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COLLOQUY: Leaping for Loyalty

A fresh look at the power of loyalty, and the potential it holds for strategic differentiation, from the author of The Loyalty Leap: Turning Customer Information into Customer Intimacy

As President of LoyaltyOne, which runs one of the world’s largest coalition programs, Bryan Pearson wrote the book on managing customer loyalty—literally. In his new book, The Loyalty Leap, Pearson focuses on how to turn customer information into customer intimacy, and why intimacy is becoming an increasingly critical differentiator. COLLOQUY recently sat down with Pearson to discuss transparency, relevance, and the importance of loyalty in an age of low customer expectations.

COLLOQUY: The Loyalty Leap seems to address both loyalty practitioners and consumers. How important is it to include consumers in the loyalty conversation? In other words, how much should marketers be “lifting the curtain” for customers to reveal what’s going on?

Bryan Pearson: The book is aimed at loyalty practitioners, but I was aware that consumers might also pick it up because they’re very interested in what’s happening with their information. And that’s precisely why marketers should engage consumers in the broader conversation around loyalty programs and the value exchange. There are two purposes here:

First, responsibly using customer information builds consumer trust, and it engages customers more deeply in the value equation. Consumers are looking for companies to provide more value in exchange for the information they provide. And they are willing to share more information if they see that the value exchange is meaningful. Today’s consumers are intensely aware that they are being tracked, and just as aware that they aren’t receiving commensurate value from the companies doing this.

Second, the type of sea change that I talk about in the book will come about only when consumers get to the point where they’re expecting a lot more from companies. They will realize that more is possible than what they’re currently experiencing, and that will help propel the industry.

Q: You talk about achieving growth via customer intimacy, primarily as it relates to the customer-focused strategy of Enterprise Loyalty. Is this level of growth possible for a company that simply has a beginning-level, traditional rewards program?

A: I think any company that is capturing customer information has the opportunity to enhance the way it thinks about the business by looking at it through a more-defined customer lens. Does it mean you have to get all the way down to Enterprise Loyalty, with one-to-one marketing and unique experiences by customer? No, but there is an opportunity to take steps in that direction by re-examining and mobilizing the organization around the information it’s capturing on customers, and the insights derived from how best customers engage with the brand. You can begin the journey. And if you find yourself to be successful, that may entice the organization to make a larger commitment to other opportunities that exist around customer-centric marketing.

Q: Making the loyalty leap hinges quite a bit on relevance. What does that look like for a company focused on discounts? For example, why does a bookstore chain with 25% across-the-board discounts need to be concerned with relevance?

A: The reality is that in the future all companies will need to compete more broadly on the basis of relevance. It will become a basic customer expectation. Sure, “cheapest prices” is a differentiator if you can truly stand behind that promise. But at some point, and for certain groups of customers, the ability to offer a whole product experience that they might be interested in, given their profile, is something that builds frequency and greater long-term loyalty. Relevance is what makes the customer engage you when they shop, and not just because you have a cheaper price.

Car manufacturers are a case in point. Why buy a car for half a million dollars when you can get one for $10,000? You can default to lowest price, but what customers look for instead is a car-purchasing experience, and they can go in all directions—hybrid, high performance, sports car, luxury, comfort.

Q: You have referred to Enterprise Loyalty as a “game-changer.” How is that true, and what types of organizations will see the biggest difference from this change in strategy?

Enterprise Loyalty will make a difference for three types of companies. The first, and the one that will feel the biggest impact, is the company that hasn’t yet started gathering and leveraging customer information. They will find efficiencies, places where they’re spending money that they don’t have to in order to engage their high-value, high-potential customers.

Second are companies that are currently running loyalty programs, but not leveraging customer info to create relevant communication streams. For them, the opportunity is to differentiate themselves with customers by leveraging that information and engaging the customer with relevant offers, via relevant channels.

The third type is a company that isn’t yet spreading Enterprise Loyalty across its entire value chain. If customer data is just sitting in the marketing department, then other departments aren’t benefitting from its insights, and it won’t be transformational. But if companies use it to inform the broader set of decisions about the customer experience, that broader application will change the conversation within the company about what needs to be done. And everyone will understand their role in transforming the customer experience.

Q: You write about employee loyalty as a key to customer satisfaction. What are the main levers for establishing this level of employee loyalty? And are we talking about a culture change, or operational tweaks?

A: We already know that the more engaged employees are around your purpose, the better the opportunity exists to get customers more engaged in the brand. Customers see the passion.

This is a culture change. Great brands, authentic brands, have found a way to make sure their associates are connected to what the company is offering the marketplace. The key is providing employees the proper customer data that allows them to provide service to customers. Achieving that requires a combination of culture, training, teaching, values and brand vision, all connected to the technology that provides critical knowledge about the customer.

Q: In the book, you cite research in which half of the respondents said they didn’t expect any benefits from their rewards programs. To play devil’s advocate, if customers aren’t expecting it, why bother offering anything remarkable?

A: It comes back to how your company is going to compete. If you think about how everyone works with tight margins, competitively it’s a very close market. The issue is that in any category you have only one Walmart-type company competing on price, and only one or two companies leading on product. You do need to be competitive in these areas, but you probably aren’t going to dominate your category on them. The one discipline companies can compete and differentiate on centers around customer intimacy.

To compete on customer intimacy, you must engage customers with relevant experiences or else they will disengage and turn off the tap of information flow. Then you don’t have the data you need to distinguish their experience with your brand.

If half of your customers aren’t expecting or receiving anything special from you, they will be drawn to the competing brands that do offer relevant engagement. The risk is that your competitors are finding a way to compete by connecting to the customer, and this type of relevance really flies under the competitive radar. Things like one-to-one communications and building unique experiences happen under the surface, and it’s very hard to see what your competitors are doing there.

Q: What’s the main thing that loyalty marketers are missing the boat on today?

Most loyalty marketers know how to engage customers, but they need to figure out how to engage their own broader organization around this asset, customer information, that they have been creating. If they aren’t figuring out how to use that asset more broadly, it will always be kept marginalized instead of being leveraged across the organization. And in terms of expense, value and return on investment, it’s far easier to monetize customer information by leveraging it across the entire spectrum of company activities instead of simply monetizing it across lift, shift and retention. We need to free customer data from the marketing silo.

Full Disclosure: COLLOQUY is a LoyaltyOne company, both owned by Alliance Data Systems.

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