Editor’s Note: Bill Hanifin has been thinking about, and writing about loyalty marketing for almost two decades now. His perspectives on customer loyalty, customer engagement, loyalty strategy and platform mechanics have been sought out by some of the biggest names in our industry, indeed, some of the biggest companies in the world. This installment is the second of a multi-part series which attempts to look over the next hill in an effort to bring upcoming disruptors into view. Next week we will publish part three in the series.
Continuing our report on the Top 5 Trends for Customer Loyalty in 2018, we continue today with Trends #2 & 3 covering the value of customer data and the mobile channel.
By Bill Hanifin
#2. The value of customer data has never been higher, or its future value at higher risk.
Marketers have always been enamored with acquisition. The broad concept of customer retention has been a hard sell, especially in some of the industries where churn is highest, e.g. wireless telephone, cable television, and credit card. It is easier to recruit new customers via big acquisition bonuses, but it takes more thought and effort to nurture the new relationship, help it flourish, and keep it vibrant over a long-term horizon.
I believe that success in acquisition can be achieved through the raw power of an enormous marketing budget, tied with creative offer creation. But like the talented athlete who can skip practices and eat poorly while finding success early in the season, the challenges of a long campaign take their tool in sidelining and sometimes season-ending injury. It’s the same in business.
The acquisition mentality took hold of data collection practices early on. As soon as marketers realized the digital world would unlock an unprecedented ability to gather bits and bytes about their customer base, they (we) set out to collect as much data as possible. Like digital bounty hunters, the fun was in the kill, while concerns over management and conservation fell to the side.
Just like the wake-up call that an endangered species might represent to a trophy hunter, consumer push back and new regulation have combined to challenge marketers in every aspect of data collection, management, and usage.
More data than ever has been collected, but marketing efficiency with this data remains low. Our research told us that customers want personalized service and benefits that map to their preferences but are increasingly shy about creating “memberships” or “free accounts” to gain these benefits.
Consumers have already given lots of data away, but they remain conflicted about how much longer to play the “pay for bits” game. A recent study from Oracle found that while “57% of 15,607 consumers surveyed from four major global regions want instant one-click checkout that can only be enabled through creation of a payment profile on an e-commerce site, 67% stated they did not want to set up such account profiles”.
In our research, we found that 56% of those surveyed worried about getting their points hacked, and 7% believe they might have already been victims of fraud in one of the loyalty programs they participate in. Rational fears or not, without improvement, consumers will soon punish brands by restricting the amount and quality of data they are willing to share.
The future of consumer attitudes towards the data they are giving away will be shaped largely by perceptions. The influencers of these perceptions are threefold:
- Value – is the value received from a brand in return for submitted data tangible, noticeable, worthwhile?
- Risk – how likely is it that the data provided will be managed carefully enough so as not to jeopardize personal profiles?
- Control – how much choice does the consumer believe she has in offering up personal data?
Value refers to how a brand manages the data it collects. Our mantra for some time has been that if there is not a written plan in place to manage each data-field collected, then the brand should not collect that item. It is quite possible to fall off the horse while reaching for the brass ring.
Risk and Control are interrelated. While consumers are highly attentive to the “big brother” possibilities represented by Amazon, Facebook and Google, an increasing number of Americans are willing to give away personal information in alarming magnitudes without considering the risk.
Ancestry.com is one example of how complicated consumer’s relationship with their proprietary data can be. The company says they have over 4 million customers in its DNA database, most of which swabbed their mouths with a QTip and sent the sample off to an address for analysis. The perceived value of learning about our ancestry has spawned immediate, almost irrational, trust in the process and is undeniable evidence that people will do just about anything to get what we want. Nothing against Ancestry.com, they just simple provide a great example of how high perceived value influences people’s willingness to share personal data with a third party.
A subtler example of how consumers balance Risk and Control is found in our use of “OAuth” services (using Google, Facebook and other apps) to login to third party sites. This service is convenient and time saving. It is also potentially dangerous to consumer privacy. I’ll take a risk and say that most consumers don’t truly understand the level of data access being given to these single-sign-on gateways.
Software license agreements (End User License Agreements) provide the best example of when control trumps risk. Buy any software, or as we have recently learned, login to an app on Facebook, and we are asked to check a box registering our agreement to written terms and conditions. It is doubtful that people know what permissions they are giving to the vendor and in this case, their acquiescence is contractual, not voluntary. “Just say no” doesn’t work here. If you want your device, you check the box saying “yes”.
Inevitably, when people lose the ability to protect themselves from harm, governmental bodies and regulators step in to fill the gap. The adoption of the General Data Protection Regulation (GDPR) gives more control to consumers over their personal data and carries potentially massive fines to those firms who fail to comply with the regulation. NOTE that today is the day the European Union regulation is scheduled to go into effect.
The impact of Artificial Intelligence?
To fulfill the promise of “1 to 1” marketing, marketers are wholly data-dependent. To clear the Value bar which is one of the 3 key influencers of consumer perceptions about data, marketers need to deliver dynamic content to hyper-segmented groups across multiple channels with infinitesimal timeliness. This worthy goal has an equally formidable challenge, best described by Dr. Rachel Royal, Director Analytics, Dow Corning at the Loyalty Academy Conference held in Boca Raton, FL on March 8, 2018.
