How Has the Pandemic Affected Consumer Behavior in Loyalty Programs?
The epidemiological situation stabilizes, and marketing normality is slowly returning to the old tracks. Some customers are reacquainting themselves with stationary shopping and are more willing to interact with in-store consultants. What challenges do marketers face in the post-pandemic reality? Will the position of the online channel last, while the offline channel will be irretrievably lost? How will post-pandemic customer behavior evolve?

Conversion to loyalty programs – an upward trend

At Loyalty Point, we support more than a dozen leading loyalty programs in the retail category. This enables us to observe changes and quickly react to emerging trends efficiently. Loyalty programs are used as sales support also in crises – that’s why their position has strengthened during the pandemic. As shown by most projects we work on, the number of registrations for loyalty programs is steadily growing. New people are eager to join more loyalty programs with the mindset of ‘nothing to lose but to gain.’ Last year we saw between 15 and 20% growth in registrations.

The digital transformation in the area of loyalty is a fact. We move away from paper form and stamp card programs to more digital solutions. Nevertheless, in-store registrations with the help of a salesperson or consultant are still very popular among many customers. Therefore, the loyalty program market is still developing in two directions when it comes to the registration process. Most companies offer the possibility of registering for the program both offline, which we understand as registering in a stationary store, and online, through a mobile app or a form on a website. Brands whose primary source of club members was online or mobile registration could sleep well. As a result, there was an additional increase in program registrations among their customers relative to 2019. In contrast, the low (compared to online) number of in-store registrations remained stable.

Online registrations – an excellent addition or a necessity?

During the pandemic, enabling online registrations became a necessary alternative for brands that previously operated primarily in traditional ways. The spread of this opportunity allowed marketers to recruit new clubbers during the pandemic period while stationary stores were closed. As a result, the number of clubbers recruited online was up to 200% higher than through the same channel in the corresponding periods before the pandemic.

However, the changes in consumer behavior did not prove to be a permanent trend. They resulted from necessity. Now that it seems that the pandemic and the worst is behind us, customers are eager to return to their habits. In-store registrations are once again returning the favor. What is essential, therefore, is that the emergence of the online channel among brands that have so far relied on attracting new clubbers in the stationary store has not entirely displaced this method. Instead, it has opened the door to attracting new customers with different preferences. The position of the online channel is now stable, so marketers need not worry that their investments were short-term, only for lockdowns.

Increased participation among young, unstable among old

Increased participation among young, unstable among elder
It turns out that turning online and promoting this channel over traditional loyalty programs has changed a lot. Young customers, especially those in the 18-24 age group, have adapted to the new reality and are more likely to register for loyalty programs than before the pandemic. Digital solutions are more intuitive and attractive for this segment of the population. As a result their share of registrations, especially for traditional loyalty programs, has increased thanks to the new registration option. An analysis of selected projects shows that we could observe between a 30 and 50% increase in the participation of the youngest age group.

People in the 25-34 age group are the most likely to register for loyalty programs, both before, during and after the pandemic. Based on the projects we run, we observe that they account for more than 30% of all people joining loyalty programs. So it’s not without reason that this is the target group for many brands.

Accepting the new reality and new opportunities, on the other hand, proved to be more burdensome for older age groups. For example, people 55-64 and 65+ have significantly withdrawn from joining loyalty programs during periods of hard lockdown. The significant reduction has influenced this in in-store registration opportunities caused by store and mall closures. Marketers are therefore faced with the challenge of simplifying the online channel so that it is intuitive and accessible to those who are not fluent in this type of functionality daily.

Offline? Online? Omnichannel!

