Anthem Marketing Managing Partner/CEO John C. Keenan has his finger on the pulse of the loyalty marketing arena. So, what better person to talk to about the state of loyalty marketing.
Keenan participated in a compelling Q&A with Loyalty360.
How would you describe the current state of loyalty marketing?
Keenan: Ever-evolving. You might have just gone through all the effort to design and launch a program, and immediately there are changes in the environment that suggest you’re behind the times, or if you’re running an existing program, you’re always wondering how to keep up with new features other programs are launching. For example, just recently we’ve seen Starbucks move from unit-based credits to dollar-based credits, a shift we’ve previously seen in other categories, like airlines. What do they know that I don’t know, and how should that impact my program?
Additionally, there are ongoing debates about the effectiveness of loyalty programs, so there is a constant need for justification. That exists on various levels, and it raises a lot of questions. What is the financial payback? What are the right measures of success, both short-term and long-term? Are we just giving discounts to loyal customers? How do you factor in all the different levers in your program that try to drive engagement? How do you measure changes in behavioral vs. emotional loyalty? What roles do location and intent play, and should we just go all-in with mobile? Should we run a stand-along program or should we join some sort of cross-brand or coalition program? Is Plenti really working, and should I consider joining? How about Belly or many of the similar mobile programs?
What would you say brands are doing well and what things are they challenged with in loyalty marketing and in methods they use to increase long-term value of their customers?
Keenan: We’re starting to see more companies use personas and behavioral segments to tailor messaging and offers, which is encouraging. This is starting to get brands down the path to true 1-1 marketing and increased long-term value. That term and the philosophy around it infuse a lot of what we talk about with our clients.
The integration of payment/loyalty/mobile is another shift that will pay dividends over the long term by making it easy for a consumer to stay loyal to a brand. Again, Starbucks is one of the companies leading the charge in this area, and everyone else is striving to keep up. It will be interesting to think about how to identify the next step-change once the playing field is leveled.
In terms of challenges, we still see an over-reliance on blanket discounts, and less emphasis on rewarding profitable incremental spend, which is really the only way to measure increased long-term value. Too many brands are training consumers to wait for the deal, which means they don’t really have a loyalty program, but just an addressable delivery mechanism. In many cases, that may be because the rewards structure is overly skewed towards the aspirational rather than the attainable, meaning discounts carry more immediate weight with consumers. I can think of several retailers that offer frequent discount offers worth far more in savings than the small payback credit you would receive after spending hundreds of dollars with them.
Taking that thought further, few brands are aggressively leveraging the data they collect from their programs, or thinking creatively about how to engage consumers at every point of interaction along the customer journey. This means, for example, that they are treating the high share of wallet/low frequency customer the same as the low share of wallet/medium frequency customer, when it should be easy to identify each and treat differently based on desired behavioral responses.
Also, contrary to best-practice philosophy, at many companies the loyalty mentality doesn’t seem to infuse all areas of the business. For example, this can mean that consumers have the ability to stack rewards opportunities, which definitely cuts down on profitability. If I’m shopping online, I can start by clicking through a rebates site, then sign in with my rewards ID, use a coupon code and pay with a cash-back credit card. Or I can enter a store and collect Shopkick points, use a mailed coupon and also collect loyalty points, then pay with my loyalty credit card. It can add up to a lot more margin than many companies may realize they are giving away, in many cases because you have different teams thinking about different parts of the customer journey.
We often hear from brands that one of their biggest challenges with data is that they have plenty of it, but leveraging insights and personalization methods is very difficult. What is your advice for them?
Keenan: Hire more outside advisers! Seriously, because doing data analysis is not part of their core competency set, too many businesses get stuck in the “descriptive” part of the descriptive-predictive-prescriptive analytic value chain, and not enough emphasis gets put to interpretation. In many cases that is a result of an insular culture, that may unknowingly narrow the perspective of folks inside the organization. Utilizing outside resources brings cross-category perspective, and access to interpretive expertise that may be difficult to develop internally.
When we start working with a new client, one of the first things we do is perform a “discovery” exercise to uncover intrinsic organizational knowledge and inform the structure of our work. I remember starting an engagement with a client several years ago, and we asked them to describe their client base. A couple of nuggets were that the typical age of a buyer was in the 35-45 age range, and “once a customer, you’re a customer for life.” They were just taking static looks at their customer file and repeating what was on a report. We dug a little deeper and applied some background thinking about how consumers operated in the category, performed some basic analysis and told them that more recently the average new customer was over 55, and more than 60% of them were one-time buyers. Jaws dropped open, but the good news was that we were able to work together to shift marketing tactics to respond to those types of knowledge.