Dr. Royal stated that “The 1:1 relationship aspect of today’s loyalty marketing is not sustainable, or possible at scale, without Artificial Intelligence”. So, we clearly need machine power to keep up with consumer expectations about how we manage their precious data. But how does your business incorporate AI into it existing analytics practice?
The answer represents a shift in our attitudes about the types of resources brands need to manipulate their data. Analytics teams in the future will shift emphasis from those that carry the burden of information processing and analysis and invest more in those who can craft the story that the data tells.
Seth Godin said it best in a post “You will not be surprised by artificial intelligence”. In that post, Mr. Godin postured that the changes brought by Artificial Intelligence will be so gradual, so subtle, that when it is properly implemented, the results will be almost unnoticeable by consumers.
Just like walking into a room and noticing a smell or sound that brings a smile to your face, the marketing application of AI will bring satisfaction to your customers in the form of communications that are on target, offers that really do hit the mark and brand reinforcement that triggers referral and recommendation.
#3. Mobile is an important channel but may not be the “one channel to rule them all”.
Heard in many boardrooms and chalked on walls in strategy “war rooms” is the phrase “we’ve got to have a mobile app”. It’s true that mobile is the channel of choice for most consumers and that mobile devices are conduit through which consumers may first connect with your brand but resist the temptation to put apps before strategy.
Despite the buzz over the mobile channel, more people are noticing that creating consistent traffic for a retailer’s app is a tough challenge. The top Apple iOS apps in 2017 were related to social media, weather, mapping, music and transportation. 89 percent of app time in UK on just five apps: Facebook, WhatsApp, YouTube, Stocks and Maps. In either list, not one retail app was in the Top 10, and you can bet that you’d have to wade far down the list to find any significant representation by retailers.
We are experiencing a cycle like that which followed the advent of email. At that time, some marketers wanted to kill all paper communications from their mix. Today, some marketers are advocating for a mobile-centric marketing focus, to the exclusion of other channels. Clearly this is a flawed strategy as it denies the essence of loyalty marketing, that “not all customers are created equal”.
Yes, the mobile channel is highly important. No, it cannot be your only channel, at least not this year. The goal should be to ask repeatedly “What’s in our mobile app?” and fit the app to your overall customer loyalty strategy, not build your strategy around the app. If you evaluate your options in mobile app creation as you should, you’ll ensure that value propositions are created that give customers the motivation and deliver “perceived value” making it worth their time to download, login, and continue to use the app.
Beyond that, the focus of every smart customer-facing brand should be to create a customer engagement and loyalty strategy that unlocks the widest funnel needed to successfully communicate with your customer universe. In a short phrase, “Access is more important than Apps”.
The experts polled in our CLMP and CSN communities agreed that a mobile app needed to be able to successfully address these questions:
- How will the app change the brand’s customer experience?
- Can the brand offer enough value in the mobile channel to build download and usage?
- Will the brand use the mobile app to personalize and inform customers? Will is save them time and be helpful? OR, will is simply be used as another wellhead in the data oil field?
Consumers want easy ways to buy your product or service but giving them access through a branded app is not always effective in driving sales without ancillary features such as mobile ordering, integrated payments, and mobile wallets.
To sum it up, the rush to the mobile is understandable, but should be tempered by consideration of an omni-channel strategy to communicate with as much of your customer universe as possible.
Despite fears over the Retail Apocalypse, our practitioner panels across global markets concurred that Brick and Mortar is NOT DEAD, especially in specific markets. Until Amazon figures out how to deliver gasoline to its Prime Members or make possible a white table cloth dining experience on Valentine’s day, convenience, fuel and casual to fine dining retailers can rest easy.
But what can be said for the rest of the retail world?
Yes, some retailers will sharply reduce their footprint or fold altogether. There is plenty of evidence in the market to support this as fact. But vanishing into darkness does not have to be accepted as fate for the broader retail sector.
Not all retailers can bring the weight of Amazon or Starbucks to the front line. Most can at least study aspects of both models and begin to think about how they can create a community atmosphere in their stores and use their ecommerce sites to aggregate customer info, product info, and payment in one package to improve the shopping experience for their customers.
Some of our expert panel supported the idea that the Point-of-Sale would soon be the most important channel for customer communications and offer delivery. Others believed that rather than the POS becoming the centerpiece, the payment gateways are the ones to watch.
It is the payment gateway which can potentially marry cardholder identifiers with the line item detail of a purchase basket to gain broader understanding of the customer and trigger more effective offers and promotions. In this case, the retailer must create the “communal experience” in their stores and provide a product pick-up alternative, while partnering with payment gateways to drive business intelligence. As this happens loyalty programs will become increasingly digital and live in the cloud along with the aggregated purchase behavior from the retailer.
Retailers who build strategy first and worry about channel usage later, will benefit by optimizing their real estate assets, improving customer experience and enhancing their human assets to remind customers why they still shop in physical stores. Those that keep this focus rather than just obsessing about the mobile channel, will prosper in the complicated future of retail.
Bill Hanifin is CEO of The Wise Marketer and is a Certified Loyalty Marketing Professional (CLMP).
Part three in this series will be published next week on The Wise Marketer.