Marketers today are driven to deploy low-cost mobile technologies, harness big data, and achieve parity with competitors. Unfortunately, these forces have combined to create a proliferation of weak, uninteresting and unengaging loyalty programs. However, by avoiding program design pitfalls and conducting a critical analysis of what loyalty can do, loyalty can become a sustainable differentiator and source of competitive advantage – even in today’s crowded marketplace.

Today almost anyone can design and launch a loyalty program. Review top competitors’ programs, make a few minor changes, and the new program design is done. Now, deploy it on any one of several new-to-market start-up platforms. Voila! Your plug-’n’-play loyalty solution is up and running.

While this method certainly checks the box for a loyalty program, it invariably fails to capitalize on the business opportunity strategic loyalty represents.

Nevertheless, the plug-‘n’-play approach is hard to resist. The strength of the trend is driven by three factors:

  • The availability of low-cost (mobile) technology
  • The race to harness the potential of big data
  • The need to achieve parity with competitors

Though these factors do logically indicate adoption of loyalty marketing initiatives, one must consider that loyalty and strategic loyalty are two very different things. Businesses driven only to “check the box” invariably end up with cookie cutter programs that do little to deliver on business strategy or drive differentiation. Let’s take a look at what happens to loyalty programs that overemphasize these factors:

The availability of low-cost (mobile) technology has encouraged businesses to implement DIY loyalty platforms that can be quickly set up at almost no infrastructure cost. While this can be a good thing, all too often it results in economically unsustainable programs and/or un-scalable platform infrastructures. Loyalty marketing is properly thought of like home ownership – it is a long-term commitment. Foundational decisions must be made with an eye toward the long term. Strategic program design thus demands a more sober, committed approach – that will pay off exponentially for smart clients over the longer term.

The race for big data has pushed businesses to design programs that collect and store all kinds of customer data but are not able to act on it. CMOs and big data are thus a bit like dogs chasing cars – once they catch it, what do they do? To be clear, there is no doubt that loyalty is a prime deliverer of big data. It can provide transactional, behavioral, demographic and attitudinal information that can be linked directly back to a named individual. But CMOs must understand that data collection is only a first step; to harness its power, it must be mated to personalized omni-channel campaigns that deliver relevant information and offers. It is only then that loyalty achieves the true lift and shift for which it strives.

The need to achieve parity with competitors has recently emerged as a major driver of program creation and evolution. For example many airlines have moved to an earning model based on dollars spent rather than miles traveled. But the question one must always ask in these cases is: who is doing loyalty most successfully? Just because a competitor is offering a loyalty program (or a new program change), does not mean it is effective.

A better reason to build a loyalty program is to achieve competitive advantage over others in the marketplace. Sure, the building process needs to consider things like ‘How do I leverage low-cost technologies?’, ‘What kind of data and analytics will the program help me achieve?’ and ‘What are my competitors doing?’ But it also needs to think beyond these considerations. It needs to define strategic loyalty program design and illustrate how only it can deliver competitive advantage.

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