Dec. 4, 2011
Digital is clearly delivering value to both people and businesses and dramatically remaking the way in which we understand how the two connect. For businesses to continue to win, they need to understand their customers across channels and respond to their needs better than their competitors. This requires a loyalty philosophy — to think about the customer first and act on these needs — and for many businesses it should also increase the importance of a loyalty program as the glue between new digital areas and the offline world.
Unfortunately, in too many cases, the new digital channels and the loyalty program are disconnected. Some businesses discuss shifting loyalty communications from print to digital through online coupons, emails and mobile apps but often these approaches have a cost-saving objective. Plus, if these communications aren't working for businesses offline then deploying them online is not likely to change this. Digital is creating the great opportunities for SoLoMo (social, local, mobile) but if you can't deliver these at a personalized or near personalized level, then you are behind in the new race to win. Retailers like Tesco and The Kroger Co., that have been successfully delivering 1:1 personalization offline for a number of years, will find it easier to transfer this personalization to digital channels, in line with customer needs and acceptance.
Even more concerning, the latest digital mechanic is viewed as a shiny new toy, worthy of its own marketing team and budget and then deployed outside of the loyalty program and in isolation of other customer-facing levers. If we all understand the potential of the digital space and of customer loyalty, why are these solutions not more frequently intertwined?
Digital is much more than a cost saving lever, a new business unit or a tactic, and businesses with customer data or loyalty programs can benefit by thinking much more strategically about the role of digital in their efforts to become customer-centric. Digital is driving more opportunities for businesses to succeed with customer loyalty because it can enable a connected customer experience and comprehensive view of the customer for the business. As digital touch points increasingly become an important way to reach and engage customers, digital is also transforming customer loyalty.
There are two opposite forces at play. While digital solutions are putting pressure on the established ecosystem of loyalty programs, they are simultaneously creating new opportunities to engage and understand customers.
Customer loyalty programs should be viewed as a key platform for growth in that they can connect the offline and online world by leveraging these digital-enabled solutions:
Availability of new data and insights: Customer-level data is one of the major benefits of a loyalty program and digital mechanics can now generate this data without the need for a separate infrastructure and reward framework. This significant amount of data, if harvested correctly and used in conjunction with existing data, can help businesses to better understand each individual customer and improve communications to better meet their needs. Insight from websites and social media can help businesses to understand intent to purchase or provide a view into advocacy and influence that can measure each customers' loyalty to the brand or business. Too many businesses think of these channels as outbound levers and forget the potential to gather the new data and insight from them. For instance, a business with a website may know which parts of the website are clicked on the most, but they may not be gathering the data at a customer level like purchase intent data or viewing preference. Personalizing the website and even a mobile version for individual customers can drive a new and proactive engagement with the customer.
New mechanics to engage customers when, where, and how they want to be engaged: Customers have an abundance of choices and opportunities to engage in the digital universe. It is important that loyalty strategies are included in the expansion of communications to these new digital channels so that the business can maximize its opportunity to reward and engage customers in the most relevant way. Many opportunities, from Facebook pages and geo-location to smart tags and mobile apps, create great opportunities to engage loyal customers, but without thinking about the customer first these solutions can just create noise and possibly loyalty erosion. For example, in the near future, it is entirely possible that customers arriving at a shopping mall could be met with hundreds of mobile offers from the stores and brands that have geo-fenced the area. Employing a "test and learn" philosophy as these new solutions are deployed is critical to accurately measuring customer engagement and preferences. Establishing the right metrics around the customer can also aid in determining the degree to which these new communication vehicles align with an overarching customer loyalty program.
Digital data in traditional "mass" media channels: Digital opens up some previously closed opportunities in the media space. With the data in digital media at the individual level, it presents opportunities to execute customer-level targeting across these channels and to enable measurement that connects online or digital exposure data with offline sales data to understand media effectiveness like never before. This not only applies to online advertising but even channels like TV through digital set-top box data, digital TV and video on demand. Loyalty data can therefore drive a new set of opportunities beyond the traditional boundaries associated with the use of customer data. Through partnerships in the online and TV spaces we are finding a growing appetite for the granular solutions that drive performance and provide the clear ROI and accountability that CMOs are seeking.
New digital payment solutions: A number of businesses have launched e-wallet programs, and some also have created their own transaction currencies. While these programs can represent the threat of disintermediation of loyalty programs, they also represent great opportunities. Customers only carry one wallet (with many cards) and likely this will be similar in the digital world. In fact, in the digital world people are more likely to carry far more cards (payment, memberships and loyalty) and offers than they can remember and certainly more than they do with physical cards and coupons. The danger here is saturation because customers will still make choices based on the information that they have at hand — so consistently establishing a presence in the customer's mind and the consideration set is key. Loyalty programs can help businesses differentiate and support their payment solution strategy by establishing top of mind awareness, trust and superior value with the loyal customer base. In the digital world, this could be enhanced through effective collaborations and partnerships that connect the experience for the customer and add incremental value, and that drive additional commercial value from a business perspective.
Reinforcing trust: New channels, new data and new service providers are adding complexity in the way businesses manage customer preferences and data. As privacy expectations continue to increase rapidly with digital solutions, trust and value are key for customers, particularly if they are going to share their information with a company. Being transparent about privacy and genuine in the incremental value that the business can deliver to customers are essential. Loyalty programs are a great platform for reinforcing and maintaining trust by delivering value throughout the shopping experience.
A loyalty philosophy and approach remains and will remain a significant competitive advantage for the companies that make this meaningful to customers. Loyalty programs should not be cast aside as an afterthought with all the shiny new digital toys around, but considered a key platform for growth and for connecting the online and offline world for customers and the business.
Matthew Keylock, Senior Vice President, New Business Development & Partnerships, dunnhumbyUSA is recognized as an industry leader in building winning customer strategies, helping to transform some of the world's largest enterprises, including major retailers in North America, Europe and Asia. (Photo by Kartik Malik.)