After the pandemic, planning activities that cover all channels and brand-consumer touchpoints proves crucial. This will give customers the freedom to choose the best option relative to their preferences. In addition, by balancing the distribution of your loyalty program across offline and online channels, you can provide a similar experience tailored to user preferences.
Turning online has its advantages, but unfortunately, also its disadvantages. Competition on the Internet is fierce, and before buying something, a potential customer wanders between websites searching for the best product. Convincing them to a particular offer is more complicated than you might think, so many loyalty program sign-ups don’t follow through with a transaction. Customers sign up to stay up to date with discounts, follow offers and get information about promotions, so they are more likely to agree to communications. Marketers should therefore focus on encouraging transactions in this case. The quality of contact information (email/sms consent) is higher for online registered customers than for offline registered customers.

Registered. And what’s next?

However, it should not be forgotten that offline registrations have an advantage – a customer in a store is more motivated to purchase a person comparing offers of different online stores, which should be kept in mind, especially by salespeople and consultants in stores to invite a customer to a loyalty program and encourage them to agree to communication. Then, such registration combined with a transaction may be the most qualitative.

Loyalty program registration, however, is only the beginning of the journey in building loyalty. Even more critical are transactions and data that customers leave behind. Consent for SMS or email communication and the ability to profile content according to customer preferences are key factors that can determine the success of a loyalty program. Typically, more than 80% of those who join a loyalty program via a website or mobile app consent to email or text message communication. When registering in a stationary store, the same consents are left by less than 50% of registrants.

Unfortunately, we have recently seen a significant decline in SMS and email communication consent. As a result, we are seeing increased consumer concerns about protecting their privacy. This is true for all age groups. Consumers’ comfort level with allowing brands to use personal data has decreased across all data types, making it even more important to reassure consumers about data security and illustrate how each consumer’s experience will be improved by sharing their data. It must be clear to consumers how their experience with a loyalty program will be enhanced if they provide personal data. Brands must therefore ensure that data is secure and transparent about how it is used.

Summary – Pandemic and Loyalty Programs

Loyalty programs are still very popular. Loyalty can save a brand, especially in difficult times, as we experienced during the pandemic. However, the mere fact of popularity of a program, having a card or an application does not determine the success of a project. The key is the level of engagement of club members. Pandemic changed business priorities and accelerated digital transformation in loyalty programs. In doing so, it has opened up a new field for action and work in the area of loyalty. In the post-covid era, there will be some changes in relationship marketing – the priority for companies will not be to acquire new customers but to retain existing ones, to ensure that the data they acquire is secure and that they are engaged in more transactions with the brand, and to engage older age groups in digital experiences.

New technologies are revolutionising the way customers interact with brands. Virtual assistants, chatbots, speech processing, personalized offer in real time are just some of the possible uses of Artificial Intelligence that change the quality of customer experience. However, many companies are afraid of the costs associated with the implementation of new technologies, and these fears are reinforced by the possibility of failure or lack of interest in the novelties on the part of customers.

Customer Experiences in the Age of Artificial Intelligence researcher

A novel approach to understanding how the integration of AI-based services can impact the customer experience is described in the article “Customer Experiences in the Age of Artificial Intelligence”. Researchers from Royal Holloway, University of London decided to break apart the customer experience into its constituent parts. The study used an analysis of nearly 450 customers of one beauty company. The beauty company provided its customers with technology that allowed them to select cosmetics based on the customer’s beauty type. This was the first step towards the current trend of technological revolution. The virtual assistant compares the customer’s selfie with a database of clinically evaluated photos and accurately classifies the signs of skin aging, selects the color of foundation or the most suitable shade of lipstick – and does so with up to 95% efficiency. The resulting customer experience data was validated using structural equation modeling. Based on trust and commitment theory, they measured how AI service quality, including convenience and personalization, affects customer experience, highlighting the importance of trust, commitment, and some customer churn as mediating elements.

Measuring the impact of AI on customer experience

The key to success in AI business is to understand the mechanisms in the minds of customers and design the buying process according to their preferences. Within a single brand, even individual customer segments can differ significantly from each other. The same service based on AI will be perceived differently by young consumers and differently by the 60+ segment. Therefore, the starting point should be the customer and their needs. Once customers have their first experience with a brand, their commitment to maintain an ongoing relationship has a positive impact on the quality of the experience. However, it is not enough to implement AI to generate additional profits. So the question is, how to do it effectively?

