Customer Loyalty

Behavioral Science Principles + CX = Retail Loyalists

Like many people I begin the day by checking my email, a task which normally includes sifting through no less than 30 emails from retailers vying for my attention. And while some see this as an opportunity to mass-delete, I am excited to begin a new conversation with brands who want to have me as a customer (like most conversations, some are more engaging than others, but that’s a topic for another day).

People have hobbies and I consider shopping to be one of mine. Sometimes that includes making a purchase, other times I’m simply browsing. I actually enjoy the experience and appreciate the effort and thought behind every floorplan, display window and home-page. Like many consumers, I make a fair amount of my purchases online. Yet, when given the choice, I prefer to escape to an actual store (gasp!) where I can see colors and touch fabrics in person. I understand the hours of thought that went into picking precisely which button to use, or what the exact shade of red should be.

Two decades in various retail roles (from specialty and department store management, to buying, to private label product development) have hard-wired my brain so I cannot help but appreciate these details as I browse each aisle. It makes me absolutely giddy. This happens regardless of the type of store I’m visiting, from specialty apparel to home improvement – but in full disclosure, it hasn’t always been this way. In my past life I reached a point where I could not separate shopping from work. I boycotted the Black Friday madness and no direct-mail offer was rich enough to lure me into a store. But true love never dies, and after my long hiatus, shopping and I have picked up right where we left off.

I am a merchant at heart; always will be. It’s as woven into my sense of self as much as any fabric ever could be. And while not every person’s life story is as closely tied to the world of retail as my own, every person is a consumer of something – it’s one thing we all have in common. We choose what brands to interact with on a regular basis, some because we want to and some simply out of necessity. That’s why retailers today need to understand how people make decisions… what’s happening rationally in their heads and emotionally in their hearts that triggers the choices they make. This is my passion today, and over the next few weeks I’m going to merge my past and my present by serving up research-based behavioral science principles that retailers should consider as they work to strengthen their bonds with customers and save themselves, quite literally, from deletion.

I start with my favorite principle – the Peak-End Rule.

How people remember an experience is not a mental summation of the overall experience. Instead, our memories are overly biased by both peak or emotionally-intense moments as well as how the experience ended. In their groundbreaking 1993 study on the peak-end rule, Barbara Fredrickson and Daniel Kahneman exposed people to two aversive experiences: in the short trial, participants in the experiment immersed one hand in water at 14 °C for 60 seconds; in the long trial, they immersed the other hand at 14 °C for 60 seconds, then kept the hand in the water 30 seconds longer as the temperature of the water was gradually raised to 15 °C – still painful, but distinctly less so for most subjects. Subjects were later given a choice of which trial to repeat. Surprisingly, a significant majority chose to repeat the long trial, apparently preferring more pain over less. In reality, it was the subjects’ memory recall that the long trial ended better that swayed their decision.

Since not everyone has a tank of 14 °C water lying around to experience this themselves, simply think about the last time that you traveled by air. If you arrived at the airport on time, cruised through security, got the seat you wanted, your flight left on time and was smooth, yet when you landed, the plane sat on the runway for 30 minutes, or worse, your luggage was lost – how would you rate the overall experience? While many things about this trip went well, it is the way the trip ended that you remember most and are likely to share with others when asked “How was your trip”?

This leads me to ask: What are the peak moments during a shopping experience that successful retailers are creating for their customers today? Not everyone is happy about parting with their hard-earned money and most of us don’t enjoy waiting in line to do so. How could the end of the shopping experience (think check-out and delivery) be changed to become more positive and memorable? Please share your thoughts below and share this with others with a similar passion. And, be sure to check back soon for the next principle I will tackle: Goal Gradient Hypothesis. Until then, happy shopping!

Inside the Mind of Decision Paralysis & Why Loyalty Marketers Should Care

I am a data driven consumer. I am a millennial with disposable income (though less and less with two kids). I am conscious about a company’s ethics and their social giving. But the most important thing you need to know about me as a consumer? I suffer from decision paralysis.

That is to say, I can’t make up my mind. And when I do? I still haven’t, not really – with my brain always playing a game of “what if” leading to increased regret and decreased satisfaction with my very own purchase decisions. And unfortunately for you, there are millions more like me, and a consumer with buyer’s remorse is not very likely to become a brand loyalist.

So how do you help us snap out of it?

The first step is to understand the two psychological barriers responsible for this inhibiting behavior: Loss Aversion and Choice Overload.

