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 first of a two-part series which attempts to look over the next hill in an effort to bring upcoming disruptors into view. Tomorrow we will publish part two in the series.
A Research based perspective on the future of Customer Loyalty
Earlier this month, Barry Kirk led a webinar on TheWiseMarketer.com talking about the findings of the 2018 Wise Marketer / Maritz Motivation Loyalty Landscape report. The webinar was hosted by Wise Marketer Group CCO Aaron Dauphinee and there were over 200 people registered for this compelling discussion of the latest findings about consumer perceptions about loyalty programs.
By Bill Hanifin
The Editorial staff at TheWiseMarketer.com has been working with the results of this research for weeks to identify a succinct set of market trends that leaders in this industry can take into consideration as they plan for 2018 and beyond.
This article explores the motivations behind the changing customer loyalty landscape and proposes 5 trends that you can use to guide your planning for the next 12 – 24 months. The trends are research based and supported by a consensus of opinion from customer loyalty practitioners around the world.
The Loyalty Revolution
The broadest conclusion from our study should make intuitive sense to you if you are active in developing and executing customer strategy. It seems clear that a wave of change is sweeping over the loyalty landscape. In fact, we should say it is “waves” of change. The waves are powerful, and it’s tough to know how to catch a safe ride to the shoreline. In the process of negotiating a safe and smooth ride, we can all expect profound disruption and confusion, but also the opportunity for great success.
If you consider the impact of these “sets” of waves together, what we really have is a Revolution, a step change from our previous reality.
If you’re a student of history, you know that revolutions can be sparked from the top, fueled by powerful factions with massive resources. Or, they can be sparked from humble beginnings. What we are seeing in the marketing world today is the latter, i.e. a grass roots, customer-driven revolution.
And the battle is about control and experience.
As a result, there has never been a more important time to reevaluate your approach to customer engagement, customer experience, and yes, customer loyalty. There has never been greater urgency to embrace new customer loyalty business models and product sets to make sure we end up on the right side of this Revolution.
Big Rock Topics
The Revolution can be defined by what we like to call “Big Rock” topics. We define Big Rock topics as those that carry such weight they demand shared interest from everyone interested in using data effectively to create deeper and more valuable customer relationships. Put in more colloquial terms, these topics are the ones that keep us up at night. We each have our own ideas for solutions and would like to test our theories among our colleagues, but politics, competitive issues, and just plain time, divert us from a devoted effort to solve this Rubik’s cube of marketing.
One part of the mission at The Wise Marketer is to bring these Big Rock topics front and center, spark a discussion across the industry and discover perspectives that can serve our entire industry. The Big Rock topics we have identified as key elements of the loyalty revolution include:
The revolution in customer experience:
- How loyalty and CX are becoming interwoven to the point where their intersection defines the future of customer marketing strategy
The revolution in customer analytics:
- How Artificial Intelligence, machine learning, and behavioral science are transforming our understanding of customer analytics to enable precision marketing at scale
The revolution in loyalty technology:
- How and whether new technology platforms and architecture could render traditional – dare we say “legacy” – loyalty models obsolete
The revolution in Omni-Channel loyalty:
- How mobile, web, and brick-and-mortar channels can be choreographed efficiently to give customers the choice and control they seek and to support more trusted relationships
The Top 5 trends for Customer Loyalty in 2018 have roots in several sources and align to the Big Rock topics we’ve identified. Before you dismiss this as “just another top 5 or 10 list”, we hope you will receive this list as it is intended to be consumed.
At TheWiseMarketer.com we’re more interested in predicting fundamental shifts in our business and helping you get ahead of the market, than sending you off chasing the latest buzzword. Therefore, the methodology we employed to create these trends is based on quantitative research and qualitative polling of two large professional groups in our industry.
We understand that it is easier to proclaim trends than to put them to use and register business gains. Candidly, the trouble with predicting trends is that they are all-too-often about as useful as New Year’s Resolutions. Over time, they reveal themselves to be not much more than hopeful promises weakly raised up with no underlying commitment or practical plan to implement in your business.
Our hope is that these 5 Top Trends for Customer Loyalty in 2018 will help you understand how to better connect with your customers, foster trust and commitment, and create more authentic, enduring and profitable relationships. We hope these trends will be anything but bandwagons to jump up on, but instead will become keyword pillars of your planning during the year.
We relied on these 3 key sources of research to arrive at the 5 Trends for 2018:
- Results of the 2018 Maritz | Wise Marketer Loyalty Landscape study, conducted mid-2017 across a sample of 2,093 US consumers.
- Opinions and commentary from two key groups of educated, professionally certified, and highly tenured loyalty practitioners:
The 5 Top Trends for Customer Loyalty in 2018 are:
#1. The path to Customer Centricity begins with Engagement.