The proposed model illustrates the relationships between the components of Customer Experience – it shows how the individual factors influence each other, highlighting the role of trust and the necessary cancellations of customers (sacrifices). The results of the study show that trust plays a key role in AI-enabled experiences.

Key elements

From a consumer perspective, earning trust is a major challenge in AI-based services. Consequently, a higher level of trust in the brand and their technology improves the customer experience. It is important for vendors to clearly communicate their achievements and subsequent security certifications to customers. The more convinced the customer is, the more willing they are to commit to a long-term relationship with the brand. Because of the sensitivity of handling customer data, the relationship between brand trust and customer experience is particularly prevalent just in the context of digital experiences.

Trust in a brand, the technologies and processes it uses, and the purpose for which it collects and analyzes customer data increases when the service is more convenient in terms of time and location and offers better quality in terms of interface design, customer service reliability, and security. In this case, the convenience of the service indicates time and effort savings. An additional convenience is its ubiquitous availability from anywhere on earth. These advantages can prove to be significant to encourage customers to use the service. Convenience has been identified as a key advantage of AI-based solutions. It is important, however, for vendors to understand that increased convenience alone is not enough to overcome the sacrifices that customers must make to use the service.

Marketer challenges

Retail for the third decade of the 21st century must include the customer in the creative process. Customers expect this because the result is personalized service and a more relevant product. Personalization is important in building a positive customer experience. In the context of the customer experience with a personalized service, consumers may feel less sensitive about what they are giving up (sacrificing), plus they are more likely to engage in interactions with the brand. The relationship engagement achieved through personalized experiences leads customers to believe that there are no alternative brands that provide similar benefits.

However, solutions based on Artificial Intelligence involve a high degree of automation in the customer service process. For the customer, this means no contact with a real consultant, which can prove to be a big obstacle, especially for customers who have not used new technologies so far. Retailers should strive for a balanced approach to human interaction, for example through carefully personalized experiences accompanied by a well-trained customer service team. This will increase engagement with the customer, which the study found has a significant impact on how consumers view their AI experience. Additionally, the number of steps a customer must go through during their shopping journey is determined by the requirements of the technology, not the needs of the user – this comes with some imposed limitations. In order to make a purchase, the customer gives up something else to use the service (sacrifices something), such as having to share more data about themselves, feeling a loss of control, loss of privacy, or lack of human interaction. Each subsequent opt-out or limitation on the part of the consumer, can result in a weaker experience.

Summary

Customer experience is recognized as a way to differentiate a company from its competitors. Unlike price, quality or product availability, which are increasingly undifferentiated in the marketplace, customer experience creates strong, lasting relationships.  The ability to diagnose the key parameters influencing the purchase experience and then understand and skillfully leverage them contributes to maximizing company profits.

The study demonstrates an innovative perspective on customer experience. It contributes to a better understanding of customer behavior related to AI. Taking trust and other modifiers into account, through the above analysis, a beauty brand could assess which metrics it should improve to optimize the customer experience by as much as a few to several percent.

Well-created consumer profiles help increase sales, but there is no doubt that marketers often do not even realize they are not using the full potential of the information about their consumers. So how do you use this data, build an effective loyalty program and mark out in the market? Show us your data and we will tell you who your customers are – we will implement an effective program adapted to consumers’ needs and expectations.

Loyalty programs are useful to optimize company costs and identify a significant portion of customers, allowing you to get to know your consumers, personalize offers, and improve the overall brand experience. There is certainly no one-size-fits-all loyalty program, so every decision should be well thought out and supported by advance analysis. At Loyalty Point, we have developed a universal way to holistically analyze the feasibility of implementing and matching loyalty program features.  

Knowledge instead of intuition

Loyalty Point’s proprietary methodology called ‘Raport Otwarcia’ is a process that we have implemented more than twenty times so far. This approach has proven successful in a wide range of industries, from NGOs to large multinational corporations.