Ingrained Traits

Loss Aversion is ingrained into human’s DNA. It is the theory that people have a higher proclivity to avoid losses than they do to acquire equivalent gains. This behavior manifests because humans are hardwired to defend what is already ours and therefore a loss going out from “our pile” creates more negative satisfaction than an equal gain going into “our pile” creates positive satisfaction. (i.e. the sadness I feel when I lose $100 outweighs the joy I feel when I find $100.) Because the loss of something is more painful than the equivalent gain, we work harder to avoid it. In the context of purchasing, this desire to prevent loss manifests itself in a nagging voice saying:

“Is this really the cheapest website to purchase through?…will the price drop tomorrow?…I swore I saw this item less expensive somewhere else…”

Rationally, someone with decision paralysis could be 100% willing to pay the advertised price for the good they are considering buying, but the idea that they aren’t getting the absolute best deal possible (therefore leaving money on the table), stalls the conversion. In short – the brain has a bad case of FOMO.

And while Loss Aversion is ingrained into human’s DNA… it is Choice Overload that is ingrained into America’s DNA. Western culture puts an emphasis on individuality, and at the core of one’s ability to be unique and autonomous is the ability to choose. Ideally, from an infinite number of variables that don’t constrict self-expression. The problem is that humans weren’t designed to intake and compare endless data – in fact, the average human cognitive ability cannot efficiently compare more than five options with any level of great detail. Those suffering from choice overload find their heads swirling with the likes of:

“What utility am I passing up on by NOT purchasing choice B?…is this bonus feature worth the extra $25?…I can see myself using both options in different circumstances…”

Essentially, when faced with too many options, the consumer attempting to maximize their decision becomes overwhelmed to the point where fear of making the wrong decision prevents them from making any decision at all. If you are lucky enough that this concept is completely foreign to you, simply Google “Jam Study” for a famous example.

To jam or not to jam, that is the question.

Removing the Barrier

Now that you understand how our complicated brains are wired, I am here to tell you there is hope. How can a business conquer the hurdles of decision paralysis to engage new customers in a manner which sets them up for a successful long-term relationship? Start by incorporating an ingredient essential to any healthy relationship – trust. The #1 way to get a consumer’s foot in the door is by making them feel at ease with committing to the purchase. Over-stimulated folks crave a certain level of trust when entering a relationship otherwise, things will never work out between you.  (And it’s not them, it’s you – “advertising practitioner” is one of the least trusted jobs in America, scoring just above Member of Congress, but not quite as trustworthy as a lawyer…or auto mechanic…or well you get the idea).

So, help them overcome that negative stereotype by offering the following:

No Questions Asked Returns 

Odds are they won’t take you up on it, but simply knowing the option exists can ease their racing mind. This is especially important for e-commerce retailers where the consumer will not have been able to physically examine a good prior to purchasing, as well as for first-time consumers who do not have experience with a previous product to establish the brand standard. Flexible returns showcase confidence in your value prop, and that confidence is passed on to the consumer.

Become a Psychic

No, not literally – but you should be able to predict what consumers are most likely to ask. Data from existing customers should certainly play a role in this equation, but another great and underutilized resource is UGC (user generated content). Spend some time researching on the internet to see what topics your audience are organically gravitating towards. Once discovered, make sure this information is easy to find – the last thing you want is a consumer leaving your website to do their own research only to stumble across a competitor’s offering. The longer someone with decision paralysis is hunched over a computer analyzing every possible option, the more likely they will be dissatisfied with their final decision – even if it does end up being your product they select. Preemptively answering questions creates the sensation of “this is exactly what I am looking for” and gives the green light to proceed with the purchase immediately.

Make a Good First Impression

Seems obvious – because it is obvious. But too many times a hyped-up sales pitch is followed by underwhelming results. What is promised must at least match what is delivered, otherwise the consumer will feel like they have lost out on some expected gain, and we know that losses are a very powerful thing. It’s important to remember the moment of success for your business is not when you receive a consumer’s credit card number. It is the moment they realize they find so much utility from their relationship with your brand that they will gladly provide it for you again (and again, and again).

The Big Takeaway

Simplify where you can. Imparting confidence upon potential consumers begins with taking the time to understand the root of their uncertainties. Rational consumers are nervous about making the wrong decision, especially in unfamiliar industries. The goal of loyalty is to create an emotional bond between the brand and consumer which will supersede the brain’s default desire to undergo a thorough rational analysis. The result? Your brand’s product is always the right decision in the mind of the consumer. No further discussion necessary.

PODCAST: How to Build Brand Loyalty Today and Tomorrow

Consumers are human beings first. This is important to keep in mind when you think about building customer loyalty.

