 5 Trends in Customer Loyalty for 2018. To learn more, take three important steps:

  1. Download the research here.
  2. Stay informed by becoming part of the conversation at The Wise Marketer.
  3. Get “even” smarter in the discipline of customer engagement and loyalty by taking courses at the Loyalty Academy and earning your Certified Loyalty Marketing Professional degree.

Bill Hanifin is CEO at The Wise Marketer and is a Certified Loyalty Marketing Professional (CLMP).