Future Proofing Customer Loyalty - Transformation from a Programme to Platform to Ecosystem
So, as of August, the UK is officially now in recession. Unfortunately, given the pandemic, I don’t think this comes as any surprise to anyone. And, more broadly, we all know this is reflective of similar economic circumstances in most parts of the world. So what does this mean for business and, specifically, for marketing practitioners?
It’s been well proven that maintaining your advertising and marketing spend leads to a smaller contraction and a faster and better bounce-back when the recession ends. Certainly this is what we advise our clients and what we continue to do as much as possible ourselves.
But it’s also never been more important to ensure you retain and develop every existing customer that you have. After all, it is also fairly well established that it costs 5 to 10 times less to retain a customer than it does to acquire a new one.
Clearly then, in these recessionary times where the market is contracting, customer retention is not just important, but the first smart and effective thing to do. Therefore, the question is how can your customer retention programme not just survive but actually thrive through this difficult period? How can you turn it to a real competitive advantage?
In this piece, we focus on customer loyalty programmes and how we believe you can transform and future proof your business and consumer relationships through them.
There are many reasons brands should consider transforming their current loyalty offering. For some brands it may be to drive increased breadth of engagement to capture more of the consumer’s lifestyle experience and grab a larger ‘share of their life.’ Or, for brands that typically have infrequent interaction opportunities such as airlines, it may be to drive up this frequency and achieve more everyday engagement with their members. For many brands, it’s just as important that their loyalty programmes can effectively serve their members’ ever-changing needs, expectations and behaviours and stay ahead and differentiate in an ever-crowded loyalty market.
Ironically, many consumer loyalty programmes offer customers ‘deal loyalty’ rather than inspiring and enabling ‘real loyalty.’ It’s a rational relationship rather than an emotional one. This is, by definition, an oxymoron. Relationships should be emotional. Instead, these programmes simply tempt with offers, incentives and discounts which, whilst they have their place, are mostly merely driving a relationship based upon transactional loyalty. Whoever offers the best deal is still the one that typically ends up with the sale. That’s hardly a measure of loyalty or, indeed, brand strength. And within this economic climate, it’s very easy to get caught in a race to the bottom.
To transform consumer loyalty and future-proof the business, we believe loyalty programmes need to be less ‘enablers of the deal’ and more about ‘enabling the experience.’ This means next-generation loyalty strategies need to be less obsessed with not just what consumers spend, and more focused on how they can become an intrinsic and indispensable part of their consumers’ lives.
This is achieved by addressing four key areas:
- Increasing depth of brand and programme engagement by creating more meaningful and personalised content and experiences
- Increasing breadth and connectedness by extending your offering into adjacent areas of your members’ lifestyle
- Increasing relevance through smart data use and technology
- Increasing usefulness by creating tools and functionality that help to make your members' lives easier and better.
The whole loyalty proposition must be built around customer centricity; able to respond to, and capitalise on evolving insights and trends, with a fluid and dynamic structure allowing for more holistic experiences, tailored to individual behaviour and lifestyle.
So, the question to ask yourself is: “To what extent is my loyalty strategy about driving offers and incentives versus genuinely making the consumer’s life easier, better and more rewarding?”
ACHIEVING THIS VISION
If a brand can play a central (and useful) role in a consumer’s life, it simply follows that they will naturally receive a significant amount of their daily, weekly or monthly spend. The challenge is that, while most brands acknowledge the desire to be more central to, and present in their consumers’ daily lives, many have no clear pathway to achieve this goal.
BBD Perfect Storm has developed an ‘evolution framework’ to move brand loyalty from a transactional, linear model into a more holistic, engagement and emotion-led, smart ‘ecosystem’ of strategic partnerships, adjacent businesses and utility-led functionality.
The framework consists of three (non-linear) phases of evolution:
- Maximising existing ‘Programme’ capability.