There are two key stages in ‘Raport Otwarcia’:

1. pre-implementation analysis
2. strategy development based on the insights gained during the analysis

The process is very methodical, and in addition to analyzing the data available in the organization, it also involves reviewing available IT tools, team structures and processes.

Our approach is characterized by partnership and result-oriented attitude what is very important. We are committed to building long-term relationships with our customers, so ‘Raport Otwarcia’ is just an introduction to cooperation, not the culminating project. That causes us to look in the long term at the ROI of the recommended actions and it happens that we advise the customer against implementing a loyalty program based on classic solutions. There are situations when we recommend the setup of a Communication Platform, where the main element is providing consumers or other groups with relevant information, and the loyalty mechanisms are in the background of our actions.

During the pre-implementation analysis firstly we focus on the available data. These are transactional data, data related to interaction, as well as many sources available, such as purchasing power, data from the Statistics Poland, information on client’s media and advertising spending and about his competitors, and a number of other information from the market. We also look at a client’s previous marketing activities, analyzing their effects and benchmarking them against best market practices in particular categories.

Importantly, ‘Raport Otwarcia’ is equally effective for entities that are just considering the implementation of a program as it is for those that already have a loyalty program in place.

Loyalty program – what do you know about your customers?

The customer base was used to send SMS messages informing about seasonal discounts. There was no personalization or segmentation was used. The company’s approach was limited to the belief that consumers were only interested in discount offers and cut prices. As the base grew in size, the cost of promotion and direct communication grew faster than ROI. A change in approach was needed. There is where ‘Raport Otwarcia’ came in.

In order to verify the customer base, we decided to analyze contents of the shopping baskets and transaction data. We verified which products customers choose (women’s, men’s, children’s), what products they combine them with and when they shop (during sales or a new collection). Ultimately, we were able to identify 50 key customer characteristics. Thanks to the segmentation of the customer base we were able to describe precisely the behavior and shopping habits of different groups. Some customers did indeed decide to buy products at discount prices, but there was also a large group of people who did not use the promotional offer at all. They preferred novelties or the highest quality products.

The key role of employees

In retail, it is very important to analyze the actions of shop assistants, as they are the ones who have direct contact with customers. Employees should be ambassadors of the program, promoting and encouraging customers to register transactions with loyalty cards. Conducting an audit among customer service allows us to find out how much employees know about the program strategy and promote it among customers. It is relatively easy to show how much an organization loses from the wrong attitude. One such example is the % of loyalty card transactions. Differences between individual shop assistants sometimes reach several dozen percent. The result is that we cannot attribute some of the transactions to a participant, so we lose of a large portion of knowledge that could learn recommendation models and communication paths.

In this case Thanks to the Opening Report, we were able to develop an approach to personalize offers taking into account all consumer groups of the brand. Understanding customers and differentiating communications proved to be the turning point for the loyalty program. Without an in-depth analysis, the company had an incomplete image of its customers’ profiles, making communication unattractive for many. In addition, it was possible to optimize the store’s offer in terms of customer preferences. The result was a 20% increase in sales performance on key campaign indicators. As it turned out, the client without data science analysis did not realize the potential of the data they had.

‘Raport Otwarcia’ is also a helpful tool in optimizing other areas of the organization. During the pre-implementation analysis we try to get to know the structure of the company as well as possible, therefore we talk to various departments (marketing, sales, finance, IT, complaints deparment) in order to gain as full knowledge as possible about the barriers and potential of processes and tools.

As a result of the above activities, the recommendation of strategy and future actions will be based on reliable knowledge that a given company possesses, and not only on benchmarks and trends. Combined with our know-how and experience, ‘Raport Otwarcia’ will be succeed. 

While the availability of data is ubiquitous, its accuracy is often fleeting and temporary. Having access to more information doesn’t guarantee success. It just provides marketers with the right field of action and tools to help accelerate and succeed. The inability to read qualitative information and the lack of reliable insights pose significant challenges for marketers today.

