What does the future of customer loyalty look like and what can different generations – from the youngest Millennials through to Baby Boomers – learn from each other? And, as mobile technology advances, collecting and disseminating a host of consumer metrics across a variety of marketing channels, how will the balance between status-driven loyalty and tangible rewards shift?
Bill Hanifin, loyalty expert and author of the Loyalty Manifesto, tackled these questions (and more) in his report, Contextual Loyalty: The Evolution of Social Loyalty Truth, which is part historical survey, part long-term outlook. Hanifin, founder of LoyaltyTruth.com, is a recognized leader in loyalty marketing, social CRM, business intelligence and payment technology.
Eager to learn more, I spoke with Bill about his generational observations and loyalty marketing insights. Here’s what he had to say during the first of our two interviews.
Your loyalty manifesto argues in favor of social media and Millennials being social media change agents. It also makes the case that tangible loyalty – e.g., physical rewards and monetary discounts – are giving way to intrinsic value, or emotion-based loyalty. Yet the report also says the top two Millennial reward app “wants” are coupon downloads and points redemption. Does that contradict the above? Coupon downloads and points redemption are classic currency-based loyalty. If this is what Millennials crave, what does that say about older, less social media-savvy demographics?
Hanifin: It’s important not to get hung up on the idea that tangible and/or monetary rewards are entirely giving way to intrinsic value. One form isn’t replacing the other. They’re working in concert to improve the customer experience – regardless of generation. Intrinsic rewards are gaining popularity thanks in large part to mobile-enabled social media and the expanding intelligence of tech-savvy consumers. Therefore, extrinsic rewards need to become smarter. Intrinsic rewards are critical, though, as they’re must less costly to implement. If we can shift a portion of loyalty costs from one to the other and keep customers happy – it’ll be a win-win. Millennials are an interesting group when it comes to their loyalty program relationships. They want to interact in a very different way than older demographics. Most important to them is transparency in the business/loyalty rules. They want to know ‘what do I have to do and what do I get for my efforts?’ They crave rewards accessibility and often rewards that come in smaller denominations and items that can be downloaded to their phones. They also don’t want to over-think the matter. Transparency is key and it’s the word my company uses. Of course, not every Millennial is like this so it’s important not to generalize too much.
If humans suffer shrinking attention spans, feel entitled, are ownership-driven and distraction-prone, what kind(s) of experiences can truly elicit genuine loyalty? Don’t people just want efficient service, fair prices, rapid correction when things go wrong and, if they’re loyalty members, the occasional points-based reward?
Hanifin: The industry hasn’t looked at consumers as human beings for quite some time. Instead, consumers have been considered as commodities to be served with rewards. It simply doesn’t matter if you’re a Millennial or a silver-haired Boomer who doesn’t embrace social media. The need for genuine experiences crosses all generations. And it’s genuine experiences and interactions that will engage people’s attention spans. So will quality service at quality prices, the same as always. Don’t get me wrong, shrinking attention spans present a vexing challenge. So does entitlement. Distraction looks like this: people walking with their heads down, consumed by mobile technology. Entitlement looks like this: a teen or twenty-something that expects a certain type of reward (intrinsic or extrinsic) for extremely minimal brand interaction. Engaging entitled consumers will be far more difficult than engaging distracted ones. But building trust can win back both. Educating consumers is also key and a good example of that is Progressive Insurance: the brand isn’t afraid to quote competitors in its advertising.
You make frequent distinction between intrinsic and extrinsic rewards. But don’t all rewards come back to a monetary basis? Take airlines. Extra leg room is not a monetary reward. Nor is it points toward a future discounted flight. But extra leg room seats are larger, taking valuable space from other potential seats. Can you elaborate on this?
Hanifin: At a purely academic level, yes. All rewards have monetary significance. If I have a loyalty offering where I open my store several hours earlier for dedicated shoppers (an intrinsic, non-tangible reward), I’m still incurring employee overtime costs, additional utility costs, etc. But what loyalty providers care about more is how consumers perceive the reward. People perceive half off an item as a tangible reward. They perceive early or priority boarding as non-monetary, because they have status as a customer. But even if there is a monetary cost associated with intrinsic rewards, those costs are much lower and beneficial to the brand.
In the time since the manifesto’s publication, I’ve seen a growing trend toward the emergence of loyalty aggregators – loyalty platforms that combine and share points between verticals, like travel and hospitality. How do you see loyalty aggregation evolving in the next year? And how do these programs, as with other examples, reinforce intrinsic rewards?
Hanifin: I think there will be many companies embracing the loyalty aggregation trend. Part of the reason for that comes down to smartphone ubiquity and the idea that marketing channels and customer engagement across multiple devices continue to merge. Consumers shop, book flights, research products and communicate via social media all on one device. It’s natural for them to expect that level of cross-service honoring from their loyalty program. I also think you’ll see brands cooperating in complementary ways to help other brands maximize their value proposition. For instance, members of Plink.com, a loyalty aggregator, can now use their points at a wide variety of outlets. Plink also offers what I call “rewards within rewards.” The Tango card allows members to earn Plink points redeemable at iTunes, Target, Home Depot, Pottery Barn and REI , among others.
Now that I’ve dug a little deeper into intrinsic and extrinsic loyalty rewards and how they are evolving, my next interview with Bill will address some of the issues surrounding generational lessons learned, the importance and viability of mobile wallets and the power of social media to drive loyalty.
Check back for regular updates on LoadFactor and part two of “The Truth About Contextual Loyalty” with Bill Hanifin.