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Consumer behavior can often change at a faster pace than brands can keep up with, prompting them to adapt their loyalty programs.
Loyalty360 talked to Laurie Meek, Loyalty Engagement Lead, Lenati, about this ongoing challenge for loyalty marketers.
Can you describe some of the shifting consumer habits today and what loyalty programs can do to adapt?
Meek: There are three broad themes emerging from consumers that impact how they interact with and emotionally engage with brands.
The ownership paradigm is changing – Consumers value experiences over goods, and thus are not purchasing material goods at the same rate – rather, they will opt for the “sharing economy” and will pay to use goods “on demand.”
Rise of urbanism – Urban consumers lead hectic lives with careers, family, friends, and hobbies occupying their time; therefore, they have scarcity of time and are looking for fast, easy, and convenient methods to purchase goods. They also have limited space and need creative solutions for how to consume and manage their material goods.
Rise of interface brands – Consumers have more direct interaction with “interface brands” like Amazon that aggregate products for sale and provide “smart” interfaces like Alexa that remove brands from the direct customer relationship (ex: listening to Spotify via Alexa means a customer has less frequent need to engage directly with Spotify’s app). This means that brands who traditionally have had more “mental mindshare” from consumers need to come up with new ways to engage with consumers so they maintain relevancy.
To adapt, loyalty programs need to elevate and expand the way they add value to a customer’s life. This means that programs need to look at a customer holistically, both as a customer across product lines and departments and at their lifestyle habits and needs outside of the brand. The focus needs to shift away from transactional engagement to superior experiences and services, and solving for pain points that make their lives easier and stimulates positive behavioral and emotional response – in the form of repeat purchases and brand affinity. The ultimate goal for a brand is to become embedded in a customer’s life.
I realize this can differ from brand to brand, but how often should a company review its loyalty program based on what it’s seeing from customer behavior?
Meek: As a rule, we follow a seven-step, iterative process for designing and managing loyalty programs. We recommend a loyalty program undergo a strategic review and redesign process every two to three years. This frequency allows for a program to be designed, deployed, managed, and observed over a significant period with continuous agile improvements made as necessary. During this time, customers become familiar with the program and can obtain value from their membership, with top customers obtaining status and forming deeper bonds with the brand.
Similarly, if any significant investments were made to the infrastructure to launch the program, this period allows for returns to be tracked and realized. However, by the time two to three years pass, the program will be ready for a refresh. In this digital age, consumer habits and technology are rapidly evolving and if a program is not reassessed in this time, it runs the risk of becoming obsolete.
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