On the surface, that can be easy to remember, but you’d be surprised how easy it is for people to forget that. So many businesses today are in this downward spiral of reducing customers to a statistic or entries in a database. As marketers, we often think of consumers in segments and there are good reasons for doing that, however – it’s critical to remember at the end of the day, you are dealing with human beings – and you have to understand what makes them tick in order to influence them. And that’s what marketing is all about.

The shift over the last year or two to the focus of AI over big data has been very helpful in solving the problem of dehumanizing consumers. Big data was sort of a useless term – it didn’t really tell us anything. Artificial intelligence is essentially a way to move beyond thinking of consumers in terms of numbers and humanize it into the experience.

Maritz Loyalty’s VP of Loyalty Strategy, Barry Kirk, was recently featured on the On Brand Podcast: How to Build Brand Loyalty Today and Tomorrow with host Nick Westergaard. In this episode, Barry expands on the recent shift to Artificial intelligence, as well as:

  • How loyalty is today
  • The modern forms of brand loyalty
  • The impact of neuroscience on marketing
  • Tips on how to focus your own customer loyalty program

Click here to listen to the full podcast!

Four Reasons Why AI Will Change Loyalty Forever

At Maritz, we are making a commitment to AI. This is not a “here today, gone tomorrow” trend. It’s going to become an invaluable tool which transforms industries. Loyalty is one of those industries. In fact, loyalty presents some unique opportunities, which makes it ripe for AI functionality.

Just this week, we partnered with our client, HSBC, on a press release which talks about an AI model we recently piloted with their customers. We trained an AI to predict reward preferences for each cardholder, and then sent a promotional email to each cardholder based on that preference distribution. The results were incredible. Of the cardholders who made a redemption, 70% redeemed in the category that the AI promoted to them. That result tells me that the customers were delighted by this campaign. They received the perfect message which scratched an itch they weren’t even sure they had yet.

We predict it’s such a big part of this transformation, that we are partnering with the Incentive Research Foundation (IRF) in a study focusing on the impact and potential of artificial intelligence and machine learning on the rewards and recognition industry. IRF president Melissa Van Dyke says, “For over half a decade IRF has been discussing how big data and personalization are the next big frontier for the incentive and recognition industry.  We have also repeatedly discovered that many programs owners do not know the power of the data their incentives and loyalty programs offer them.  Artificial Intelligence and predictive analytics are the tools industry can now use to take these trends and turn them into actionable information that makes their programs more motivating.”

This is just the tip of the iceberg. There are countless applications for AI in the industry, and we are excited to be on this journey along with our incredible clients. Here are a few reasons why AI is so important to the future of loyalty:

  • The width and depth of loyalty data. Customer Loyalty has better data than just about any industry. Each touch point with a customer is a chance for you to collect data – every email, every visit, every purchase, every reward. This creates a data story for each customer, but the book is thousands of columns wide and millions of rows deep. A human simply can’t read it well. Only with our modern machine learning methodologies can we take that incredible scope of data and make use out if.
  • The need for personalization. The very fundamental aspect of loyalty programs is that your best customers want their experience with the brand to feel different than the average customer. There are monetary benefits, sure, but the non-monetary benefits can be just as important, if not more. Calling the customer by name, knowing their preferences, knowing their history with the brand are things that make that loyal customer feel that one-to-one connection. With AI, personalization becomes more feasible at scale than ever before.
  • Keeping points fraudsters at bay. The prevalence of fraud, to attack the customer’s account and his or her point balance is a threat that is unlikely to go away. AI will be a valuable ally in the prevention of fraud. Many current fraud prevention systems are based on rules – if this specific thing happens, raise a red flag. This is mostly effective, but all rule-based systems are a little bit like a levee. As soon as the fraudster finds the rule, they can break it wide open and exploit the system again and again. AI fraud prevention systems work a little differently. They adapt and learn, so that the holes in the levee are patched and can never be exploited in that way ever again.
  • The future interface: chat. One very tangible example of AI’s rise is the voice assistants – Google’s Assistant, Amazon’s Alexa, and Apple’s Siri. Customers are becoming incredibly comfortable chatting with an AI system daily. This trend will be felt in loyalty too. As this technology gains maturity, the interactions with AI chat systems will get better and be able to accomplish more for that customer. I predict that, in the near future, customers will prefer interacting with a brand over chat, even if a human is an option, because that chat bot will be able to service the customer faster and easier.

The IRF study will be released later this year, but even now it’s a safe bet to predict AI will have enormous impact. Melissa believes AI will have 10 times the impact the discussion around millennials has had. “For many years it was easier to craft programs based on generations because it summarized the data in a way that seemed actionable.  But our research continuously finds there is an intersectionality that makes a loyalty program’s focus on generations suboptimal. AI offers the incentive and reward space the opportunity to harvest data in ways significantly more impactful on motivation than generational considerations,” according to the head of the IRF.

