customer strategyFEATUREDHEADLINESPersonalizationLoyalty Personalization as the Future of Marketing

The success of personalization is dependent on identifying the true drivers of loyalty.
Guest ContributorJanuary 14, 202117 min
The Home of Customer Engagement - News / Research / Technology
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The industry consensus is that most consumers want personalization but there is clearly a disjunction between reality and rhetoric.

The secret to successful loyalty programs is understanding why consumers keep coming back for more. Only, today it’s no secret. In fact, the world’s consumers reveal precisely what they’re looking for, why they return and where they’re likely to go next on a daily basis. Every transaction, online activity, comment and referral generates mass data – which can be used to strategically create the most effective personalised loyalty programs.

In an increasingly competitive world, businesses and organisations have to appeal to their customer’s hearts, minds and wallets. Traditional methods of retaining customer loyalty are rapidly becoming obsolete. Indeed only 37% of customers surveyed by KPMG identified points and rewards as one of the most effective ways to secure their brand loyalty. In most countries, points and rewards were less likely to generate loyalty than corporate transparency and honesty.

What are the effects of customer loyalty?

When customers are loyal to a brand they are 86% more likely to recommend the company to friends and family. The effects of word of mouth marketing are multiplied when simulated by customers who are loyal. Combine this with the fact that people are 51% more likely to make a purchase backed by trusted recommendations and you have a winning formula.

The same KPMG survey found that a further 66% of loyal customers are likely to write a positive online review after a good experience. The power of customer testimonials cannot be understated. The same is true for the negative impact of bad reviews published online.

All companies have ups and downs and there’s no telling when a customer will have a sub-par experience- even with the most customer-focused company. However, when it comes to loyalty, 46% of existing loyal customers will remain loyal even after a bad experience.

What prompts customers to be loyal?

Here’s a numerical breakdown of what matters most:

  • 74% of consumers said product quality inspires loyalty
  • 66% said value for money keeps they coming back
  • 56% said it’s customer service that prompt loyalty

Building customer loyalty today means that establishing an emotional connection with customers is no longer a -nice-to-have but its a need-to-have. And nothing tugs at our emotions more than personalization. Incentives for companies and customers alike exist to reward good customer service and in turn customer loyalty.

Personalised Loyalty Programs

The industry consensus is that most consumers want personalization but there is clearly a disjunction between reality and rhetoric. Whether personalization is manifested in communication, promotions, offers or service; when surveyed, only one in five consumers saw personalization as a leading benefit of loyalty programs.

The value that consumers place on personalised offers from loyalty programs varies by country. Germany, for example, were among those likely to say that behaviour tracking was a key deterrent to joining loyalty programs at all.

Since the drive for personalization is in conflict with public concerns about data privacy, there is more to be done in terms of providing peace of mind to customers. “Personalization” doesn’t necessarily ring synonymous with targeted email marketing, or redirecting customers to pages they’ve once viewed. Rather, the success of personalization is dependent on identifying the true drivers of loyalty.

Millennials have become the most intensely researched generation and are of course the new wave of big spenders. From first time home buyers to retail and grocery shopping, millennials are key targets for many organizations’ customer loyalty programs.

More than 6 of 10 millennials would prefer to donate their loyalty rewards to a good cause as opposed o redeeming them personally. When compared to the 40% of Baby Boomers who said they’d do the same; there is a clear difference in the way loyalty programs should be presented to each demographic. Personalization in this case, for example, would call for organisations and companies to align themselves with causes and charities that are of interest to Generation Y, AKA millennials.

Just how effective are loyalty programs amongst millennials? Well, KPMG found that 1 in 7 don’t actually belong to any program at all. However, of those who do subscribe to a program, 81% say their membership increases their spend within the company concerned. When this is compared with the 66% of Baby Boomers who say the same; it’s clear that getting millennials onboard a loyalty program is key to securing more sales.

When personalization is materialised not through product preferences, rewards and points, but rather through matters of interest such as transparency, sustainability and innovation; millennials and Generation Z consumers are more likely to become active members of such loyalty programs. Once onboard, this demographic is also more likely to contribute to positive online reviews, social media posts and word of mouth marketing.

Personalized and improved Loyalty Programs Ahead

An overwhelming majority of customers surveyed agreed that customer loyalty can be improved and 75% of them said they would switch brands for a better loyalty program. How exactly can they be improved?

For a start, they should be made easier to use. Avoid lengthy registration processes and rules and conditions when redeeming rewards, since these are most likely to deter customers from using their membership again – diminishing the company’s ROI and defeating the objective of the loyalty program.

Loyalty programs are generally associated with the hospitality industry, which is proven to be quite effective as consumers repeat their purchases. A good example is Starbucks’ rewards program, which enables regular customers to reap awards based on how much they use Starbucks. Another example is Repeat – an app designed to connect restaurants and customers, and reward consumers for coming back sooner.

Once an easy-to-use loyalty program is in place, make clear to customers why they should enrol in your program, what they’ll get out of it, and why they should keep track of their rewards. True loyalty is defined by empathy and emotional engagement. So, remember that rewards are more likely to be effective when they offer an exclusive experience or more importantly to Generation Y, at least, to donate to a good cause.

The future of Marketing to Target Audiences

Times have changed. Conscious consumerism has reached new heights and customers are demanding more than high-quality products and reasonable prices. They want transparency, honesty, more information, and most importantly to be aligned with a meaningful cause. Personalised loyalty programs are one of the most effective ways to tug at the heartstrings, minds and wallets of the customers you want to keep.

By identifying the most important value propositions to your customers, companies can implement strategic incentives into their personalised loyalty programs. A one-size-fits-all approach just won’t cut it. The bottom line is, for a program to be an effective marketing tool, a business must truly understand loyalty drivers of each target demographic and then create differentiated loyalty programs to offer each customer.

daglarDaglar Cizmeci is a serial investor, founder and CEO with over 20 years’ industry experience in aviation, logistics and finance. Graduated from Wharton School and MIT. Chairman at ACT AirlinesmyTechnic and Mesmerise VR. CEO at RCCL and EHGC. Co-Founder of MarsfieldsARQ and Repeat App. He also runs a personal blog where he shares actionable business management and funding tips.


This article originally appeared in Business2Community. Photo by Ricardo Gomez Angel on Unsplash.

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