What Does Success Look Like for Customer Loyalty Programs in the Digital Age?

Without a single view of the customer, it's not just marketing dollars that are at risk, in some cases it can be the entire business.

How should customer loyalty be rewarded in the digital age? For many companies it's about ensuring the highest-value customers are incited in ways that drive engagement. Without context, however, loyalty program redemption can come at a cost to the business.

As a global head of consumer insights at a leading food and beverage brand told Capgemini, customer engagement can only be strengthened by revising redemption programs: "Consumers are becoming more and more demanding. The entire redemption and reward mechanism, and everything associated with it, needs to become much sharper."

One of the main ways to do that is to link data analytics to business value. Only then can brands reward the behaviors they want to see from their most important customers and crucially see the impact on the bottom line. Airlines for example, want their best customers to refer frequent flyers like themselves, not friends and family who rarely ever travel.

Using individual analytics provides brands with the context that may help to drive future business value, too. If a rather dishevelled 20-something is travelling economy, it would be helpful for the airline to know that this is in fact the daughter of a high net-worth individual. A bump up to business lounge access may therefore help to lay the groundwork for a profitable future relationship.

Brands in all sectors need to get on top of data governance. For loyalty programs to succeed, brands need end-to-end traceability of everything that a customer does. Only then can they link loyalty programs back to the business value they deliver. That means data governance must be stepped up. Companies need to make it easy for customers to join programs, but not so easy that lost or forgotten cards can be replaced with a single signature on a new form. Multiple views of the same customer weaken a brand's ability to reward desirable behavior. If those multiple views carry no useful data, they can be much worse than ineffective; they can actually start to undermine business activity and destroy value.

Without a single view of the customer, it's not just marketing dollars that are at risk, in some cases it can be the entire business. When the CFO of a global mining company was renegotiating a corporate finance contract, his preferred bank was unaware of a connection between the CFO and a female customer who had been tagged for fraud and locked out of her account.

It would have been helpful for the bank to have known that the female customer was in fact married to the CFO, especially given she'd been unable to resolve the problem after several painful calls with customer service representatives. The CFO eventually threatened to withdraw the entire company's business. A single, contextual view of one of its most important customers would have spared the bank a great deal of pain.

Strong data governance should lie at the heart of every loyalty program. Organizations must build profiles that provide a rigorous understanding of the needs, attitudes, and behaviors of their most valuable customers. These 360-degree views must be enriched with data taken from customer interactions across every touchpoint, from point-of-sale to mobile app.

Organizations must also realize that loyalty is the end result of sound business practices. It's not the means. Obsessing about loyalty can come at the expense of healthy customer interaction- interaction that should make a customer feel important and valued, not like a stepping stone to revenue. Loyalty is a by-product of engagement. Focus on engagement, backed by individual analytics, and brand loyalty will follow.