The loyalty program space is crowded and largely similar. Features like points and tiers have become table stakes, and consumers are more interested in the idea of rewards than they are to actually use them.
The average consumer is enrolled in eight loyalty programs across multiple industries and are active participants in five, according to Deloitte research from January.
A handful of brands are creating fresh avenues for loyalty outside of the saturated space of traditional loyalty programs and their focus on transactions and rewards.
“The future of loyalty really is going to be anchored in understanding consumers at a deeper level than just purchase behavior and interacting with them on a deeper level as well,” Katherine Black, partner and Americas lead for grocery and retail at Kearney, told CX Dive.
Apps are one of those avenues. At their core, apps that look beyond transaction-based rewards engage customers with services and experiences while keeping the brand top of mind.
The Dick’s Sporting Goods’ GameChanger app is a prime example of a non-loyalty app that is building engagement with customers while collecting useful information. The app helps parents connect with youth sports through features like alerts, game livestreams and stat tracking, and it offers coaches options like event scheduling and team messaging.
“That app isn't really selling the consumer anything directly, but it is engaging that consumer on a weekly or maybe even more frequent basis,” Black said. “They can see what's going on with their team sports and how stats are moving and so on and so forth, and that just increases engagement in the category.”
Dick’s declined to comment for this story.
Going beyond transactional rewards
Many loyalty programs fail to generate true customer loyalty.
The problem isn’t a new one, according to Katie Thomas, lead of the Kearney Consumer Institute. Loyalty programs have never truly been about deepening customer relationships.
“The reality was, a lot of retailers would admit to this, too, that when loyalty programs first got popular, they were basically just data farming,” Thomas told CX Dive. “It wasn't necessarily to drive a ton of loyalty. It was how do we get consumer data, and what's the minimum that we need to offer them to get it in return?”
Now loyalty is reaching its next stage in which it supports the activities that customers are already engaging in, according to Thomas. For some businesses, just making it easier to engage with the brand is enough. For instance, Starbucks Rewards builds on customers’ daily coffee run.
Dick’s found where it can support something relevant to the customer with GameChanger, according to Thomas. Many Dick’s shoppers are already engaged in youth sports, which makes it a natural pairing.
The Nike Run Club app, which helps users track their performance as well as connect with other runners, is another example of an app that connects a brand’s products with an activity the customer is already doing.
The goal of such programs is to build connections with the brand, according to Halle Stern, a director analyst in Gartner’s marketing practice. Rather than reward transactions, they aim to offer something useful while keeping the business behind the program top of mind.
“It's more about what is a target segment of ours doing?” Stern told CX Dive. “How can we help support them and make them feel like they're part of the brand and position ourselves as the preferred supplier for when they need to get sporting goods?”
Transactional loyalty programs are still important. Consumers and businesses alike understand and expect points, tiers and benefits for shopping. However, non-transactional apps — or non-transactional elements in an otherwise traditional loyalty program — can forge deeper connections.
Each approach is a matter of perspective, according to Stern. Traditional loyalty starts from the business’ perspective, while other approaches start by thinking about ways to assist the customer with a service they will appreciate.
Data beyond what traditional loyalty can capture
Non-transactional features and apps still need to prove their value to the business. While they probably won’t drive as many sales as a loyalty program promotion, they offer valuable insight into customer behavior.
Loyalty programs are great at collecting leading indicators like purchase frequency, channels used and average basket size, Stern said. However, “the transactional data from a traditional points-based program is only one piece of the puzzle.”
Experiential programs help brands collect information about lagging indicators like attitudes and behaviors, and can build on Voice of the Customer data to get a fuller picture, according to Stern. Combining leading and lagging indicators enables a more holistic understanding of loyalty.
Extracting data from a more experience-based app requires some extrapolation, however. For an app like Dick’s GameChanger, teams would need to start from how customers are using the app — such as what they’re watching or which features they’re engaging with — and work out how that information could affect the products, promotions or events the company wants to boost, according to Thomas.
Even when the details aren’t immediately relevant, they can help brands build a more complete picture of the customer.
“When you have that kind of information, you actually have more information about the consumer, not just this really tight discovery journey,” Thomas said. “How are they spending their time? How quickly do they watch it? Who are they sending it to?”
Know your customer before you begin
Any loyalty venue, whether traditional or more service-focused, needs a baseline level of customer knowledge before it can be a success.
The process starts with customer personas. These have felt like “cardboard cutouts of a customer” in the past, but modern data practices have reached the point where personas can be used to identify the right touch points an app or feature should target, Stern said.
“There are these prioritized data sets about our highest priority customers — what drives satisfaction, what drives loyalty, their needs, their values, their psychographics, how they're using specific channels,” Stern said. “All of that information has made personas much more actionable and adopted across the organization.”
The form non-traditional loyalty should take depends on the company and its core audience. Thomas points to Pizza Hut’s BOOK IT! reading program as an example. Launched in 1984, the program is built around engaging the chain’s family-focused customers.
Regardless of how companies approach their app or service, these programs work best when they tap into a community, according to Thomas. Customers generally aren’t interested in joining a corporate-created group, but they appreciate it when that business makes it easier to connect with organic communities.
For instance, GameChanger connects with existing youth sports teams rather than trying to create its own approach. Additionally, Dick’s didn’t develop GameChanger itself — the retailer acquired the app’s owner in 2016.
“[Brands] want to plug into the communities consumers have created for themselves,” Thomas said. “So that's what you're seeing here. Kids use sports, which is certainly a community in and of itself, and so you're seeing the loyalty plug into that as opposed to trying to push a community onto somebody.”
Getting these loyalty venues right requires brands to get creative in terms of how they think about the features that would interest their customers and how they will provide a return on investment. However, as the loyalty space becomes increasingly crowded, alternative venues of loyalty are becoming more attractive, making the work worth the while.
