Is Loyalty Boring Customers?

Found an interesting article from September 2014 from Caroline Papadatos which discusses the gamification of loyalty programs.  It really gets the mind going, because I think the gasification side is not data driven enough and the opposite is true from the data side.

A few weeks ago, I had the privilege of judging the 2014 LoyaltyGames, an incredible week-long global challenge involving 1,500 practitioners and students from 102 countries, with 15 judges who were remarkably, never in the same room nor on the same continent.

The 2014 contest had three components: awareness building, game design and loyalty building.  The game experiences were clever and fun, and I was won over by the sheer creative genius of the contest submissions. The loyalty component was straightforward: reward and recognize customer / donor tiers without breaking the bank. With a gamification spin, it meant solving a conventional customer engagement problem with an unconventional tool set. Sounds simple enough, but as I scanned case submissions looking for earn ratios and attainability models, all I could find were badges, likes, certificates and pins.

It is fascinating how much badges and pins can get people excited.  The basis of these games has a lot of merit, but what I have a problem with is the same with social media as a channel, it is not targeted at all.  There's no meat behind the game.

My answer came from Gabe Zichermann who in a recent eight-part gamification series in COLLOQUY Magazine makes the bold statement that “loyalty isn’t fun enough anymore” and our customers are bored. Gabe clearly has a point – loyalty now competes for attention in a world where Angry Birds has been downloaded two billion times. It gets worse. At the LoyaltyGames award ceremony, a renowned gamification expert accused loyalty programs of “bribing” their customers. Now my back is up, but are we outraged or outdated? 

The truth is that loyalty programs need a shot in the arm, and while experience design always has a place in the loyalty tool set, few data practitioners are charming or entertaining. And gaming is not just for Millennials. The average social gamer is a 43-year-old-woman, which just happens to be the primary target market for grocers, drugstores and a host of other retailers. So why aren’t loyalty practitioners flocking to gaming? 

I totally agree, loyalty programs need a shot in the arm.  As I have written before, most people engaging with loyalty programs are just taking the free stuff, theres very little loyalty or behavior being driven from them.  It is fascinating to combine the rich data from the loyalty programs to the fun concepts in gamification to create a targeted loyalty gamification model.  I think this would work extremely well.

I could imagine a program where certain behaviors are awarded more points and a bounce back offer could include multiple point thresholds for buying everything in a market basket analysis.  So if the customer who usually buys a TV also buys cables, programmable remotes and a blue-ray player, the customer will get multipliers if these are purchased in the next 2 months.  This gives some fun to the loyalty program, while driving the behavior to purchase items that are typically purchased with TV's.  The best of both worlds.

There’s no doubt that loyalty programs lose their luster when they became overly programmatic, but where gaming meets transactional data analysis and customer behavior change, there are notable exceptions. BrandLoyalty’s Instant Loyalty Programs in Europe, Asia and South America have a huge fun-factor for retail shoppers – on the surface they’re a widely popular collectible game for children but there is a financial underpinning that drives incremental spend, participation and superior financial performance based on maximum turnover & transactions from family households.

Whether you’re pro-loyalty or gamification, you can certainly agree with Gabe on this: “taking something that’s crummy and putting some game frosting on it won’t magically change your customer”. But let’s face it, the mix of gaming techniques and data-driven loyalty can only be good for business. And be honest, if you were given the choice of getting on a plane for yet another industry slideshow or signing up for a multi-player gaming challenge, which would you choose?

Perfect combination, a shot in the arm.  The technology exists, lets gamify our programs.  This is what I have been harping on about for a month.  These are the types of things that create great customer experiences.    

Enrollment vs Engagement: Loyalty In Action

Getting to the checkout without hearing that phrase is a modern feat of humankind. Retailers, financial services, and expanding sectors like drugstores and restaurants know that loyalty membership programs are one of the easiest ways to get individual data on shoppers while enhancing the brand-to-consumer relationship. But when shoppers are asked (and asked, and asked again), they often can’t see the forest for the trees—that a loyalty program is an opportunity for consumers themselves to customize a relationship with brands.

The average number of loyalty programs per US household has grown to 29, based on data gathered by Colloquy. That same loyalty data shows that only 42 percent of those memberships are currently active. Just imagine what advantages consumers are missing out on when over half of their memberships are disused. Enrollment doesn’t necessarily mean engagement.

In an offline world the enrollment of a customer into the loyalty program is the main metric associates are measured to determine if they are pushing the loyalty program.  I have never liked this metric, because it doesn't measure the true purpose of a loyalty program.  

The true purpose of a loyalty program is to get your customers to engage with it.  Enrollments are a byproduct of engagement.  The metric that should be used is an engagement %.  Instead of measuring the Enrollments by associate, a better metric would be to measure the amount of sales tracked with a loyalty rewards number versus the total amount of sales for each associate.  The higher the %, the better the associate.  When this engagement % increases, I will guarantee the enrollments will increase with it.  Plus it enforces associates to be on the lookout for the best customers, not just the customers that will help them reach their goal of enrollments.

Using Smartphones and Apps to Enhance Loyalty Programs - NYTimes.com

I am such a big fan of using rewards on a smartphone.  There is no better way to communicate with a customer than with the device they are carrying around in their pocket.  The next evolution for rewards programs is moving from a card in the hand or a punch card mentality to devices that allow even smaller businesses to compete against bigger competitors.  

Smartphones and loyalty apps have begun offering small businesses enhanced program features and automated administration capabilities once affordable only to large companies like airlines and hotel chains. These capabilities also offer the equivalent of a real-world psychology lab for easily evaluating the effects of offerings and incentives on customer loyalty.

The key to any reward program is to capture data about a customers behavior.  If your program isn't allowing you to capture transactional level data in conjunction with the program, there may be a need to consider this approach.  If only to capture the amount spend and the date, this will allow a lot more opportunity for the business.  As I wrote in The True Purpose of a Loyalty Rewards Program, it is imperative to have a program that incentivizes a customer to share their data with you, but not over-incentivize.  The key is to drive behavior by targeting the customer, rather than giving everyone the same rewards.

“Clearly, this is the best of times for loyalty programs,” said Mr. Bolden of the Boston Consulting Group, who recommended that small businesses “focus on the non-earn-and-burn aspects of the program.” He suggested that spas consider a separate waiting room for their app-identified best customers.

“Or when the treatment is over, you hand the customer a glass of Champagne and strawberries,” he added. “If you’re an apparel retailer and you get in a new line from a new designer, invite the top 5 percent of your customers in first so they can see it before anyone else.” The point is that many effective rewards need not cost much to bestow.

Driving behavior is not all about a discount.  Understanding what your customers want and delivering them an experience is more important than a discount.  Because a customer that is coming just for a discount is more than likely not your most loyal customer.

“With apps you now can target specific customers and influence specific behaviors and keep track of all the results and understand the results,” Mr. Smylie said. “Because the check-level detail is now tied to a customer’s profile, we can understand what their purchasing behavior is, what their interests are and cross-reference that against their social media profiles and market to them more effectively and involve them at a deeper level with our brand.”