The past, present and future of loyalty

20 September 2012

Over the past 25 years, the approaches being taken to increase brand and customer loyalty have evolved significantly. Some have been iconic, some inspirational, some have created lessons to be learned but all have driven forward a positive change in the way brands engage with their customers.

Here we look at the key loyalty trends with examples across various sectors and geographies to outline the future direction of loyalty initiatives in the coming years.

The milestones of loyalty

-   Rewards for purchases - whilst trading stamps were the early incarnation of a loyalty initiative, it was American Airlines who pioneered the use of loyalty miles to reward its customers for flying with the airline via its AAdvantage programme in 1981. It has continued to extend its loyalty proposition since then and remains among the largest FFP by quantity of members.

-   Rewards for any purchase - the growing popularity and availability of co-branded credit cards in the early 1990s saw customers increase their earning potential and being rewarded based on the way they purchased, rather than just what they purchased.

-   Earning and redeeming with partners - by the mid-1990's brands started to see loyalty programmes as key profit centres by using them as promotional currency with related partners. Airlines were the first to enhance their member proposition with the introduction of travel-related partnerships, although it wasn't until around 1997 that their programmes further extended their reach beyond travel to include wider lifestyle elements. Programmes in other sectors such as retail have since followed suit.

-   Emergence of coalition - Air Miles launched in the UK in 1988 and was the first major national coalition programme. By 2000 multi-brand programmes with a shared reward currency were appearing worldwide, and broadened the partnership approach to drive customer loyalty; the US got its first national coalition programme (Upromise), Air Miles spread across the globe and coalition programmes became more widespread in certain geographies e.g. Nectar in the UK, Payback in Germany.

-   Digital and social platforms - with the increasing rate at which consumers are adopting new technologies, brands and programmes have continued to take their loyalty propositions into the digital arena. Brands such as Asia Miles and Air France KLM , for example, are providing online learning and redemption platforms. By 2005, the emergence of social networks such as Facebook and more sophisticated mobile devices (e.g. PDA phones) created greater opportunities for customer engagement and the amplification of brand advocacy. The emergence of viable social rewards platforms and virtual currencies are now creating new and innovative ways in which brands can engage with consumers.

The fundamental principle underlying all of these approaches, regardless of industry sector or brand, is the use of customer data to derive insights that can be leveraged to create a more direct and loyal customer/brand relationship. Whilst the more mature European and US markets have followed a more structured approach to loyalty marketing, brands in the more emerging markets have been able to jump straight to more digital or social-based activity to cater for today's consumer needs and their brand expectations.

 

So where does loyalty's future lie?

Real-time engagement

The rise and near-ubiquity of the smartphone has provided new ways for loyalty marketers to reach, engage and entice customers in real-time. In fact, Gartner estimates that 468 million smartphones are already in use worldwide, and Juniper Research predicts that by 2015 mobile payments will grow by 40%. Most people are seldom without their phone, so they can easily be used as a 'virtual' loyalty card to provide personalised offers, or to receive incentives to be scanned and redeemed in-store.

The future of loyalty may well be governed by the use of technology, both by brands and by consumers - however the game will not be about the technology itself, but the value it can deliver to enhance the brand/consumer relationship. Brands need to look at the opportunities presented for real-time and more virtual engagement through the increasing adoption of smartphones and mobile apps and social TV.

Hyper-personalisation

Brands will continue to develop their approach to delivering a more tailored and individual proposition to customers and as such will be evaluating their capability to "hyper-personalise" their communications approach i.e. one-to-one tailored messages and marketing approaches, such as websites that instantly redesign themselves based on the customer's own preferences and purchase history.

All brands will continue to develop a more integrated, innovative and intelligent brand experience.  The new Burberry store in London uses RFID to trigger digital 'mirrors' that show video clips relating to garments. This sort of brand level initiative could be further personalised by incorporating customer behavioural and purchase data to the customer with a video that not only shows the garment but shows it based on an individual's colour preferences, size and accessory suggestions in real time. Improving the experience in this way could be an incredibly powerful initiative to engender customer loyalty.

Taking a holistic view of customer value
Combining all sets of data from transactions to interactions across all channels and being able to establish the value and meaning of how they interrelate will become increasingly important in optimising marketing investments designed to enhance customer loyalty. A more holistic view of the consumer and the value associated with different and multiple channel interactions is the insight brand's need to better understand what will drive the desired customer behaviour.

However, it is acknowledged that there are some challenges to be overcome in making this total view of the customer a reality. The approach taken to embrace the concept of 'Big Data' and how various data sets are combined across the wide variety of customer channels - including mobile and social networks - will be critical to aid wider customer understanding and positively influence loyal behaviour.

For the loyalty marketer, the future of loyalty promises to be even more exciting as the pace of change and technological evolution accelerates.  Success to securing loyalty in the future will be how brands embrace these future trends and evolve their proposition to deliver above and beyond customer expectations.


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