Faithful: Leveraging user data to increase Loyalty

Loyalty is in crisis. It’s not just the fact that we have realised that monogamy was invented by poor men.

From an evolutionary point of view, girls would be just fine sharing rich husbands. It was on the average dude’s best interest the idea that “it’s not OK to have many wives”. Somehow, the story was sticky enough for Western civilisation, and here we are. If you don’t believe me, check out this book by evolutionary psychologist and scholar Robert Wright.

But a far less faithful species is at large in the contemporary world — the all-connected, omnichannel, digitally-empowered, media-savvy consumer

According to the last Forrester Researcher report, 

programs are more oriented to pushing transactions on behalf of merchants than to creating distinct value or experiences for customers.

This crisis does not come alone, and this is where the alert comes: it is not only that customers “grew tired” of their usual point accumulation.

The crisis in loyalty programs comes as a side-effect of the highly competitive automation of payments and transactional data. Once transactional data is enough portable, Forrester predicts, 

commerce experiences of tomorrow (are) to be squarely centered on the customer by combining rigorous authentication; invisible, frictionless payment; and simple access to and use of all relevant rewards.

The problem of focusing on more things, instead of focusing in more experiences

The bottomline is that customers are bored. They are looking for real rewards to their effort, to their loyalty and to their engagement. It doesn’t sound enough anymore that after purchasing over and over from you, they are entitled to… purchase more from you, with a small discount. Or that they may earn again

Brands on the things side are probably in need of, first off, surviving the KonMari method. We have a little side project of creating the spark index, where customers assess if the products they bought still “spark joy” after a while. Let’s see if we bring it to life anytime soon.

But either services, things or any type of consumer goods are in definitely need to reinvent loyalty. The first one to break the current model will thrive, as “a “jumper” able to take financial risk and use AI to mine, exchange, and recommend rewards that make the most sense to the consumer at the time of purchase”, still according to Forrester.

What we have come up with

There is plenty to be done, right now, to start a better loyalty program. Usually, there are three problems, which I will describe briefly. And one universal solution, that must be adopted, in either the simplest loyalty structure or the most complex, fully automated, personalised, mined and so forth.

A key strategic movement is in using loyalty programs to enhance the experiences your product or service enables. That’s a tricky concept, because we are not talking about two items instead of one. It is about offering partnerships that won’t compete with you, yet are closely related to what you do. These partners will facilitate the enjoyment of the experience your service or product provides. If you sell tears of joy, get someone to offer the tissues.

The problem of internal points, instead of  letting consumers use their rewards elsewhere

Maybe your customers are just not that into you. Let’s face it: in the US, people using smartphones receive 45.9 push notifications per day, on average. That’s only the notifications rate. Start thinking of the share of wallet of your customers, with all the new mandatory bills (from Netflix to Audible, from Todoist to Blinkist).

Building a powerful pool of partner brands is essential to motivate your program to have stickiness. At the moment, it is usually laborsome to compute points for rewards. In some cases, it is even more laborsome to claim those rewards. So it’s important to act fast: get your pool together, and work out a data lake small enough to make things happen in the foreseeable future, but big enough to compute fast and output the shop. Loyalty programs are usually thought of as banks, where companies and inflate and deflate the currency. That’s not the way to go. Think of it as a city with its own currency, but a plurality of vendors.

Don’t think of it as a bank — think of it as a little independent city with its own currency.

The problem of progress

This is a problem very rarely taken in consideration by companies. That’s because they tend to think it’s enough to offer more of the same to keep customers engaged. It might have worked with Baby Boomers or X Generation, but Millennials are not really into more stuff — as a generation born in the verge of the digital revolution, materialism has lost a big part of its appeal. Immediacy is part of the core, as social markers are displayed instantly on the web, not on shelves.

I have been applying for a few years a number of principles from gaming industry. They work like a charm. Tom Chatfield has described a number of those in his seminal book Fun, Inc.

Initially, the idea is to think in universal principles of game engagement, when planning an engagement flow. A few examples are the visibility to progress within the program; short-term goals that are hard enough to get, and long-term goals that are easy enough to get. Right? Of course, it’s a low-hanging fruit that companies rarely reap. 

There are many principles we have been applying, from a colorful plethora of rewards, to surprise elements that pop up for no reason — tapping dopamine and delight effects in various tones.

Mad Men: It’s around season 5 that you think “How did we get this far?”
Jay R. Ferguson as Stan Rizzo, Elisabeth Moss has Peggy Olson and Ben Feldman as Michael Ginsberg.

An evolving relationship

Another important layer that we have applied to these programs is the idea of relationship progress. Don’t think of it as real-life examples, such as friendship or romantic relationships. Think of long-term TV series or successful video-game sagas. Remember how Don Draper started as a creative in the first season of Mad Men, and on the fifth season they had changed offices, gone through downsizing, and Draper got even his name in the company, read as Sterling Cooper Draper Pryce?

The feeling we crave is to be far, far ahead in the program — say, on the 4th year — and look around noticing how different that is from the first year, and how much things have evolved.

To sum up

Current trends
Seamlessness. Autonomous transactions are seamless, and become the invisible valuable, part of a high-value commerce experience.
Ecosystem and partnerships. The walled gardens of rewards and loyalty will fall. Rewards and points act more as liquid currency.
Calibration The balance between effort and reward is combined with the variety of rewards, to keep it stimulating and shareable.
Engagement. Every engagement effort is rewarded, even if not the main core expected behavior.
Progress. Progress is visible, comprehensible and understood how to move forward. More importantly, the Calibration: how does the program evolve over time? How is one level different from another? How can customers understand what they are missing?
Quick and long-term wins. There are short and long term goals, each of which bringing a different type and level of reward.
Personalised. Rewards are highly personalised, based on AI, past purchase behavior, and other connected data points.

References

The Future of Payments: The Invisible Value. Forrester Research, 2018, The Future of Payments: The Invisible Value, www.forrester.com.

Chatfield, Tom. Fun Inc.: Why Gaming Will Dominate the Twenty-First Century. Pegasus Books, 2011.

Ellis, Sean, and Morgan Brown. Hacking Growth: How Today’s Fastest-Growing Companies Drive Breakout Success. Crown Business, 2017.

Ellis, Sean. “What Is a North Star Metric?” GrowthHackers Blog, GrowthHackers, 5 June 2017, blog.growthhackers.com/what-is-a-north-star-metric-b31a8512923f.

Ries, Eric. The Startup Way How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth. Penguin Random House LLC, 2017.