- Creating a loyalty ‘Platform’ allowing for more meaningful interactions on a more frequent basis
- Enhancing and augmenting the loyalty and lifestyle capability further to reach a fully connected ‘Ecosystem’ offering which becomes an essential part of individual lifestyles.
Stages of Progression →
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EVOLUTIONARY PHASES EXPLAINED
As is illustrated in the pyramid above, it is important to recognise the three-phases are not completely linear and sequential.
THE PROGRAMME PHASE
This focuses on driving maximum value within the brand and its current partners. It tackles improvements to personalisation, segmentation and recognition capabilities and looks at introducing new tactics such as gamification and ‘next best action’ mechanics to allow for more individualised progression pathways. An example of this is the Emirates Skywards programme which allows its top tier Platinum members to ‘unlock’ new benefits such as Tier Miles rollover and complimentary upgrades through gamified and personalised engagement. Also, stepping outside of the traditional tiering model. Qantas uses cohort-driven program constructs to drive good behaviour and reward different types of ‘valuable’ members e.g. high buyers, career flyers, new joiners, etc., increasing engagement and broadening affinity with the programme. Getting this phase right ensures that the underlying loyalty ‘nuts and bolts’ are working as efficiently as possible.
Some simple, yet effective examples of emotional programme loyalty can be seen with MyWaitrose in the UK, who offer all members a free take-away coffee each time they spend in store, or Pret a Manger, who, instead of a traditional loyalty programme, empower their staff to surprise and delight random customers with free coffee and food every once in a while leaving them with a positive and memorable experience of the brand.
Our client and frequent flyer programme, Etihad Guest, has also really cut through during the Covid-19 period. Whilst all airlines are obviously operating in challenging times, they have really stepped up and emotionally connected with their customers through their Moments of Thoughtfulness ‘Your Special Guest’ programme. This initiative really demonstrated an empathy with consumers and the challenges they were facing. It has been rightly, and widely, lauded.
THE PLATFORM PHASE
This phase overlays the existing Programme and starts to deliver deeper, more emotional member engagement through in-depth personalisation and tailored experiences, and by increasing useful capability within everyday life adjacencies through new partners and new business solutions. This increases ‘meaningful touch frequency’ and results in more independent and 3rd party revenue streams for the brand, while expanding the value and breadth of its loyalty currency. Many loyalty programmes are becoming platforms. A loyalty Platform approach requires a completely customer-centric outlook and defined omnichannel strategy to ensure a frictionless and highly relevant experience for the member at all times, and to ensure that any new business ventures, strategic partnerships or utility propositions are fully aligned to members’ lifestyle needs. The obvious example for many frequent flyer programmes is when they introduce a credit card that can earn miles in the programme.
A more emotionally engaging approach is evident in Walgreens loyalty offering in North America which is built around unique, non-monetary health rewards, creating additional value for both its members and the retailer. It offers various sub programs such as ‘Beauty Enthusiast’ and ‘Balance Rewards for Healthy Choices’ to deliver on different customer needs and engagement for different segments. It also puts great emphasis on creating emotional value and delivering a personalised experience. From a simple thank you message being sent to members every quarter, through to sophisticated use of data and research to uncover insights and create utility to improve their customers’ lives. For example, their partnership with WebMD and their ‘Relief Advisor’ tool taps into the insight that many people get overwhelmed with the amount of products available. The tool asks a few questions and provides a tailored recommendation to the customer, reducing stress and providing reassurance and support at a critical moment.
Nike also offers utility to increase loyalty and emotional engagement through its portfolio of apps supporting and enabling different interests such as Nike Training Club, and Nike Running Club. This platform usefully combines workout inspirational and tracking with product suggestion and purchase. It has intentionally moved away from financial rewards and instead rewards its members through softer benefits such as access to meditation through the Mindspace app, and free access to music through Apple. A more future-facing example for a supermarket’s loyalty programme and consumer interface would be for it to link a consumer’s smart fridge at home; they can then embed themselves into the consumer’s loyalty and consumption by being useful.