I’d love to hear how you’re using AI to make a difference and encourage you to share your thoughts in the comments below.

 

Loyalty Program Design: Ignore Customers, Increase Returns

When speaking with brands on loyalty program strategy, it’s clear companies know they should be utilizing their data and personalizing the user experience, but there is often a barrier of hesitation to openly treat customers differently. This hesitancy is rooted in the fear of ostracizing a portion of their consumers who are deemed “less valuable”. Why can’t we simply strive to provide every customer the same high-end treatment that they deserve? Well, because they don’t deserve it.

Not all customers are created equal. A successful loyalty program design allows a brand to:

  1. Focus on Best Customers: New friends are great, but old friends are invaluable. Your brand’s best, loyal customers will celebrate triumphs and help carry the business through rough times. They are different from the impulse purchase crowd and should be revered with your attention.
  2. Make Customers Feel Important: Customers expect special treatment. Research conducted by Forrester indicates that 59% of US online adults who belong to a customer loyalty program say that getting special offers or treatment that isn’t available to other customers is important to them.
  1. Reward Good Behavior: When customers exhibit positive engagement behavior with your brand, recognize it. Furthermore, let them know they will be rewarded for being good. SWA’s “Companion Pass” and Sephora’s “Rouge” are examples of how implementing aspirational status tiers with meaningful rewards can drive fierce loyalty.
  2. Maximize Promotional Budget: Offering all customers the same discounts, rewards, and communications can get expensive – and boring. Segmenting customers within a loyalty program will allow you to track the types of products they buy, how often they redeem, and how well they respond to communications, allowing companies to track the progression of a consumer’s journey with their brand – ideally even leading to predictive analysis.

Of course, there are instances where treating every customer the same does work. Take Publix, for example. At the end of last year, Loyalty360 published a post about Publix & how their “treat every customer the same” mindset has helped them retain brand loyalty over many generations. The grocery-chain doesn’t necessarily have a traditional loyalty program, but they do have many loyal customers. Their belief is that every customer should be treated to the same superior customer service and they attribute their long-term brand loyalty to this consistent treatment of customers. So how has this strategy worked so well for Publix?

First, they emphasize their core principles – remaining true to providing competitive prices, quality products, and customer experience. This ties directly back to their slogan “Where Shopping is a Pleasure” – an easy to digest value prop which they ensure is carried out by their eager-to-help, positive associates.

Next, they deliver consistency while also adapting to the industry surrounding them.  Customers return week after week because their in-store experience is a positive, known commodity. For consumers with more evolving needs, Publix has several online ordering options, including the increasingly popular home delivery powered by Instacart.

While this informal loyalty approach has worked for Publix, this wouldn’t work for every company seeking to achieve brand loyalty. Publix has the distinct advantage of being a “ritual vendor” (The average US household made 1.5 trips to the grocery store per week in 2017) and usually consumers repeat at the same store due to proximity and familiarity – two inputs that make a habit hard to shift once engrained. Publix also has a long history of superior customer service, and unfortunately brands looking to retain and engage customers in the here and now can’t afford to wait 80 years to build up that kind of reputation.

Before dismissing the Publix case study as irrelevant to your company’s situation there are aspects of the Publix secret sauce which every brand should aim to replicate, namely creating a resonating value prop + delivering your core product well. Without these key foundation blocks, a brand will not succeed no matter how clever their loyalty program design is.

So how do you determine which strategy is right for you?

As you can see, no loyalty program is one-size fits all. Program design must be unique and tailored to the brand’s needs and more importantly, their customer’s wants and needs. And while Publix doesn’t operate on a formal loyalty program, their initiatives over the last 87 years have formed loyal customers who stay away from competitors.

 

The State of Global Loyalty: A Conversation about Turkey (Series)

The State of Global Loyalty: A Conversation about Turkey

What does customer loyalty look like outside of the US? How are companies around the world addressing the evolving challenges of customer retention? And what can US loyalty marketers learn from their global counterparts?

Welcome to our Global Loyalty Series! Seeking to find those answers, I recently posed questions to loyalty experts in our Maritz Global Partner Network, challenging them to offer insights unique to their regions around the world.

global loyalty, e-rewards This week, I connect with Enis Karslioglu, CEO of Sanal Magaza in Istanbul.

1.What are some of the biggest challenges companies in your region are facing when it comes to retaining loyalty program members? What opportunities do you see for these brands/marketers?

