Building trust through transactions: the four drivers of loyalty

Each purchase is another data point for insight into consumer behavior.
Each purchase is another data point for insight into consumer behavior.
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By Bryan Pearson 

President & CEO of LoyaltyOne and Best-Selling Author of The Loyalty Leap | Follow his blog at www.pearson4loyalty.com

Marketers have become adept at identifying the unique preferences that distinguish one consumer from the next. But unfortunately they are less skilled at delivering on those preferences.

For example, if we look closely at customer data collected through a loyalty program, we can detect little blips that hint at a customer’s passion or life stage. A sudden increase in office apparel could indicate a job change. Someone who buys sunscreen in January is likely preparing for a vacation. And several gallons of paint would hint that someone is investing in home improvements – and possibly preparing to sell their home.

Insights from this level of detail present opportunities to better address that customer’s needs in a personalized way, creating engagement and, when done in a way that resonates, loyalty.

But keep in mind that loyalty takes more than merely launching a “points for purchases” rewards program. An effective loyalty initiative should be viewed as the foundational platform on which customer engagement is built. It is a device that, through the use of shared personal data, facilitates relevant experiences that inspire the customer to return to your brand.

Today, four important drivers are shaping a customer’s loyalty to a brand:

•  Loyalty program excellence: Loyalty programs today are largely ubiquitous, but few venture outside the comfort zone of the traditional earn/redeem model. Smart loyalty operators are responding to major shifts in consumer behavior and the global economy with loyalty innovations that enhance the traditional model, offering more personalized rewards designed to increase activity.

For example, Citi ThankYou Rewards allows members to design their own rewards, even allowing them to pool points for group redemption, or donate points to charities

•  Customer relevance: The entire loyalty program experience, from sign-up to communications to rewards, has to be relevant to what the consumer values. Mobile and digital communications should be one-to-one – today’s overwhelmed consumer can see right through mass messaging.

The Audience Rewards program highlights relevance by partnering with hotels and stage productions so members can earn and redeem points in a variety of ways. For example, a Broadway fan who stays at a New York hotel and recommends shows via social media can earn points to redeem for tickets to “Wicked.”

•  Enterprise Loyalty: Most marketers have engaged in gathering consumer data, but many don’t know how to use it in a way that is demonstrably beneficial to both the brand and the consumer. Smart data use requires releasing the data beyond the marketing department, where it traditionally is stored, and sharing it across all departments.

Everyone from the C-suite to frontline employees should have access to the insights that will help them deliver an elevated experience (while protecting customer privacy). Companies can map all touch points to identify which critical encounters define the brand’s value, and continually enhance activities to better serve top customers.

•  Emotional loyalty and brand advocacy: Brands have a tendency to confuse customer frequency with loyalty, but they are not the same. A customer may frequent a business simply for convenience or out of habit. Emotional loyalty is a matter of gaining trust, through communications and services specific to that consumer’s needs, without being creepy or annoying.

Think of it this way: say a customer signs a contract with a telecommunications company that has a monopoly on a new smartphone. This customer may keep renewing the contract, but her true loyalty is to the phone manufacturer, not the telco provider.

For the past decade, senior leaders from the world’s top brands have come together to discuss the most pressing trends affecting their customer strategy.

This year, we are breaking down these four drivers with leaders from CVS, FedEx, Coca-Cola and more at the 2013 COLLOQUY Loyalty Summit from September 23-25 in Dallas.

As a senior Quartz reader, I invite you to join me at this year’s COLLOQUY Loyalty Summit.

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This article is written by COLLOQUY and not by the Quartz editorial staff.