Loyalty 2.0: Embracing Engagement-Based Incentives and Strategies

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Over the years, loyalty programs and strategies have evolved to reflect consumer behaviors. But, as the competition within various markets becomes increasingly fierce, cultivating said loyalty has become more challenging than ever. Thus, companies across industries are now working to embrace the ever-growing spectrum of digital channels to create communities and facilitate conversation.
Customer Loyalty

Over the years, loyalty programs and strategies have evolved to reflect consumer behaviors. But, as the competition within various markets becomes increasingly fierce, cultivating said loyalty has become more challenging than ever. Thus, companies across industries are now working to embrace the ever-growing spectrum of digital channels to create communities and facilitate conversation.As Paul Donovan, director, retail at SAP, highlights in 1to1 Media's recent feature, Channeling the Right Digital Demand Gen Strategy, loyalty strategies have moved beyond discounts and sales promotions, as consumers can easily turn to the competition with mere clicks. Instead, in this era of loyalty 2.0, brands must focus on encouraging engagement, for customer experience stands as the primary differentiator. By incentivizing consumers to share their insights and building brand advocacy, companies boost satisfaction and generate content.

Here, we speak with Matt Moog, CEO at PowerReviews, about the differences between transaction-based loyalty programs and engagement-based loyalty strategies, while also exploring how popular brands are already integrating such tactics to achieve increased reach and retention:

1to1 Media: Why are loyalty programs beginning to transition from transaction-based to engagement-based strategies?

Matt Moog: Many leading companies, brands and retailers alike, are starting to adopt engagement-based loyalty tactics because the way people shop is evolving. Previously, sales was the singular end goal for loyalty programs, which is why promotions like airline frequent flyer miles worked--if you spend so much, you get something in return. While these tactics are successful at driving repeat sales from a single customer, they fail to develop a relationship between a brand or retailer and the consumer.

On the flipside, engagement-based loyalty is focused on rewarding customers for engaging with a brand or retailer and providing various forms of user-generated content, such as product reviews and user photos. As a result, engagement-based tactics help foster relationships with customers and amplify reach by turning repeat purchasers into advocates who can influence other communities of consumers.

1to1: How are companies using gamification to engage users?

MM: Brands and retailers are using gamification to encourage people to write reviews and answer questions. By gamifying the process of engagement, companies can solicit content and other insights from customers in a way that's not only enjoyable, but also ultimately mutually beneficial.

For example, Step2, a children's toy company, incentivizes customers for reviews and other user-generated content with a game-like platform called the BuzzBoard. Shoppers who frequently contribute reviews and other content move up in the ranks, from New Bee all the way to Queen Bee, based on their level of participation. As contributors accumulate points, they also earn credits ranging from $5 to $20 toward future purchases. With this model, Step2 is able to engage its current customer base in a fun way, while fulfilling a need for customer contributed content, like online reviews and user photos, which help drive more sales in the long run. By generating such large volumes of content, Step2 also has the ability to syndicate reviews to retailers, like Toys 'R' Us and Wal-Mart, to provide SEO value and help consumers make purchase decisions.

1to1: How are companies using social media to engage users?

MM: Many companies are using social media to engage consumers in a variety of ways--from fielding customer service complaints and tracking brand-related conversations through hashtags, to engaging directly with the people using their products.

With the success of its hit series Game of Thrones (GoT), HBO used social channels to engage its audience, even between seasons, and amplify content created by GoT fans. Using hashtags like #RoastJoffrey, the network engaged fans, celebrities, and even some of the cast members, in the first ever social media roast of one of the show's characters. In the first two days of the roast, HBO captured more than 60,000 roasts across Twitter, Instagram, and Facebook. To reward continued engagement from fans, HBO has been active in replying and retweeting fans on Facebook and Twitter, and turned to Pinterest and Tumblr to showcase the best fan-submitted content, such as recipes and artwork. Not only did these tactics encourage fans to generate creative, useful content for HBO to share, but it also turned the show's fans into advocates who spread GoT related content in their own social feeds.

1to1: How do these techniques impact customer loyalty? What are the benefits and challenges associated with engagement-based strategies?

MM: Engagement-based techniques allow companies to motivate specific consumer behaviors and foster deeper relationships with their customers. By engaging customers, these companies can open a direct channel of communication with their users, forcing transparency as well as accountability on the company's part to acknowledge and act on consumer feedback. Additionally, when customers leave reviews and other types of content, they feel like they've left a piece of themselves and they're proud of it. They want to keep contributing and being a part of that community. Engagement-based techniques help to foster that participation and create advocates, amplifying the reach of the company's message into new communities.

Looking specifically at brands, especially those that sell products via retailers, the biggest benefit of engagement-based strategies, like collecting ratings and reviews, is that they create a direct channel to interact with customers who have traditionally just engaged with the retailer. On top of that, brands can then syndicate the user-generated content they're collecting which contributes value to and deepens their relationship with retailers. However, retailers too can take advantage of engagement-based strategies to create that between their business and customers.

The challenge, though, is that with engagement-based strategies, the behavior a company is trying to motivate must also have a direct and understandable benefit to the consumer. For example, every time you rate a movie on Netflix, the service's recommendation engine gets smarter. A company's request from consumers--whether it be social sharing or contributing original content--must clearly demonstrate its reciprocal value to the consumer.

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