THE ECOSYSTEM PHASE
The Ecosystem Phase comprises building a more proprietary and broader network of additional services on top of (and outside of) the brand’s initial business relationship, offering to broaden reach, engagement and penetration, and to provide usefulness, convenience and completeness for members. The Ecosystem uses hyper personalisation and predictive, real-time targeting to deliver seamless relevance, value and recognition to the member across all touchpoints and throughout all their lifestyle needs. This in turn, provides increased revenue opportunities through higher reach and frequency of use; richer, broader and more actionable data; a larger share of wallet; and ultimately longer-term value and advocacy.
Qantas loyalty transformed its traditional frequent flyer program into a sophisticated, mutually reinforcing ecosystem made up of a network of over 500+ coalition partners and its own new business ventures including Qantas Hotels, Shopping and Health Insurance. All leverage the Qantas loyalty assets to create a unique proposition in the market. These assets and capabilities not only provide a richer and more valuable member experience, but also enable a diversified source of value for Qantas Loyalty through an ever increasing revenue stream from its new businesses.
UAE-based Majid Al Futtaim is one of BBD Perfect Storm’s valued and, we believe, visionary clients. Majid Al Futtaim has a diverse range of lifestyle propositions, from leisure and entertainment to shopping and hospitality.
Majid Al Futtaim recognised the opportunity to join together its different propositions through the SHARE rewards programme. The creation and continual development of SHARE Rewards is something that we (BBD Perfect Storm) are fortunate to work on. SHARE is not just built on a deep and profound human insight (the best things in life are those we share with the ones we love). It’s also constructed and predicated with a customer-first ecosystem. The more joined-up, seamless and personalized the access to the different business entities, the more beneficial the SHARE ecosystem is to Majid Al Futtaim and its customers.
Amazon Prime, whilst not a traditional loyalty programme is an example of a highly useful and thus brilliantly effective ecosystem proposition which instead of aiming for increased share of wallet, is seeking a larger ‘share of life’ with its breadth of offering, convenience, frictionless customer service and its fully customer centric, hyper-personalised approach making it hard for any other business to compete on the same level. However, what Amazon lacks is arguably ‘emotional’ loyalty which many of the other brands mentioned so far do so much better. Discovery in South Africa is also an excellent example of an organisation that has embedded itself in consumers’ lives with an ecosystem of different insurance and financial products from banking to health insurance, all interconnected and incrementally beneficial through the Vitality healthy living and rewards platform. Interestingly, when you get to this level of ecosystem the ‘loyalty points programme’ aspect really becomes incidental to its effectiveness because the organisation is just so fundamentally ‘useful’ to consumers’ lives.
THE IMPACT OF A LOYALTY ECOSYSTEM
The ultimate aim for this evolved loyalty proposition is to fully envelope members’ lives and become an indispensable asset facilitating meaningful interactions on a daily basis.
The broader product and services remit this strategy creates, leaves the brand less exposed to individual market changes, and minimises the role for competitors in any one sector, as the consumer is conveniently able to access all their relevant products, services and content in one personalised, consolidated and customisable destination.
This ‘destination’ should be aiming to become the members’ first port of call for any of their lifestyle needs, able to deliver them the very best value because it knows them so well. This then becomes their most trusted source, as the deeper the consumer interacts, the more useful and relevant to them it becomes.
By putting your brand at the centre of this value exchange, you are creating advocacy, stickiness and engagement at a totally different level which in turn will translate into higher revenues, increased market share and longer-term ROI.
BBD Perfect Storm is consulting and advising clients across a range of industries as to how they can evolve from a Programme to a Platform and Ecosystem to drive business growth through increased customer-centricity.
Please contact us if you would like to chat about your consumer loyalty proposition.
Tel: +44 (0)20 3198 4329