2021 — a Renaissance for Loyalty Programs?

The coronavirus pandemic has made this year full of new challenges, both business and organisational ones. Widespread social distancing has changed our habits in almost every aspect of daily life. Many industries have faced new, unfamiliar and unpredictable challenges and crises. More than one idea or project failed and others had to be postponed and wait for a better time. The year 2020 has changed the way we think about business, at least for the foreseeable future, and it has made its mark on loyalty programs as well.

We have seen for ourselves what works, what functions well and what is profitable — even in this time of global economic crisis — and what does not, and thus has been irretrievably lost. Therefore, it is worth drawing conclusions from the past few months, applying the predictions and approaching the challenges we will face in 2021 with more enthusiasm.

Although customer loyalty is extremely valuable, it is increasingly difficult to maintain. 70% of customers admit to checking out competing brands’ offerings to find the best product or service. And yet, it is still more profitable to keep regular customers than to acquire new ones. Loyal, recurring customers spend at least twice as much as new customers. Advanced loyalty programs rich in personalised offers help retain regular customers and improve their consumer experience.

For Loyalty Point, 2020 has proven to be a huge lesson, and, in fact, we will still have to test this new knowledge in the coming months. Based on our own experience, knowledge of the market and lessons learned from the pandemic era, we have prepared a description of several trends we are likely to encounter in the new year. It’s hard to say how long the changes that have taken place in the loyalty program market will continue. Nevertheless, in the nearest future, it is worth drawing conclusions on the situation. Let them guide you to ensure that your organisation has a better, and certainly more stable position on the market.

The trends that will dominate the loyalty program market in the near future are primarily in the following areas:

  • Use of new technologies, digitalisation
  • Turning to the individual customer on a mass scale
  • Pandemic-resistance

2021 will focus on the consumer, and the sustainable economics of loyalty programs to deliver more value and a better customer experience. Given the rapid changes in customer engagement coupled with the reliance on digital technology, it’s now more important than ever to accelerate digital transformation in the field of loyalty. The following elements may be key in shaping loyalty programs:

1.Omnichannel and strengthening touchpoints

Omnichannel! This is a buzzword that has been at the forefront of all discussions about the future of CRM lately. The key is to plan activities in such a way that they cover all channels and points of contact between the brand and the consumer. They must be consistent and provide an identical experience in the physical and virtual worlds, so that we can ensure continuity in knowledge acquisition and communication regardless of the market situation and changes in the behaviour of a given consumer. The strategic combination of communication channels along with sales channels, as seen from the perspective of loyalty activities, requires flexible planning of the activities and mechanics. Adaptation to market changes must take place without altering the main features of the program. An omnichannel operation allows companies to better aggregate and process data, thereby personalising communications more effectively and providing customers with a better brand experience. Appropriate collection and analysis of data allows you to act on a mass scale, but, what’s important, in a highly personalised way.

2.Personalisation on a mass scale

The experience shows that nowadays, when consumers are much more cautious in planning and managing their spending, reaching them with a personalised offer gains in importance. In order to meet this challenge, the marketers must have the right attitude. Tracking consumer purchasing decisions has become the norm, and with the information gathered, you can provide better brand experiences and more personalised offerings. We are moving away from an intuitive approach or one based on general statistical data to a model in which we can verify with great reliability the effectiveness of the actions carried out, assess the real yields, compare them with each other, and act on a massive scale but in a highly personalised way. And the customer, because of attachment and a sense of uniqueness, leaves behind more and more information that can be used by the company to draw data for the future, while addressing customer needs much better and delivering the value they expect.

3.Appropriate and safe use of data

The question today is not whether to invest in data and technology, but how to best use the data that have already been collected. The loyalty programs bring real benefits to the companies, provided that they rely on the necessary knowledge about their customers, which becomes the basis for building the whole mechanism. The customers are increasingly aware of the consequences of sharing their data with companies. Trust is the foundation of loyalty, so over time, brands will increase the effort they put into protecting data. At the same time, customer identification methods will be enhanced, which will certainly improve the consumer experience. With most of our daily activities going online, the companies are also able to aggregate data about their customers more accurately. The rise of e-commerce will definitely accelerate the use of data to predict the future.

However, data are not just about online transactions. The shift of customers towards smaller formats in everyday shopping (“closer to home” stores) makes it even more important to know the habits of the customer, to encourage them to identify themselves. Customer identification allows us to get a full insight into their profile. Therefore, we can conduct effective actions aimed at using the potentials defined as a result of such an analysis.

4.Digital transformation

Being able to move quickly in an increasingly digital world can be crucial. According to Deloitte Global Marketing Trends, more than 60% of respondents believe the coronavirus pandemic has increased their appreciation for properly designed solutions using new technologies. The same number of respondents will be much more willing to use modern, available solutions. Given the sharp changes in expectations towards customer engagement, coupled with their increased recognition for and reliance on digital technology, it is now more important than ever to accelerate the investments that enable companies to respond quickly with the most relevant messages and offers. Examples include mobile payments and e-wallets, which provide customers with greater flexibility and convenience in their payment choices. By 2021, most POS systems should be able to accept mobile payment methods and provide access to real-time data.

The trends mentioned are not separate mechanisms, but mutually complementary strategies that will help ensure the growth of loyalty programs and a stable position in the dynamically changing market in 2021.

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Is It Worth It to Invest in Loyalty Programs during the Pandemic?

Are loyalty programs still attractive? Or could they be? The coronavirus pandemic has shown that investing in loyalty is currently more important than ever. Customer habits have changed, so the approach to loyalty programs should change as well. The companies that want to be customer-centric offer a variety of suggestions to increase customer activity. Paul Martin, Head of Retail KPMG, aptly notes that:

Customer loyalty is not dead, it’s not even dying — it is being reinvented for the digital age.