In larger scale programs such as airline companies and the banking industry, redemption is always a major challenge. In order to retain and convince the customers to come back, the rewards offered play a very important role in the programs. We highly advise to our customers to design the program to deliver related, high perceived value rewards, within a reasonable time frame to their target audience and program participants.

2. What cultural changes are you seeing in Turkey that are effecting customer loyalty?

Loyalty concept awareness is a big hurdle in Turkey. Offering high value rewards and a large variety of rewards is extremely important and challenging. Heading 3 different segments is a major challenge for our sales and marketing team with very little events.

3. What does customer retention mean to you? What does the ideal, loyal customer look like?

The ideal loyal customer is the customer who comes back often and makes new, frequent purchases with the brand. They are the member who engages new members and creates word of mouth about the brand in the market.

4. What do you believe makes a loyalty program successful?

The two main components of a successful loyalty program are creating a strong relationship with the consumer and increasing sales through the loyalty program.

5. What advice do you have for loyalty marketers?

  • Create your own permission based CRM
  • Engage your customers
  • Mine and launch individualized campaigns
  • Increase your penetration and sales

6. Are you a member of any loyalty programs? If so, which do you believe is the best loyalty program?

Turkish Airlines Miles & Smiles program is one of my favorite loyalty programs I participate in. I really feel rewarded and excited each time I spend my miles on ticket redemption. I also enjoy shopping in the www.shopandmiles.com Rewards Portal.

7. What is your wish-list for an ideal loyalty program? What would this program look like for participants?

First, an ideal loyalty program should be laid out on the proper technology. Rewards should be designed to fit perfectly to the target audience and program members. KPI’s should be set properly and aimed to be fulfilled from within the program. The program should be impressive and engaging enough to evoke the target audience to become members instantly and retain them for a long time. We aim to make every loyalty program create long-term value for both our customers and their customers.

8. How concerned are you about loyalty program fraud? Do you have any tips on how to be mindful of loyalty fraud?

Fraud is a major topic that should be taken into consideration at the very beginning of developing the program. Every measure should be taken both operationally and technically while developing the software, all the way to project launch. Correction of fraud later might create a big cost and tarnish the company’s reputation.

About Enis 

Enis, originally an Electronics Engineer from Hacettepe University in Ankara, has a wide experience in Media, including his past management of CINE 5, the biggest Pay TV of Turkey.  He received an Executive MBA at Harvard and participated in the General Management Program at the Kellogg School of Management at Northwestern University.

Enis established BIGGPLUS GROUP in 1999 and is the CEO of the group, including SANAL MAĞAZA INC. He has been focused on customer loyalty programs, E- Commerce and E-Rewards as well as merchandise development, carrying the company up  to  the leading position in Loyalty sector in Turkey, serving thousands of corporate clients such as Nestle, Unilever, P&G, Philip Morris, Axa Insurance,  Bosch, Goodyear, Coca Cola, Loreal, Turkcell, Ford, Shell, BP, Castrol, and Turkish Airlines, etc.

About Our Global Partners

Maritz  partners with top loyalty practitioners worldwide as part of the Global Strategic Partner Network.  Carefully vetted, trained in Maritz’ solutions and in regular communication with our solution leaders, Strategic Partners bring geographic market-specific expertise to our global clients.

 

The State of Global Loyalty: A Conversation About South Africa (Series)

What does customer loyalty look like outside of the U.S.? How are companies around the world addressing the evolving challenges of customer retention? And what can U.S. loyalty marketers learn from their global counterparts? 

Welcome to our Global Loyalty Series! Seeking to find those answers, I recently posed questions to loyalty experts in our Maritz Global Partner Network, challenging them to offer insights  unique to their regions around the world. 

This week, I connect with Barry Coltham, Managing Director for Achievement Awards Group, with input from Richard Cramer, Director of Loyalty.

Over the past 26 years, Barry has been instrumental in building the company’s deep expertise in automotive, banking, healthcare, and retail verticals and leading major research-based initiatives. Barry has a Master’s degree in Business Leadership and is a Certified Human Performance Technologist through the International Society for Performance Improvement.

 

As the Director of Loyalty, Richard leads a team of passionate loyalty marketers and analytics experts to deliver sophisticated, creative loyalty solutions. He is a veteran advertising executive with deep understanding of big brands, consumer psychology and relationship marketing. Maritz has been a shareholder in Achievement Awards since 2000.

1. What are some of the biggest challenge companies in South Africa are facing when it comes to retaining loyalty program members? What opportunities do you see for these brands/marketers? 

