Most — if not all — consumer-facing companies have a strategy for building and maintaining customer loyalty. But how comprehensive and sophisticated those strategies are varies. Some loyalty approaches are basic; a simple system of rewarding frequent or high-spending customers. Others are highly complex, leveraging AI and machine learning to mine deep insights into customer behavior and deliver personalized offers and recognition. Knowing where your company’s loyalty activity falls on this spectrum will tell you how mature your loyalty approach is. And according to a Forrester report published in late 2020, that’s the first step toward evolving your loyalty strategy in a more productive direction.
At their core, loyalty strategies create connections with customers to deliver positive business results — more robust relationships, revenue, and higher lifetime customer value. But the approaches that have worked in the past may not be sufficient to achieve the same results in the future. Maybe a strictly transactional program isn’t helping you identify and reward the customers that mean the most to your brand, even though it’s historically driven higher frequency. Or perhaps your current system isn’t capturing insights across all of your consumer touchpoints because how your customers interact with your brand has evolved, or your tech stack lacks capacity. Your company’s needs and priorities change all the time; you can’t afford a loyalty strategy that’s stuck in arrested development.
In other words, it may be time for your loyalty approach to grow up.
But how can you tell when it’s time to advance your loyalty strategy to the next phase of maturity? And what investments should you make to help it along? There’s no one-size-fits-all handbook for loyalty program growth, but you can chart your roadmap to a more mature and effective customer connection approach.
The first step, according to Forrester’s report Chart Your Course To Customer Loyalty Maturity, is engaging in a current-state assessment of your loyalty strategy, research, process, technology, measurement and team. When you know your baseline loyalty maturity in terms of these six areas, you’ll know where to focus your efforts to “graduate” to the next stage.
If your company is at the beginning of its loyalty journey, conducting such an assessment is probably a straightforward task. You likely have a program with narrow functional parameters focused on measuring a few quantifiable customer behaviors managed by a small team. However, if you’re farther along the loyalty maturity spectrum, you might have multiple layered systems performing complicated tasks and funneling data to an array of stakeholders. Either way, a clear-eyed assessment of current capabilities is necessary to identify areas that can generate incremental improvements.
Let’s say you’re in the first phase of loyalty maturity, what Forrester dubs “Beginners.” Your goals for your loyalty efforts are likely transactional in nature: to drive frequency and spend. To progress, you need to expand your loyalty approach beyond that transactional mindset, starting with how you define loyalty. How does customer loyalty align with broader corporate objectives? Do different departments in your organization expect different outcomes from your loyalty initiatives?
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From there, you need to establish ways to learn about your customers. A generic rewards program doesn’t need deep customer insights to work — nor is it particularly adept at capturing them. But true customer connection requires a more comprehensive understanding of who your customers are and how they engage with your brand.
To graduate to the next phase of loyalty maturity, you’ll need the capabilities to gather customer data that facilitate that understanding.
“Adulting” for Loyalty
Tracking customer behavior through a loyalty framework is the late adolescence of loyalty maturity. Now the hard work begins. Companies in this “Intermediate” stage have the tools to capture both behavioral and transactional customer data, and they have a coherent loyalty strategy that goes beyond earn-and-burn. Although they have a direct connection with their customers through a loyalty app (or similar consumer-facing portal), they’re unable to combine and analyze sales and loyalty data to gain comprehensive insights into their customers. Legacy systems often hold them back from building a personalized digital connection with customers.
Companies that already have systems in place to establish and maintain (and monetize) one-to-one connections with their customers might seem like they’ve reached the pinnacle of loyalty maturity and have little to gain from further investment. But there’s always room for improvement. Forrester recommends that companies in the “Advanced” phase take action to partner more closely with other departments (beyond loyalty or marketing), explore automation tools like AI and machine learning, and invest in other technologies that increase your emotional understanding of your customers.
The Life Lesson: Improving Customer Connections
Evolving your approach to loyalty has as much to do with your company’s current needs and priorities as anything else; there’s a place on the loyalty maturity spectrum for everyone. Standing still isn’t an option, however. Companies should always strive to improve their connections with their customers at every phase of development. Progressively embracing more mature loyalty strategies is the way to forge those connections in a lasting way.