Qualitative customer data is a rich asset in today’s digital economy to drive successful campaigns. A Harvard Business Review study shows that companies with the highest customer loyalty have significantly more frequent access to real-time, up-to-date consumer behavior data. The strength of customer loyalty depends largely on the quality of the experiences a company offers them. These experiences are becoming more valuable through personalization which is  based on data captured in real time.

What makes some companies more successful than others?

Effective marketing strategies are an initiative that, through the use of valuable data, allows companies to optimize their communications and maximize their ROI. Real-time data refers to anything that creates useful insights about customers that marketers can immediately process and implement. And this, in turn, leads to a faster and more efficient marketing process, providing additional returns. Real-time data analysis is the process of preparing and measuring the quality of data as soon as it enters the system. Capturing data from potential customers is much easier today, given the multitude of channels:

• mobile apps,
• websites,
• social media,
• email.

Real-time Data Marketing refers to automatic responses to customer behavior. When a customer visits the website, uses an app, searches for the product it ultimately results in a personalized and contextually relevant offer at a given time that brings customer attention and interest, purchase and building a positive experience.

Real-time Data – Acting here and now

Marketing using real-time data is a welcome tool and one of the most effective ways to gain customer loyalty. Leaders should focus on developing real-time analytics capabilities because as consumer behavior is becoming less predictable. To remain competitive, companies must instantly identify ways to acquire and retain customers. The speed of data-driven action enhances this competitiveness in a volatile marketplace.

The big picture of the customer base only emerges through real-time data analysis. With modern data management platforms, marketers can collect, source and analyze data from multiple sources simultaneously. Due to the dynamic nature of data, it can be used in more effective ways than when using only statistical data. This creates offers that are useful to customers and, most importantly, current. It is important to act in a systematic, end-to-end manner. Personalizing a website or redirecting a customer based on an interaction that took place a week or even a day ago is not real-time marketing.

There is a growing expectation among consumers for brands to deliver messages to them in a personalized way, but only if they consent to the use of their personal data. This allows brands to offer the best possible experience. Digital transformation and increasing competition have made building customer engagement a very challenging task. Brands are changing their approach to implementing loyalty programs and are showing special interest towards solutions based on new technologies.

Summary

Real-time data marketing affords a certain level of automation. For best results, it is important to control the entire customer lifecycle in real time, but at the same time omnichannel. A systematic approach to collecting cross-channel data on customer actions and responding immediately through preferred touch points is key. By observing and processing the information, companies are able to assess the individual needs of shoppers, suggesting the right products or services, providing them with relevant content. In this way, procedures based on real-time data analysis will make customer interactions smoother and more efficient across channels.

Pressure on the bottom line, shorter strategy implementation cycles and increased customer expectations require the introduction of solutions based on the latest technology to streamline the purchasing process and improve the overall customer experience. Artificial Intelligence supported by data analytics is increasingly used by companies and is key in addressing the challenge of competitiveness. So, does implementing hyper-personalization lead to building stronger consumer-brand relationships?

Loyalty due to experience

The customers no longer base their loyalty on price or product alone. Instead, they remain loyal to companies because of the experience they receive. Artificial intelligence and machine learning are changing the way companies interact with customers. They help to personalise the services and product recommendations by processing:

• previous purchases,
• interactions with the communication,
• customer preferences
• combining them with a range of other data collected, as well as with analysis of people who have chosen similar patterns.

A customer who is no longer anonymous is worth up to 18 times more to the retailers than the average consumer. This is possible thanks to the advanced personalisation achieved based on contextual and behavioural data. The marketers are choosing to use AI technology to build authentic interactions with customers in real time.

