Loyalty is a business imperative. Over the years the concept has become known by a variety of names: loyalty, engagement, advocacy, etc. No matter the label we put on it, brands' need to cultivate a base of loyal and devoted customers is paramount to driving the long-term, sustainable success of any business.
While many of you may be charged with specific tactical responsibilities, as we move into 2011, I challenge you to look outside your proverbial box and take a more strategic look at loyalty. Over the years loyalty has become compartmentalized, often viewed primarily as a patchwork of programs and tactics that reward loyal customer behavior, especially repeat purchase. Yes, these initiatives are an important part of loyalty, but they are one aspect of a bigger picture.
In the broad sense, loyalty is not a destination, but rather a journey that is driven by a brand's business objectives. One of the biggest trends we are seeing is marketers looking at loyalty with this broader lens -- addressing loyalty from a strategic business perspective first, and then acting tactically to build deep, long-lasting customer relationships.
As you determine how best to create and implement the initiatives that will drive your overall loyalty strategy, here are 10 trends we see unfolding:
1. Loyalty will focus more on emotions than on rational, incentive-based initiatives. Behavioral economists tell us that economic decision-making is 70 percent emotional and 30 percent rational. This is why incentive-based loyalty programs that tend to be rational do not work well. It's the emotional side of the decision-making process that creates connected, passionate, engaged customers.
2. The goal of customer loyalty initiatives will be to engage customers. Marketers now realize that although spend and number of transactions are important, customer engagement is the holy grail for loyalty initiatives. With engagement comes loyalty, advocacy, trust, passion -- the soft side of the customer relationships that directly impacts the bottom line.
3. Companies will increasingly look at how customer engagement and employee engagement work together to drive bottom line results. A 2009 Gallup study quantified the impact of customer and employee engagement. The research reveal that those in the upper half on customer engagement and the lower half on employee engagement, or vice versa, get a 70 percent boost in bottom-line results; those in the upper half on both customer and employee engagement get a 240 percent boost.
4. Voice of the customer programs are an important strategy for brands, and we expect to see greater focus on them in 2011. A recent IBM study with more than 1,500 CEOs from across 60 countries and 33 industries discovered that "getting closer to the customer" is a top business strategy and area of focus for CEOs over the next 5 years. In fact, 88 percent of the CEOs surveyed said this was a key area of focus, followed by 76 percent saying that "insight and intelligence" is also a key area.
5. Relevancy will be a key driving force of customer loyalty and engagement. Today's customers want loyalty programs to be "about me" -- individual, relevant, meaningful, etc. Personally relevant deals are the second most frequently chosen reason for spending more with a company, mentioned by 48 percent of people, according to new research by Ipsos Mori and The Logic Group. Data collection and usage is extremely importantin building relevancy. Brands need to use the information strategically that they collect to show customers they're listening and give them what they're asking for.
6. Marketers will take a more strategic look at in-the-moment marketing, looking at how best to use all customer touchpoints, including mobile. ABI Research reports that businesses are poised to spend $1.8 billion on location-based advertising in 2015 as part of their overall mobile marketing budgets. However, with Congress looking to regulate net neutrality and cell phone marketing, marketers are going to have to take a more strategic, generational look at how they can most effectively use in-the-moment marketing, including mobile. This is certainly not a one-size-fits-all communication channel. The most successful loyalty initiatives will be those that are relevant in terms of both messaging and communication.
7. Cause-related marketing and corporate social responsibility programs that are aligned with strategic corporate goals will effectively drive loyalty, especially with millennials. According to a recent survey by Cone, while interest in cause-related marketing grew among the general population between 2008 and 2010, social and environmental causes had a significantly greater influence on the purchase decisions by millennials than by other generations. If marketers are looking for 18- to 34-year-olds' receptiveness to branding, social and green issues are a good place to start, with 85 percent saying they would switch brands because of such marketing and 73 percent saying they would try a new brand.
8. The restaurant industry will be investing more in loyalty initiatives. Just-released research conducted by the National Restaurant Association in partnership with Loyalty 360 and rDialgue found that 84 percent of respondents plan to invest more in their loyalty initiatives because of their proven ability to drive business growth.
9. The future of debit rewards is going to change. The demise of the debit card loyalty program has been greatly exaggerated and the entire loyalty model is going to be dynamic and changing rapidly over the next few years. Expect to see growth in partnership programs and a greater focus on the coalition model. The key to making any of these programs successful is creating a currency that works.
10. Marketers will integrate social gaming into their loyalty initiatives. Social gaming has become a widespread activity across practically all demographics, with AllFacebook.com reporting that there are now 200 million people playing games on Facebook every month; 24 games have more than 10 million users per month. Traditional incentive-based marketing does not drive the level of consumer participation that can be achieved via gaming -- and it's this sought-after participation that builds lasting relationships, engagement, brand affinity, and brand loyalty.
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About the Author: Mark Johnson is CEO of Loyalty 360 - The Loyalty Marketer's Association