Understanding your customers is key to building real, lasting loyalty. The next generation of loyalty programmes is based on cultivating genuine, intimate relationships with your shoppers through a deeper understanding of their individual needs, preferences and behaviours.
True loyalty is in essence a balancing act between three things:
1. Rational loyalty, which focuses on transactional and quantitative aspects of the programme, such as earning points by making purchases and later exchanging those points for various forms of value. This is where most loyalty programmes focus, and is partly why so many loyalty programmes appear similar in nature;
2. Behavioural loyalty, which considers a customer’s historical patterns of behaviour, such as a customer choosing to only fill up at a certain petrol station, not because they necessarily prefer that brand’s petrol or service, but simply because it’s on the way to work and is convenient to use; and
3. Emotional loyalty, which aggregates the customer’s connection with the service offering and is influenced by a range of “soft” factors, including developed trust, consistent service levels, alignment of values and purpose, meaningful dialogue, and repeated positive experiences.
The most successful loyalty programmes balance these three different aspects to create relevance, value, and accessibility, while building deep emotional connections that create lasting loyalty. But whether customers actually engage with the loyalty programme or not largely depends on the loyalty programme being able to answer positively to the following three questions:
1. “Is it worthwhile?” – in other words, does it add value to the customer’s life, does it provide a positive return on their efforts, and is there dialogue with the loyalty provider that makes the customer feel understood?
2. “Is it relevant?” – many loyalty programmes hardly ever communicate with customers or communicate poorly. In our tech-enabled, data-driven environment, there’s no excuse for poor or impersonal customer communication, and customers know this.
3. “Is it easy?” – in other words, are the forms of value represented by the loyalty programme easy to access? Is it simple to extract value from participating in the loyalty programme? Can loyalty value be easily exchanged at a variety of retailers or other service providers? If not, expect customers to disengage and adoption rates to decline.
In future, tools such as AI will play an ever-greater role in personalising loyalty communication and value offerings at an individual level. With data, retailers can understand their customers better. Using transactional and non-transactional sources of data, retailers can build well-rounded profiles of customers that will improve how they communicate, how they personalise loyalty benefits and how best to retain them as active customers.
In the coming years, four key aspects will shape the loyalty industry, namely:
1. Individualisation – We are in the Experience Economy and there is a growing recognition that a one-size-fits-all approach is no longer good enough. Customers expect to be understood, to receive relevant communication and to engage with programmes on their own terms.
2. Partnerships – South African loyalty programmes have invested huge amounts of time and energy in expanding their partner networks. Expect more partnerships between non-competing and value-adding brands and loyalty programmes over the coming years.
3. Gamification – This is all about increasing customer engagement by adding elements of fun, entertainment and excitement to the process of interacting with the loyalty programme.
4. Customer journeys – by pulling in greater amounts of data from multiple sources and using AI and machine learning to develop a deeper understanding of various customer journeys, loyalty programmes are better able to predict when certain types of customers are likely to disengage from the loyalty programme and can introduce incentives to keep them engaged. This is particularly significant considering the Generation Zs, who are less brand-loyal than some of their older generational counterparts.
By: Deon Olivier, Customer Engagement Consultant at Innervation