Micro-segmentation

The concept of segmentation is currently undergoing a transformation. Given the new criteria, and in particular the behavioural data, the companies can now better understand that their existing and potential customers may be very different in terms of their consumption habits. AI allows you to use behavioural segmentation at the micro level. Instead of dividing potential customers into rigid segments, you can define consumer behaviour taking into account even seemingly small differences, at the level of small groups or even individuals.

Over the past few years, the companies have managed to collect huge amounts of customer data, and this allows marketers to take a highly personalised approach, for example by adding more and more criteria to describe the customer. New segmentation techniques focus on supplementing the core data set with complex elements such as behavioural information, psychographic information, data from external sources to understand consumers and predict what they want before they even interact directly with the product. Further refinement leads to personalisation, where each consumer is a distinct segment.

Hyper-personalization

More and more companies are adopting deep personalisation of services — from product design through pricing to creating consumer experiences — which creates a steady rise in expectations among consumers in this context. With machine learning applications such as social media mining, sentiment analysis and customer churn prevention, you can be tremendously efficient in processing large and unstructured data in real-time, and generating accurate predictions to help make marketing decisions.

Hyper-personalization of marketing activities is the advanced real-time customisation of offerings, content, and customer experiences on an individual level. This reflects a shift in marketing, which was previously product-centric and has now become customer-centric. With micro-segmentation and hyper-personalisation, you can plan effective communication activities in an automated way. With artificial intelligence and machine learning, it is possible to generate qualitative real-time recommendations that allow for better detection of trends in the data acquired, recommendations for working with segments and program mechanics and overall recommendation support in the way the personalisation is done.

Benefits for the company of hyper-personalization

On the one hand, artificial intelligence and automation are saving time and costs for the company, while on the other hand, they offer greater customer benefits based on improving the customer experience. The Deloitte study, Connecting with meaning – Hyper-personalising the customer experience using data, analytic, and AI (deloitte.com) shows that hyper-personalisation, when done well, can deliver ROI of up to 800% on marketing spend. Additionally, it can also increase sales by at least 10%.

With hyper-personalization, the companies can send contextual communications to specific people at the right place, at the right time, and through the right channel. Hyper-personalised marketing offers the opportunity to build meaningful customer engagement, deepen existing relationships and build new ones, and improve the customer experience. Implementing this type of strategy not only improves customer satisfaction, but also increases brand loyalty, purchase propensity and overall marketing effectiveness.

With the growing amount of data, its sources and new points of contact between consumers and brands, there is a wide range of possibilities for personalisation of services. Loyalty program management platforms are one of the tools that make it possible to effectively use this type of customer data. Artificial intelligence-based tools have a critical advantage — they allow you to act in real time.

The data, analytics, and artificial intelligence are essential tools for developing a hyper-personalised strategy that will allow brands to stand out in the marketplace and gain customer trust. Real-time automation and optimisation are becoming the way of doing things in marketing, and machine learning methods are the best solutions available today that not only improve the customer experience but also increase profit for the company.

Typically, about 20% of customers are responsible for almost 80% of brand revenue, so it is important to know your regular customers, their habits, preferences. Knowing what they like and what they avoid, we can provide our company with stable growth in building customer value. It turns out, it is the customer-oriented companies that grow up to 250% faster than the competition. So what is behind their tremendous success, even more so in unstable times?

High consumer loyalty directly affects a company’s profitability and market position. Even more so now, when almost all industries have been hit by the pandemic crisis, it is crucial to organize business around the needs of regular customers. Unfortunately, the desire for profit, while cutting costs, results in the practice of actions that actually harm customers and in the long run affect the company’s revenue. The loyalty program should be looked at from a long-term perspective. Only then will we realize its potential and see that it is an investment, not a cost.

A Change is Needed

In the face of a pervasive pandemic, we have had to find new ways to life in a world where social distance has quickly become the norm. Most of our existing habits had to change, including our daily shopping or visits to stores and malls. With this comes a change in approach to loyalty programs and marketing. While the stationary stores closed overnight last March, IKEA needed to find a solution to keep kitchen design and sales steady.  As Adam Jankowski Customer Engagement & Loyalty Manager at IKEA Poland points out, this was accomplished with a quick response and adaptation of consultants’ best practices into an online format in just 7 days.