The major challenge is ongoing member engagement once programs have launched. We now have over 130 loyalty programs in South Africa, many that offer the same type of rewards. The value propositions have been watered down due to the on-going cost of running the programs which has resulted in member disinterest. Research by Truth Loyalty in 2017 found a decrease in the number of programs that women participate in, from 6.1 programs down to 5.6, as well as a slight decrease in the number of programs men belong to. If brands want consumers to stay involved with their program and frequently engage with it, something needs to change. The opportunity in South Africa is to go beyond rewards and to engender emotional connection and customer experience.

2. What do you believe makes a loyalty program in South Africa successful? 

A great value proposition and simplicity, the ease of use of a program, and surprise and delight rewards that are personalized and make members feel special. Another important element is the integration of programs with partnerships that are relevant and add value to the members’ lives. We can see in South Africa that the top programs are the ones that are easy to use.

3. What cultural changes are you seeing in South Africa that are affecting customer loyalty? 

There is a big transition over to mobile, and more people using internet on mobile phones than laptops and more mobile phones than the overall population. There is a fragmented, costly media landscape that does not reach rural poorer communities – mobile phones are the only way to access these members.

4. What’s the biggest piece of advice you have for loyalty marketers? 

There should be an understanding that you will have to increase sales by 6% to pay for the loyalty program. Most programs in South Africa reduced their value propositions because they did not factor in the cost of running the program. Employ a Specialist Implementation Agency and SAAS platform with experience in running the programs. The loyalty program is an integral part of the company’s DNA.

5. What is the impact, if any, of government regulations on loyalty programs in South Africa? 

There are two major legal acts that impact loyalty programs in South Africa: The Consumer Protection Act (CPA) and the Protection of Personal Information Act (POPI).

First, the CPA states that loyalty credits or awards are a legal medium of exchange (like cash) when suppliers offer it as consideration for any goods or services offered.  Because the loyalty benefits are legal forms of exchange, the goods given in return will also be subject to the CPA. This means that consumers are fully protected against defective, unsafe and hazardous products in the same way as a consumer who purchased goods and services with cash or on credit. Under the CPA, suppliers have a duty to ensure that the goods offered to consumers in loyalty programmes are in stock. In most advertisements you will hear the “while stocks lasts”, “subject to availability” or “terms and conditions apply” at the end, which suppliers believe cover them if they are not able to satisfy the promises made. The other major legal act, The Protection of Personal Information, refers to how loyalty programs process a lot of personal information and the processing of this information must be done lawfully.

About Our Global Partners:

Maritz partners with top loyalty practitioners worldwide as part of the Global Strategic Partner Network.  Carefully vetted, trained in Maritz’ solutions and in regular communication with our solution leaders, Strategic Partners bring geographic market-specific expertise to our global clients. 

The State of Global Loyalty: A Conversation about Latin America (Series)

The State of Global Loyalty: A Conversation about Latin America

What does customer loyalty look like outside of the US? How are companies around the world addressing the evolving challenges of customer retention? And what can US loyalty marketers learn from their global counterparts?

Welcome to our Global Loyalty Series! Seeking to find those answers, I recently posed questions to loyalty experts in our Maritz Global Partner Network, challenging them to offer insights unique to their regions around the world.

­

This week, I connect with Mario Giuffra, Managing Director at Promotick.

In his early 20s, Mario founded Promotick, the first loyalty and incentive company in Peru, with his twin brother.  They started managing successful programs for big companies in many different industries:  banking, airline, supermarket, telecommunications, etc.  It didn’t take long before Promotick had expanded throughout Latin America.  They currently operate more than a hundred programs in nine countries.

Mario, what are some of the key challenges and opportunities companies in Latin America are facing when it comes to retaining loyalty program members?

One of the biggest challenges that companies face nowadays regarding the retention of users is the amount of loyalty programs that members have access to. Airlines, supermarkets, credit card programs and even smaller niche programs are adopting bigger and more complex offers over time. In this scenario, mechanisms of differentiation need to be more creative and dynamic to keep programs on track. This can be done through the following strategies:

  • Increasing use of technology to get ahead of new apps.
  • Build a solid structure of data and customer information management to understand their needs better.
  • Look for strategic alliances that allows more added value towards customers. A company rarely specializes in all kind of rewards, which is why finding the right partners strengthens the offer of benefits.

How are Latinamerican government regulations influencing loyalty strategies?

In some Latinamerican countries, tax policies are requiring the companies to pay taxes on some rewards redeemed by customers. This makes the products much more expensive and deteriorates the relationship between accumulated points and dollars spent, which in the end lowers the perceived value of the rewards.

