For Love or Money 2020
The Point of Loyalty, 2020-05-01
MK: I’ve been buying this report (mostly Australia-focused) for a few years now and agreed with its author Adam Posner to publish a high-level summary that will be useful for most of us. It’s important to mention that this is my reflection on the report, which may deviate from the author’s point of view.
Data and Trends
Membership in loyalty programs is stable [4.x memberships/person], but the # of active members [using membership 1+ times/year] is down 20%+ over 5 years. Fatigue? Arguably the most critical point for all loyalty programs.
61% of users want brands to have loyalty programs. [MK: Knowing that loyalty programs are not free to the company, this puts extra pressure on the margins and the unit economics.]
Loyalty programs are essential for targeting Gen Y/Z.
What Loyalty Means to People
Behaviour (transactional)
I buy more (and more often) from this brand than from competitors [works for retailers, too]. #1
I make all of my category purchases from the brand.
I recommend the brand – a driver of behavioural loyalty.
I am prepared to pay a premium for the brand.
I go out of my way to make purchases from the brand [Michelin 3 stars :)]
Belief (emotional)
I trust the brand with my information.
I would miss the brand if it were gone – Gen X would be the most sad.
I post positive reviews of the brand on social media.
I remain with the brand even if they mess up (but fix it).
I love the brand – a key driver for Gen Z.
Do Loyalty Programs Work at All?
Indeed they do. Influence on: decision to purchase (2/3), how much and how often (1/2), recommendation (1/2).
Add to overall brand experience (2/3).
[MK: Important: firms need to be upfront with their customers about the existence and benefits of their loyalty programs. The loyalty behaviours of people who learned about the program before and after a purchase vary substantially.]
People are increasingly using the benefits of programs —> finally the programs work! And Baby Boomers are make the most of them (statistically speaking).
Evolution of a Member
Reward and remunerate – seeking financial benefits (discounts or rewards). 70% of members are here.
Acknowledge and appreciate – surprise and delight [MK: status game].
Make life easy – reduce friction and complexity.
Personalize – goods and services match consumption patterns.
Socialize – collective and consumer benefit.
Personalization
Company Perspective
Past purchases and user data —> personalized offers and benefits
Sending reminders to restock
Special offers to educate or increase consumption
Seamlessly authenticating the member to ensure they can benefit from customized offers.
Member Perspective
Medium – using my preferred channel with the highest engagement.
Message – I like the message form and relevant content.
Member – my needs and personal preferences are being understood.
Moment – I’m most responsive to the message at this particular time.
Motivations to Join
Convenience - I already buy from a brand, let’s get rewarded. Less important now as the focus is more on the benefits rather than belonging.
Transactional - I buy from a brand and the benefits and rewards are meaningful. Increasingly the key motivation.
Emotional - I love the brand. Not as important for anyone other than younger men.
What’s in it for Me?
Money - By far the most valuable thing. Doesn’t matter much if it’s immediate or deferred (next purchase) cashback.
Time – if there’s value to be had, people don’t mind spending some time.
Ego – important, but also need to look at who pays for the product (ex: travel – leisure or business).
Changing Behaviours
No change – 51%. Huge opportunity for improvement.
Spent more, purchased more often– 20%. The sweet spot.
Spent more to get rewards sooner – 15%. Can be driven by targeted campaigns.
Purchased more to get rewards sooner – 14%.
Understanding how close members are to their rewards (vs. confusing them into NOT redeeming) is a key factor.
Learn, Earn and Burn – What Could Go Wrong?
Learn
Brands fail to explain what the rewards are for.
Accessing rewards may be cumbersome.
Earn and Burn
Poor balance of earn and burn kills value of a program.
If members go out of their way and still don’t get rewarded enough – they drop.
Rewards expiration between any meaningful accumulation kills loyalty.
Data Security and Privacy
50%+ people are OK with sharing their data; 24% are not.
Members have heavy distrust for loyalty programs’ ability to personalize the offers.
Data protection is increasingly becoming more important.
Frictionless Mechanisms
People are increasingly dropping their loyalty card use in favour of digital cards.
Integration of loyalty + payment is the winning formula. Even separate digital loyalty and payment work well, but not the physical cards.
Calling It Quits
Evolve, not just close