“The expansion of technical capabilities in the field of kitchen planning via the Internet, combined with the increase in the number of planners and at the same time the reduction of the price of the kitchen planning service to PLN 1 caused that the niche, until then, online service began to enjoy enormous interest. The number of projects carried out in this way increased over 60 times compared to the period before the pandemic. Caring about the safety of customers, we also introduced appointments with consultants in the store for a specific time. Solutions with a customer-centric approach build trust in the brand, which is especially important in unstable times” – comments Adam Jankowski.

Digital Transformation in the Area of Loyalty

The digital transformation, accelerated by the pandemic and currently taking place in the world, is forcing companies from “traditional” industries to change their business attitudes to more technologically advanced ones. Last year influenced the acceleration of digitalization, which resulted in huge opportunities in the context of data analytics. The number of data sources, the volume of data, and new possibilities for combining them are constantly increasing. A potential that companies need to recognize is their current customer base.

To increase customer loyalty and profitability, managers need periodic reports on the performance of each cohort:

• How much did it cost to acquire new customers?
• What percentage of customers remain active?
• How frequent are their purchases?
• How much does it cost to serve them?
• What is the revenue per customer?

With accurate reporting, employees can draw conclusions for the future and learn from their mistakes or replicate activities that have been profitable. In this way, we can increase the activation of existing customers, regulate service costs, predict behavioral changes, or stay in touch even after the purchase process is closed. We also have greater opportunities to attract new customers and, through antichurn analysis, minimize lost revenue.

The Idea of Reverse Loyalty

A way to maximize the value of the customer base is the idea of reverse loyalty, which is the basis of the solutions implemented by Loyalty Point. A loyalty program is no longer a one-way stream of information from the brand to the customers. The customer and their opinion become as important in decision making as the brand itself. By fostering a positive customer experience at every stage of the customer’s purchase path, a company builds trust and increases overall satisfaction. Customers are no longer mere consumers; they don’t buy a product outright. A customer is a user who uses our service or product and is more aware of the changes and phenomena that occur on the market. The company must build a holistic experience with the brand. Customer centricity enables you to reach the right person with the right channel and the right message – at the right time, and the idea of inverse loyalty helps you deliver long-term and valuable value to your business – acquiring valuable customers and keeping them coming back.

How do these changes look in practice?

It is interesting and significant how, in less than two years, thanks to the support of Loyalty Point, the loyalty program of the Decathlon chain of sports stores has developed. Having a loyalty program gives great potential, because in case of such high dynamics of changes in consumer behavior we can observe these changes in real time, and this knowledge can be used at all levels of the organization: from marketing, communication, through sales, to support of daily work and processes in stores. As a result of our work with the data from the loyalty program, we took the initiative to expand the tool (dashboard), which presents a series of analyses of the current migration of customers and changes in their behavior during the lock-down period, and beyond it for the purposes of marketing activities.

For the needs of conscious conducting of communication by people responsible for coordination of local communication activities within the sports category, we have prepared recommendations of the assortment based on the scoring engine. The recommendations can be successfully treated as a communication and sales driver in the following weeks. We have built Persons (operational segmentation) as a tool to support employees to get to know the customers better and understand who they communicate with in a given period, what their motivation for purchase is and what their consumption profile is. We perform all the above activities based on data from the program, as well as external data such as weather forecasts, interactions with web content and communications.

Customer-centric Approach – How to Achieve It?

The new loyalty model takes on particular importance as we look at a world in a time of widespread lockdown. Companies should maximize activities that make them more customer-centric – they then achieve a greater ability to both retain customers and acquire new ones. They gain recognition when they can perceive customer needs, even the unspoken ones. Achieving this depends on two sets of capabilities:

• design thinkin
• careful application of state-of-the-art technology

The ability to analyze data and artificial intelligence are key to designing a consumer-centric operation. The flow of customer feedback helps create highly personalized offerings. Using technology to improve the customer experience can provide reduced service costs, among other benefits. Customer-centric companies can deliver useful, relevant content to customers even after the sales process has closed. Our experience shows that online campaigns powered by CRM data are re-educating costs by up to 40% and increasing interest in the products offered by up to 55%.

