What's new in Loyalty 2.0, and what comes next?

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By: Wise Marketer Staff |

Posted on August 4, 2011

What's new in Loyalty 2.0, and what comes next?

There are several key aspects of customer loyalty strategy that have changed since the era we now know as 'Loyalty 1.0', according to Grass Roots' digital marketing consultant, Anthony Monger, who here examines the 'Loyalty 2.0' strategy and its descendants.

Almost everybody believes that they know roughly what 'Web 2.0' means. Most often you'll hear definitions such as "Websites that do more stuff using newer technologies". But, following the same logic, Loyalty 2.0 (and ever onward) should surely "do more stuff" than Loyalty 1.0 did. But does it?

In order to differentiate between these clearly different versions of customer loyalty strategy, we need first to look at what Loyalty 1.0 did:

  • It rewarded you for purchasing (or doing) something;
  • it treated and rewarded everyone the same;
  • It often rewarded you for doing something you were going to do anyway.

So what about Loyalty 2.0 and later versions? This is where the definition becomes a little awkward, as there seems to be no 'line in the sand' where one version ends and another begins. Even as you read this article, some clever marketing company is probably dreaming up the next version. Where are we up to now? Is it Loyalty 5.0? Loyalty 6.0? And what would an upgrade entail?

The reason that it's so difficult to define Loyalty 2.0 onward is that, just as one comes out, someone else will claim to be the first next generation loyalty agency, or to have developed the first next generation platform. There are simply no standard or rules to follow. Having said that, there are some simple guidelines that will help your loyalty strategy stay relevant :

  1. Loyalty is a long-term, individual relationship For marketers and brand strategists alike, loyalty can no longer be seen as a short-term tactical (and mostly defensive) tool. Used this way alone, it will inevitably fail you in the medium-to-long term as the so-called 'halo effect' wears off. As a result, we have all been forced to move on to more sophisticated strategies and technologies, with the loyalty strategy sitting at the heart of the organisation and spanning the marketing, HR, IT and finance functions. In fact, marketers are even becoming serious about marketing to 'the segment of one'. For example: John, 19, from Croydon, who likes skateboarding: you get a completely different reward from Margaret, 43 of Winchester, who likes gardening - and we're going to talk to you differently too. Using dynamic segmentation tools, we know when you change your mind and preferences, and we can keep up to date with what's most likely to be right for you.  
  2. Online portals Online portals and catalogues are increasingly opening up the world of loyalty and reward, and if you're working on a hosted flexible platform that you can adapt to your changing needs, so much the better. If you can add and evolve functionality as trends change and business opportunities arise, you can also avoid the inconvenience and cost of rebuilding in a couple of years when technology moves on.  
  3. Integrate! Think outside the old models - it's not all about rewarding direct purchase. For example, you can use multichannel communications to reward your followers and fans for posting reviews and content about a product or service, or for inviting their friends to engage with your brand.  
  4. Act on insights Organisations are getting better at collecting data from loyalty programmes, but many are still not doing anything decent with the data. An effective loyalty programme will allow you to harvest, clean and mine data to generate insight and formulate campaigns to up-sell and cross-sell within your segments, as well as attract new customers.  
  5. Keep it simple Your audience wants to know "what's in it for me?" and "how do I get it?". If your programme is complicated or reads like an aircraft instruction manual, you'll simply turn people off. So make it clear what you want them to do and how to do it - make it easy for them. However obvious your claim and redemption process may seem to you, a fresh pair of eyes may be able to spot any potential sticking points or gaps.  
  6. Engage your employees Even if you get your offers right, with slick communications and accurate segmentation, if a customer walks into a shop to buy that pair of jeans and the customer experience is a let-down, then it all falls down. This is where mystery shopping CSI can help you: identifying strengths and weaknesses in service, and showing you just where recognition, incentives and learning programmes will bring you - and your customers - the most benefit.

Get this whole approach right and your customers won't only stay loyal to you, but they'll actively engage with you more often, buy more frequently (and at higher values), and recommend you more, effectively becoming your own brand ambassadors. With this strategy in place, you'll find yourself back where it all started at 'Marketing 1.0', with the most powerful version of all: Word of mouth.

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