Today's loyalty marketing industry resembles a battleground, where brands are fighting to gain a foothold in the valuable "mental real estate" of approximately 650 million consumers - some 14.5% of the global population - according to Gerrit McGowan, founder and CEO of KULA Causes.
Loyalty programmes are expensive to implement and manage, and are often funded solely by brands themselves. In fact, the financial strains and issues of connecting with consumers have created a major struggle within the loyalty marketing arena.
Now add in another layer of complexity: traditional loyalty programmes seem to be losing their touch. Nearly US$16 billion worth of points, miles and other rewards (about one third of the total $48 billion issued) goes unredeemed by consumers every year. Perhaps these consumers are looking for new and more meaningful ways to connect with their favourite brands? Or perhaps they want loyalty programmes that share their values and meet their individual needs and lifestyles, personally.
Either way, there's one thing consumers crave from companies beyond just good value for their loyalty, and that is corporate social responsibility (CSR) and corporate philanthropy (CP). Why? Because consumers like to support companies that have a positive impact in the world. Research demonstrates this: Edelman reported in its 2012 Goodpurpose study that 47% of consumers bought cause-supporting brands at least monthly. And that's not all: Edelman also reported that 87% of global consumers believe that companies should give equal importance to cause efforts as to business efforts.
This is especially true for Millennials, the generation born between 1979 and 2001 - who will make up an increasingly large segment of overall loyalty programme membership as the Baby Boomers age. A study published last year by marketing firm Barkley shows that 55% of Millennials - versus 48% of overall consumers - are likely to favourably view a company that engages in cause marketing. It also shows that 52% of Millennials attempt to buy products from companies that support causes they care about.
The current lack of innovation in current loyalty programmes, along with consumers' desire to support causes is paving the way for a new model - one that combines the best features of loyalty programmes with the powerful emotional element of cause marketing.
Cause-Related Loyalty Marketing (CLM)
Cause-Related Loyalty Marketing is a new marketing model that makes the most of both loyalty programmes' and CSR/CP's power to attract consumers, while helping companies to better meet those consumers' expectations of social responsibility. For years cause marketers (and brands) have sought ways to effectively monetize CSR/corporate philanthropy, in essence asking, "What is the ROI on our company's philanthropic efforts?" Although this question has never been effectively answered, loyalty marketers have been sitting on the solution for decades. Just as data on the issuance of loyalty currency can be gathered through the customer lifecycle and quantified for value, so can philanthropic dollars - as long as they are awarded to and directed by customers like a loyalty currency is.
By applying the cause-related loyalty marketing model, companies allow customers to donate the value of their earned and unused miles or points, which can be converted into cash contributions for causes they care about. This new approach and thinking creates relationship changes on many levels. For one, it enables loyal customers to direct corporate philanthropy efforts, creating more meaningful engagement and connections.
In turn, when customers can donate to causes that truly matter to them, their appreciation for the companies that make these donations possible grows. Research has shown that consumers tend to view socially-responsible companies and their products more positively and that spending money to help others makes the spender happy as well. This leads to a more meaningful (and therefore stronger) bond between the company offering CLM and the customer partaking in their loyalty programme. Naturally, a more loyal customer means repeat business for the company, particularly if the company supports local causes - church groups, schools, food banks - that allow customers to see the benefits of their charitable giving right in their own communities.
By using the CLM approach, companies can also gather value-laden data on customers' charitable transactions and build even deeper loyalty - while generating ROI on philanthropy efforts - by targeting customers with individualised rewards or campaigns based on their buying habits, locations, communities and cause affinities.
Research shows that this type of consumer behaviour is only going to become more prevalent. The 2012 Goodpurpose study also found that consumers in the world's biggest emerging economies have high expectations of companies in terms of social issues. Meaning, the huge number of traditional loyalty programmes that offer stale rewards are likely to only dilute customer loyalty.
Given these trends, it's evident that this new evolution of loyalty marketing aligns with companies' need to support their own bottom line, while enabling them to sustainably support causes. It also speaks to the concerns of today's - and eventually, tomorrow's - consumers, so companies can utilize a new solution to connect with customers in powerful new ways and turn shoppers into loyal, repeat purchasers for years to come.