Also, there are contingencies in the work environment when giving rewards. Tax collectors make companies pay taxes if an employee receives a reward. As in the previous case exposed, the product gets more expensive and this strategy of motivation becomes non-viable.

What does customer retention mean to you? What does the ideal, loyal customer look like?

For me, loyalty represents the preference for a product, service, or company over time in a constant and sustained way. Understanding the preference as the first option when it comes to the purchase.

Loyalty is the result of giving a good service at a reasonable price. A loyalty program should be built, therefore, after the service has been given efficiently. We cannot pretend to implement a loyalty strategy if we are not capable of giving the product or service offered initially. For example, if we want to implement a loyalty program for a newspaper company, first we must make sure that the delivery of the newspaper is done well and on time every day. Otherwise, the loyalty program will not work.

The ideal customer is one that buys our products steadily and recommends them to others by their own initiative.

What’s the biggest piece of advice you have for loyalty marketers?

When implementing a program, I consider that the following factors will help maximize the chances of its success:

  • Understand the customer by using all the information provided. It is important to watch and listen periodically.
  • Maintain high levels of communication throughout the duration of the program.
  • Utilize different platforms for operation.
  • Offer effective customer support.
  • Provide ease of use and understanding – clear rules, easy interaction and simplicity.

Finally, what is your wish-list for an ideal loyalty program for Latin American consumers? What would this program look like for participants?

The ideal loyalty program is one that can understand consumer needs and get ahead of them timely. This shows that it understands consumer behavior and  preferences. With this initial strategy, the program would always surprise participants with things that are inside their world of expectations.

Another initiative that I would like to see in a loyalty program is the capacity to provide future credit based on my consumption behavior history. For example, if I lack 5% worth of points to obtain a benefit today and my purchase behavior maintains the same for a long time, I would like the program to allow me to use that 5% I need against my future purchases.

About Our Global Partners

Maritz partners with top loyalty practitioners worldwide as part of the Global Strategic Partner Network.  Carefully vetted, trained in Maritz’ solutions and in regular communication with our solution leaders, Strategic Partners bring geographic market-specific expertise to our global clients.

The State of Global Loyalty: A Conversation about Europe (Series)

What does customer loyalty look like outside of the United States? How are companies around the world addressing the evolving challenges of customer retention? And what can US loyalty marketers learn from their global counterparts?

Welcome to our Global Loyalty Series! Seeking to find those answers, I recently posed questions to loyalty experts in our Maritz Global Partner Network, challenging them to offer insights unique to their regions around the world.

First up, I connect with Michael Lausenmeyer, Managing Director of Boost Loyalty Europe.

Michael is experienced in CRM & loyalty consulting, OMNI-Channel Marketing, and international project management and offers significant experience from the worlds of  retail, manufacturing, media, pharmaceutical, travel, finance, energy industries.

Michael, what are some of the key challenges and opportunities companies in Europe are facing when it comes to retaining loyalty program members?

One challenge is how to make members redeem their points and  how to keep them active in the programs. It is not so much that people quit the program, they even collect points, but they do not get involved enough to redeem points. There’s also the question of what to entice the members with. There is a tendency to focus on the short-term effect of monetary rewards, which only fuels the need for additional and higher discount measures and is therefore hardly sustainable.

We see great opportunity in digital solutions. Seamless collecting and redeeming of points via a personal device for one, but also engaging customers in new and different ways with new communication technology. Customers are much more inclined in sharing data when they get something in return.  Also, rewarding engagement has to be much more part of loyalty in the future. This personalized yet automated communication and attention to the individual customer is the key to activating them profitably.

What cultural changes are you seeing in Europe that are affecting customer loyalty?

In many European Countries there will be a further shift towards the use of individual handheld devices and even better coverage and faster connections. Brand and loyalty programs will be competing even more intensely for a place on the first screen of smartphones. There will be a shift in demographic with the Boomers retiring and a new generation of shoppers moving up. For them, monetary rewards are still relevant, but that is simply not enough to get close to the consumer of the future. New technologies and new loyalty concepts will be influenced by and will in return influence shopping and loyalty behavior.

How are European government regulations influencing loyalty strategies?

Changes in data regulations might have impact on the way personal data must be handled in the near future. There will be an optimization in Europe starting end of May. I cannot imagine there being less transparency in the future, but I would guess there will be many more security regulations that need to be met when handling customers’ data.

What’s your best piece of advice for loyalty marketers?

Stop doing loyalty like it was done ten years ago and don’t be led by personal preference. Adapt your programs and measures to your customer of the future not the current one.