If you are performing the work internally, you have to avoid relying on software tools to solve your problems; the reality is that you still need an expert operating the tools to work toward the desired outcome. So for example, personalization is easily doable from a technological standpoint if all you want to do is insert first name in an email, because you’ve heard that alone increases engagement. But that doesn’t help you get to the types of language, imagery, and calls to action that are going to resonate with an individual, or group of like individuals. That requires more human intervention, and some creative thinking. Once you have begun to develop actionable insights, step your way into implementation and build on some early wins, rather than trying to hit a home run right out of the gate.
One other thought, going back to an earlier comment: The whole concept of exploring the customer journey is very much in the forefront of thinking – at least among the advisory set. But I’m not sure it has taken hold within a lot of practitioners yet. In many cases, if it has, it often ends with defining the customer journey, while the real opportunity is to think about the potential consumer interaction points, and how you can leverage those to enhance the brand relationship, driving toward increased brand loyalty, and more importantly, long-term incremental value.
Mobile seems to have become exponentially more of a factor for loyalty marketers in the past two years. How do you foresee mobile’s role for brands seeking to become customer-centric?
Keenan: As regards to mobile, bandwidth is going to increasingly become a concern, and I’m not talking about mobile connection speeds. Mobile and social channels are going to be constrained by the limited real estate and attention deficit inherently related to interacting with consumers through those channels. There are only so many ad slots that can reach a consumer who is primarily focused on doing something else, and disruptive or interruptive advertising will increasingly get tuned out. Witness the debate over ad blocking going on right now. I don’t expect that consumers are going to be any less disdainful of ads just because they’re members in a loyalty program.
If you go back some years, there was a lot of talk about “Miller’s Law”, the concept that humans only have capacity to keep track of seven things at one time, explaining, for example, why telephone numbers had seven digits. In earlier times, I remember giving numerous presentations talking about contention for consumer interest, and how loyalty marketers outside of the top seven categories were going to have a tough time getting on a keychain. Grocery, pharmacy, fuel, and credit cards probably had a lock on the first four spots. Banks, airlines and hotels had strong claims. All those represent products or services that account for substantial amounts of a consumer’s spending, and/or high levels of involvement.
Is that different today? Just because mobile enables consumers to easily – maybe even unconsciously – get involved in a loyalty program doesn’t mean it will hold your attention. Loyalty marketers need to think about how they can integrate mobile into their brand experience in a valuable way in order to gain consumer attention. Just having a beacon or some method of identifying a consumer is in a store isn’t enough, there still has to be a reason for consumers to pay attention.
What emerging platforms do you think will play a larger role in loyalty marketing in the future?
Keenan: Mobile cross-brand loyalty programs are starting to gain some traction with consumers, things like Belly. The big question is whether there is enough giveback to hold consumer attention. And obviously the convergence of mobile/payment/loyalty is shaping up to be a game changer, but that is going to have to be driven by the big payment providers. Programs like Plenti are starting down that path, with AmEx as the primary sponsor taking a big position in that space. And all of the credit card companies are starting to offer custom analytics around individual consumer spending, offering a compelling opportunity for loyalty marketers to expand their knowledge about their members – and act on that knowledge.
How important is a unified and totally aligned corporate culture to pull off any loyalty marketing goals?
Keenan: It has definitely always been a key tenet of loyalty marketing that it requires a company-wide cultural
commitment to be successful, but I’m not sure that’s always true. It depends on how you establish the goals for your program. For a lifestyle brand, it would be more important because so much of how you engage with the brand could be made relevant in the context of the loyalty program, so your entire team needs to be approaching their jobs with that mindset. Or for a hotel chain, which is a truly experiential relationship, it should be something that permeates all aspects of the operation.
But for other brands, or those with a more limited hold on consumer attention, that may not be true. For example, think about one of the sandwich shops that runs a points program. You enter, you order, and only at the point of payment do they ask for an identifier. They can still be successful in terms of driving profitable incremental value with that type of program. Does that require an organizational commitment to loyalty? I’m not so sure.