Summary

Nowadays, when consumers are much more cautious in planning and managing their expenditures, reaching them with personalized offers is becoming increasingly important. Meeting this challenge requires marketers to have the right attitude. Although tracking consumer purchase decisions has become commonplace, putting the collected information into practice is not yet the norm. This is a great loss, as you can provide a better brand experience with the collected information.

Data-driven scoring models can elevate consumer activity by up to 300% on average. We are moving away from an intuitive approach or one based on general statistics to a model where we can verify with great reliability and precision the effectiveness of actions, real-world yields, compare them to each other, act on a massive scale but in a highly personalized way. With the help of machine learning methods we can isolate unique customer segments based on even several hundred variables. Thanks to this, we gain the possibility to reduce costs for advertising, because the offer is tailored to a given segment.

Loyalty Point’s experience shows that organizing around the value delivered to the customer is certainly a common sense approach. But that doesn’t yet mean it’s a common practice for the entire marketplace. Certainly, understanding the potential inherent in the value delivered by loyal customers requires a maturity of organization that is built over time. As the Loyalty Point team, we look to the future and see the directions in which the industry is evolving so that we can provide our partners with the best and most cutting-edge solutions to help them gain trust and create a strong bond with their consumers.

Big Data, the enormous amount of data, the ways of collecting them, and the possibilities of analysing and using them have revolutionised the way we compete today. Most industries thrive on data. And while the question is no longer whether to invest in data analytics, but rather how to do it effectively, many marketers approach the topic of data science with caution.

The projects involving data science have enormous potential. According to 70% of marketers, surveyed by McKinsey Global Survey, they allow companies to get competitive advantage through product improvement and business process optimisation. More than 90% of global executives expect to get value from artificial intelligence.

Data driven revolution

The data-driven trend has been reinforced by digital transformation. The impact of the Covid-19 pandemic is pervasive and is driving change the business was not sufficiently motivated to make before. According to a recent study by International Data Corporation, the global economy is focused on digital transformation, with the big data market expected to reach a dizzying $210 billion by 2020. However, most companies do not leverage the full value of their databases. Typically, the companies analyse just over 10% of the information they collect. That’s why they need support with sales management, product planning and branding.

Digital transformation has also contributed to a shift in marketing approach: from companies focused on product development towards businesses where customer experience is paramount. The new role of marketing managers requires technological support from the area of collecting and analysing end customer data.  Big data analytics is a key area for marketers to properly understand their customers, market, and also competitors.

Big Data means what?

What is Big Data anyway? A hackneyed slogan? A buzzword that says nothing? As enthusiasts of data science we will try to demystify this message and prove that data analytics is not only an opportunity for large corporations such as Google, Facebook or Amazon, but for most companies in the Polish market. Data-driven projects we carry out often produce twice the results at twice less costs for our clients in comparison to equivalent periods.

Big Data in CRM campaigns

Digital campaigns fed with CRM data result in 40% cost reduction with up to 55% increase of interest in the products offered. Data-driven models can increase consumer activity by up to 300% on average. Thanks to data science, we are moving away from an intuitive approach or one based on general statistical data to a model in which we can predict the effectiveness of campaigns with great reliability and precision.

The analytics have changed the nature of competition today. When combined with technology and the right strategy, it optimises operations in every area of business. Digital transformation is the present that affects all industries and has made marketing even more valuable. Real-time understanding of customer data across all points of the customer journey allows marketers to develop a more informed and proactive strategy for designing better experiences.

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.

Loyalty at a premium

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.

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:

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.

New loyalty

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.

Market changes

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.