Loyalty is not simple anymore. It is not about being “loyal” or “not-loyal”. The behavior of our customers towards our brands is anything but monolithic. It is nuanced and sometimes complex. The Wise Marketer | Maritz research pointed out that rather being able to simply label customers as either loyalty or non-loyal, a multi-dimensional model defined by two planes of interactions could be applied to group them into one of 4 loyalty “types”. These types were formed based on the style of interaction employed by a brand to its customer relationships (ranging from highly relational to highly transactional) and the overall nature of customer interactions with the brand (are they active, passive, or something in between?).
The topline finding of this classification of loyalists was that over 55% could be identified as Mercenary Loyalists (Barry Kirk’s 4D Loyalty Framework), telling us that much too much brand loyalty was being sought out by attempting to “buy” the customer. Experience has proven that monetary incentives alone are not sufficient to create lasting relationships between brand and customer. We concluded that an opportunity existed for brands to win higher customer share through a more complete offer.
Next, the research sought to understand how intense the propensity for loyalty was among those considered loyal in the first place. The good news for marketers is that only 3% reported they are not ready to give consistent patronage to any brand. 29% were considered Resolute Loyalists, meaning they considered themselves to be highly loyal and bought principally from just their favorite brands.
The biggest group, totaling 68% of responses, were considered Transient Loyalists, meaning they considered themselves loyal to individual brands, but were susceptible being convinced to move to a competitor. The research showed that the resiliency of someone considered a loyal customer was not equal across a large group of customers. With 68% in this category, it is clear that much more Customer Lifetime Value was in play than previously believed. That translates into a big opportunity for any brand to win profitable groups of customer through increased share of wallet, but it also showed that it was more important than ever to create a customer loyalty strategy that would create the playing field to encourage this shift.
In sum, the research underscores the idea that “Customer Loyalty is a strategy, not a program”. That said, what is the right strategy? Should brands be focusing on Customer Engagement, Customer Experience, or Customer Loyalty? Is there a way to rank these three concepts, and can they be magically aligned with one-another?
The research pointed us toward the answer. Over 41% of consumers surveyed said they had quit a loyalty program, and 40% of that group had ceased to participate within 90 days from joining. It seems that while Customer Loyalty is an important concept, it should not be the first step, or even a primary objective of a customer marketing strategy.
Instead, maybe Loyalty should be considered an outcome of a disciplined plan to engage with customers across many points of a customer journey. The first point of contact or engagement will be dependent on the individual customer.
- Are they researching your brand online? Looking for reviews, recommendations?
- Are they seeking out product information, attempting to understand how your product or service will save them time, money, make their life more convenient?
- Have they just made a first purchase or are they repeat buyers who have yet to try products in complementary categories?
- Could they be historically high frequency and valued customers who have gone silent in recent months?
Wherever they encounter customers along this journey, brands should spark this contact by providing information, incentives, offers, and special treatment where they are in the journey. Working with customers in journey-defined cohorts, they can be nurtured into deeper relationships.
Trend #1 states “The path to Customer Centricity begins with Engagement”. This doesn’t mean that we are abandoning the goal to create, develop and retain high value “loyal” customers. It does mean that we recognize that while not all engaged customers can be considered loyal at a given point in time, that just about all customers considered “loyal” are engaged with the brand on a consistent basis.
The research supports that Customer Engagement has to be the primary step among several (improving customer experience would be another), which combine to generate the big goal – the ability to stimulate higher value “loyal” customers in a predictable and financially measurable manner.
There is evidence that this trend is recognized by brands already. Maybe we just proved the idea through research and gave it a name. Retail brands of all types are defining “customer loyalty” on an individual level to serve their brand promises.
Using the Convenience and Fuel Retail industry as an example, market leaders Speedway, 7 Eleven, WAWA and Cumberland Farms have each chosen a core loyalty model different from each other. While Speedway operates a well-developed currency-based program familiar to many, 7 Eleven is building around the mobile channel, WAWA uses a reloadable gift card as the “rails” of its program and Cumberland Farms uses a decoupled debit tool to offer gas savings and drive loyalty through a payment tool.
This is thoroughly refreshing evidence that brands are engaging customer strategy development with cold-eyed commitment and adopting the model that best supports it brand promise and support achievement of their financial objectives. This move to independent thinking by brands and the willingness to adopt new models threatens solution providers whose product set is tied to an individual executional model.
In some respects, brands are a step ahead of providers today and it is a critical moment for the provider community to retake the leadership position in developing strategy and practical models for their clients to execute.
Part two in this series will be published tomorrow on The Wise Marketer.
Bill Hanifin is CEO at The Wise Marketer and is a Certified Loyalty Marketing Professional (CLMP).