Who do you see doing a great job at driving loyalty or consumer engagement?

I am member of several programs, but mainly trade or airlines. I really like the mechanism of Cookie Clicker though, because in my opinion, in its simple way this website applies pointers from behavioral science very effectively.

Finally, what is your wish-list for an ideal loyalty program for European consumers? What would this program look like for participants?

  • Relevant Service and information
  • Seamless applicability
  • Transparency in data use
  • Rewards for my time and contribution not just money spent
  • Impeccable technical set up and design
  • This program would put the participant first, giving them a reason to be part of the program.

About Our Maritz Global Partners

Maritz partners with top loyalty practitioners worldwide as part of our Global Strategic Partner Network.  Carefully vetted, trained in Maritz’ solutions and in regular communication with our solution leaders, our Strategic Partners bring geographic market-specific expertise to our global clients.

3 Trends that Rewrote the Rules of Loyalty Marketing in 2017 (Part 3)

(This is the third in a three-part series on shifts that occurred in 2017 that will have long-term impact on the loyalty industry. Part 1: Liquid Currency covered the adoption of pay-with-points solutions and Part 2: Loyalty Program Fraud covered the increasing awareness of program hacking risks.)

Shift #3: Coalition Loyalty Programs Stumbled

If you were one of the many loyalty experts predicting the likely failure of any coalition loyalty model in the US, you might have ended the year enjoying a bit of schadenfreude.

2017 was simply a tough year for coalition loyalty to catch a break.

While the dominant form of loyalty program outside of the US — one wherein members can earn and redeem points freely across a defined network of complimentary brands (the coalition) — a large-scale coalition loyalty initiative has never succeeded in the US. That seemed about to change when American Express announced the launch of Plenti almost three years ago. But since then we’ve witness not just the multiple stumbles experienced by Plenti, but challenges with both of its Canadian-based counterparts:

  • Plenti – While boasting more than 30 million members and the support of Amex, Plenti has struggled to attract and retain key partners to maintain a strong coalition. And it ends the year seeing the exodus of more partners and declining support from their parent entity. 
  • Air Miles – the Canadian-based coalition program owned and operated by LoyaltyOne suffered a significant PR hit starting late in 2016, when Canadian media began to cover the upcoming first-time expiration of Air Miles points. Due to overwhelmingly negative public reaction that continued into this year, Air Miles reversed their decision and agreed to reimburse members who had already dumped their points. That decision resulted in a multi-million dollar loss, much of that in unrealized breakage. The incident pushed some Canadian legislators to pursue legal restrictions on loyalty point expiration policies. AirMiles subsequently announced other changes to their program in an effort to gain back some of the member good will lost over their point expiration issue.
  • Aeroplan – the Canadian-based coalition program, owned by Aimia, was jolted earlier this year when its key partner, Air Canada, announced it was leaving the relationship by June 2020 to establish its own proprietary loyalty program, a move that could potentially cost Aimia millions of dollars in lost revenue and leaves their coalition program without an airline anchor brand.

So, as I noted — a tough year for North America coalition loyalty schemes.

Its the Consumer, Stupid

When I first wrote about Plenti back in March of 2015 I asked, “Is Plenti the holy grail of loyalty?” I outlined my rationale for being skeptical that a coalition could succeed in the US, while expressing optimism that if any entity could pull it off, it was Amex. My main concern was whether US consumers would actuality understand and embrace a coalition loyalty program.

New data from a Maritz 2017 consumer study only reinforced my concerns:

  • 50% of surveyed consumers said they were not familiar with Plenti at all (although of those who were, a majority had a positive or neutral view of the program). 
  • Less than half of self-identified Plenti members said they have ever redeemed for a reward through the program.
  • The majority of members said they only purchase from one or two coalition members (defeating the main value prop of the coalition model)

Amex might still put it out, but its just as likely that the stumbles experience by Plenti and the significant challenges with Aeorplan and Air Miles portend an inevitable decline of the coalition model the US.

Implications for Loyalty:

When Plenti debuted it was considered a potentially serious threat to proprietary loyalty approaches. Coalitions offer brands the allure of participating in a loyalty scheme without the up-front costs and commitment that can come with launching their own program. But the last year has shown the weaknesses of the coalition model, particularly in its inability to engage US consumers. And when you take into account the challenges with Canadian coalition schemes, it seems that many companies are making the calculation that they are better served by owning their own program where their brand rules supreme. Moving into 2018, its a safe bet that proprietary loyalty will continue to have strong hold over the US loyalty market.

Thanks for following along with our 3-part series – Maritz Loyalty wishes you a Happy New Year!