There is no doubt that loyalty programs are evolving. We are more and more moving away from collecting points and exchanging them for prizes to step towards more attractive and better profiled benefits. To effectively reach consumers, the companies need to prepare smarter predictive analyses that not only help understand the participants’ purchasing decisions, but also make it possible to reach them with personalised offers. In 2020, we’ve seen a shift away from old habits. The consumer loyalty has been re-evaluated due to the pandemic and a shift in how we make purchasing decisions. In addition, we have been hit hard by the ubiquitous digitalisation that has gained momentum with most of our daily activities going online.

A study by The Digital Transformation Institute shows that keeping a loyal customer is up to six times cheaper than acquiring a new one. Additionally, the cart value of an emotionally involved customer is twice as high. According to the study, 70% of loyal consumers spend, on average, twice as much, and almost half of the respondents are able to admit that their spending for the brand would be adequately higher if they had an emotional bond. The calculation is simple. Customer retention is therefore not only cheaper, but will also bring in more profit, which is why investing in loyalty should still be a major focus for marketers — also in these volatile times.

In fact, a factor that has significantly redefined the approach to consumer loyalty is uncertainty. 2020 has proven to be an extremely unpredictable year, and the experience we have gained from working with clients over the past few months shows us that the average consumer is now much more prudent in planning and managing their spending. This means that another obstacle stands in the way of acquiring a new customer. Hence, the effort to retain a regular customer turns out to be all the more important.

The special role of e-commerce and small formats

Faced with an ever-present pandemic, we had to find new ways to have a social life in a world where social distancing was quickly becoming the norm. Most of the old habits had to change, including daily shopping or visits to shopping malls. This involves a change in approach to loyalty programs and marketing. Smaller stores closer to home and e-commerce have gained in importance.

When it comes to small formats, where as a rule the cart value is smaller, this definitely needs to be taken into account in the program’s offer. You want to consider this low cart value when planning benefits and if possible the benefits should be immediate. On the other hand, a low cart value often means that the transactions are very frequent. Then, the benefits are a great tool that can be used by the customer on their next visit to the store. We also get huge opportunities here in terms of data analytics. We can, and indeed should, respond to any deviation from the observed patterns of participant behaviour. You can find a handful of information here because purchases are made very frequently. Such an approach is possible precisely because of loyalty. By encouraging customers to identify themselves we are able to get a full insight into their profile. Therefore, we can conduct effective actions aimed at using the potentials defined as a result of such an analysis.

E-commerce is the second format that has significantly gained in importance. All solutions designed for e-commerce have gained momentum practically overnight. The shift towards online shopping is causing brands to place more and more importance on data analytics, as every customer leaves behind a mass of information.

Data, data and more data…

The data are a key element to building an effective loyalty program. Marketers are paying even more attention to the quality and type of data acquisition, which allows not only tracking but also predicting trends and responding to consumer needs in a timely manner.

While loyalty itself is difficult to measure, loyalty actions, on the other hand, are quantifiable characteristics. Thanks to a reasonable policy of acquiring and using data, which is, or at least should be, the main objective of loyalty-building activities, we are moving away from an intuitive approach based on general statistical data to a model in which we can verify the effectiveness of our actions with great reliability. Appropriate collection and analysis of data allows you to act on a mass scale, but, what’s important, in a highly personalised way. This would not be possible with ‘classic’ tools, using the same general communication to all the beneficiaries of a loyalty program. In this sense, more and more companies are beginning to appreciate the potential inherent in gathering customer information and treat CRM as a verifiable investment rather than an unnecessary cost.

The natural shift of some sales to the internet results in a tsunami of contacts in online channels. Here, too, a well-integrated loyalty program supports customer service processes, allowing for faster customer identification, integration with purchase history, history of complaints, returns, received benefits and promotional offers, and many other valuable information in the process of handling customer inquiries. All of this translates into increased service efficiency and reduced time.

While digitisation will certainly change the approach to loyalty programs for years to come, it’s hard to predict how long the effects of the pandemic itself will last In the near future, the relationship between the consumer and the company will become increasingly relational, meaning that everything that happens in any part of a brand’s marketing activity can have an impact on customer loyalty. This trend also reinforces the need for companies to become truly customer-centric and ensure that customer data are fully integrated into company systems so they can improve their loyalty offerings.

You must also take note of the dynamics of change in the market. At Loyalty Point, we pay particularly close attention to ensuring that each project can clearly prove its direct, positive impact on customer value over time. High-quality and large program database combined with good communication processes is the driving force behind most of our projects. In practice, this means an increase in purchase decisions by as much as 60% compared to the control group. Effective campaigns for the participants significantly increase sales and generate up to 10% of additional turnover brought by the program beneficiaries. Another important issue is the ability to reach out to your customers immediately to let them know how you are doing in these very dynamic times with store closures, new customer service processes, additional safety procedures. This means that you are communicating everything that translates into customer comfort and a sense of security.

The companies are increasingly treating their customers as partners who should be protected, nurtured and invested in strategically and systematically. Very dynamic changes have become a natural part of everyday life of most organisations. In this field, the loyalty program is a reservoir of knowledge about the needs, habits and preferences of customers.

In conclusion, the pandemic has accelerated the already progressive digitisation of loyalty programs, further boosted the development of mobile applications and the significance of data collected and properly analysed has never been more important and promising.

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If you are interested in our offer, have a brief for us or you want to know how we can support your business, write to us.
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