The Journey to Customer Loyalty
Customer-facing companies typically evolve through a predictable set of data ‘life stages’. Their journey begins with no systematic collection of customer interaction data and basic reporting, moving to a strong program with rich insights. At Ellipsis, we categorise companies into 3 groups depending on how customer data is used in the organisation. We have labelled these Loyalty Apprentice, Loyalty Craftsman and Loyalty Artisan.
It’s important to note that the proposed changes to Australian privacy laws will restrict how customer data can be harvested, used and stored, impacting the journey to customer loyalty while creating challenges for each group.
1. Loyalty Artisans
With the environment already in place to personalise communications at scale some of these organisations are monetising the data itself as Retail Media Networks. Time to start using the data to confirm hypotheses around customer needs and preferences rather than a place to look for behavioural patterns to exploit mechanically. Loyalty Artisans will continue to use their first-party data to get, keep and grow their existing customers’ spend while aggressively harvesting more data about customers to compete as digital media channel providers.
They will continue to invest in Customer Data Platforms (CDPs), the trending, must-have technology they need to manage the enormous volumes of data they are gathering about customers. Tealium, Amperity, Salesforce, Adobe, Microsoft, SAP, and Oracle are all in the CDP race along with many contemporary loyalty platforms including SessionM, Capillary and Clutch which offer CDPs as a core component of their solutions.
These data owners include banks, telcos, airlines, and insurance companies, which all come from an existing class of organisations that already know their customers’ identity because their relationship is contractual... They do not need a loyalty program to identify customers, and they have other objectives in their “data for value exchange”.
Increased share of wallet is one loyalty goal for these organisations, which want to increase the amount of data they have about each customer. For example, Slyp in Australia, funded by banks, inserts retail shopping receipts into banking apps, giving customers (and the bank) a central, more detailed view of their purchases.
In Australia, the contenders include Woolworths Cartology and Coles 360, and stay tuned for a Wesfarmer’s digital behemoth on the back of OnePass data.
An Example...
Woolworths Everyday Rewards
Woolworths Cartology is a retail media partner using data-drive marketing to help clients to connect with Everyday Rewards members. By using loyalty and internal shopping data Cartology can target ads to customers while they shop in-store or online. Leveraging data analytics and advanced technology to help meet the evolving needs of shoppers.
The Everyday Rewards Program also incorporates Eagle Eye's AIR platform to enable real-time personalised digital promotions. With Cartology's insights and Everyday Rewards benefits, customers can enjoy a more convenient and rewarding shopping experience.
2. Loyalty Apprentices
Launch a program, start collecting permissioned first party data asap.
Stick with the basics first as customer data becomes available and the temptation is to communicate over and over. With new data available for the first time, begin the process of detoxing from mass discount offers, discounting is less and less effective at increasing sales, let alone margin, price elasticity has decreased significantly in many retail categories. If you have an obsession, make sure it is timing. Use your new customer data to track when valuable customers are ready to buy again and make them an offer then and only then.
At the opposite end of the loyalty scale from the Artisans are what we might call “Loyalty Apprentices”: and the future for this company class is “Some panic, much haste”. Their internal monologue can be summarised as: "Outsourced, targeted marketing is disappearing! How on earth will we acquire new customers? We have little permission, data, or ways to capture it. And we can’t outsource targeting anymore."
Many of these players will commission a loyalty program of their own to start collecting first-party customer data.
These typically smaller organisations are now in a hurry, so cookie-cutter programs such as ‘spend to earn points/coupons’, or ‘cash-back’ might seem fine, in principle.
A good program should increase customers’ lifetime value, not just record their behaviour. Without compelling propositions (something other than just “discounts as rewards”), scan rates will languish, and removing transaction friction will become a predictable, critical need.
But apprentices who aspire to become Craftsmen (and ascend to the middle of our loyalty mastery spectrum) will be challenged by the tight supply of the marketing analysts needed to use their shiny-new customer data effectively. The market will of course respond and provide external suppliers of such services but caveat emptor.
Not all Loyalty Apprentices will launch their own programs. For many, it will be simpler to start buying marketing services from Retail Media Networks. This is especially true for suppliers to these retailers.
3. Loyalty Craftsmen:
Continue with enthusiasm. Treat marketing as a Test and Learn laboratory and customer data as the feed stock needed to reduce discounting and a single minded appeal to price.
Occupying the middle ground are the Loyalty Craftsmen: companies which have an existing loyalty program that is collecting customer data and requires additional marketing and technical infrastructure to unlock the full benefits.
These Craftsmen will be challenged by tightening privacy regulations because they lack integrated systems, making consent tracking, the right to be forgotten and data portability difficult to achieve. Artisans have already invested in the infrastructure to make that work, and Apprentices have little data to manage anyway, but the Craftsmen may be forced to hit pause on extending their first-party marketing activity while they build the capability to comply with both new regulations and more demanding consumer expectations.
If you are in this position, we recommend you continue to use your program to engage and reward customers while complying with current regulations (maintaining member privacy achieves little if it’s because all your members get bored and leave).
Making full use of member data whilst complying with this new regulatory environment requires a concerted effort and management commitment. How much effort depends on the complexity of your current data sources, your plans to build a data asset and how it will be used.
Alternatively, Loyalty Craftsmen can choose to stay where they are, deciding to optimise their current value proposition, ensuring it continues to use data in compliance with new regulations.
But, as more brands succeed in becoming Loyalty Artisans, increasing customer expectations for personalised content and offers, that static position will become increasingly non-competitive. If they are not moving forward, these organisations may find themselves moving backwards.
An Example…
MyMacca’s
MyMacca's Rewards provides customers a range of offers and discounts with 100 points earned for every dollar spend. The loyalty proposition can be further enhanced by leveraging customer data to provide more personalised content and offers with the objective to reward and further engage customers. Whilst complying with current regulations.
The journey to customer loyalty should allow decisions to be based on insights and will combine insights and technology to execute your strategy. Remember to keep it simple, you don’t need to do everything to stay relevant.
We are Ellipsis, the Loyalty Experts. We help you measure, manage and grow customer loyalty. We’re here to help, please get in touch…