Infuse Non Transactional Rewards into Your Loyalty Strategy

Posted on September 22, 2020 by Dominic Machado

The majority of retailers still view their loyalty programs through a restrictive and narrow ‘purchase-and-get-points’ lens.

We are not discrediting the model; it has been proven effective, and given the challenging economic landscape, discounts and store credits still carry a lot of weightage. Having said that, brands will have to take into account the rapid commoditization in the loyalty marketing space (the average customer is part of 15+ programs) and relook at their loyalty program to give customers a compelling reason to come back beyond cost savings.

Expanding the Scope Of Your Loyalty Program

While discounts and cashbacks are great for attracting new customers and lowering the risk of commitment, there lies a massive opportunity for brands beyond the horizons of transactional loyalty.

A staggering 84% of consumers in a study said they would actually spend more with retailers that offer points for activities other than spending.

*Report by COLLOQUY

To boost customer retention and program ROI, brands will need to expand their loyalty program to incorporate behavioural, experiential and engagement-based rewards like QR code scans, store check-ins, app download, newsletter subscriptions, product trials, event access, social shares, and reviews in addition to transaction-based rewards.

Trailblazer Brands in the Non-Transactional Loyalty Space

China has been at the forefront of O2O, omnichannel, and loyalty marketing innovations and the underlying tech powering most of these transformations is WeChat – the largest messaging app in China with a whopping 1.2 billion monthly active users from a wide range of age groups.

Brands like Dyson*, Kipling* and Lee* have managed to crack the omnichannel customer journey code by incorporating omnichannel loyalty, non-transactional rewards, and of course WeChat.

1.The consumer sees the brand’s ad in the offline world, scans the QR code and starts following the brand’s WeChat account. He/she receives Welcome Bonus points for following the brand’s WeChat account. Based on the user’s demographic & location, the brand sends a personalized in-store promotion to the customer

2. The customer earns points for checking-in at the store and for completing a transaction. The brand also generates a real-time, limited period discount coupon for a different product.

3. Once the customer purchases the cross-sell product, he/she receives a feedback survey. The customer completes the feedback survey and earns more points in their account.

4. A few weeks later, the customer receives a notification for an online sale and is prompted to redeem their points to get higher discounts.

With this journey, the consumer has been incentivised to explore all of the brand’s touchpoints (WeChat, physical stores and online channels), thereby giving the brand a complete Omnichannel View of the customer.

Another great implementation of non-transactional rewards and gamification in loyalty is by Health Promotion Board (HPB)* – a statutory board under the Ministry of Health (MOH) of Singapore that was established to enhance and drive national health promotion and disease prevention programmes

HPB’s flagship program – Health Insights Singapore (hiSG) – seeks to understand the health behaviours and lifestyles of Singaporeans. Participants are offered a free Fitbit Ionic smartwatch that collects lifestyle and behavioural data across various health topics such as physical activity, nutrition and mental wellbeing.

With the Healthy 365 mobile app, participants in the programme earn HPB Healthpoints for diverse use-cases like: wearing the smartwatch, completing step count challenges, syncing fitness records, answering questionnaires, scanning QR codes and recording meal logs.

HPB uses Healthpoints to drive real-world changes in consumer behavior by rewarding users for healthier purchases (through barcode scans from food, drink or grocery consumption) and redeeming them for shopping and dining vouchers, as well for EZ-link top-ups.

[*Capillary has an active engagement with these brands]

Leveraging AI to Measure the Impact of Non-Transactional Rewards

Retailers have traditionally focussed on the transactional aspect of loyalty programs and for a good reason – it’s easier to quantify and track the ROI. However, advances in AI and Machine Learning have made it a lot easier for retailers to understand which non-transactional rewards and strategies drive sales. According to a Capgemini report, 70% of consumers with high emotional engagement spend 2X higher with the brand.

AI can help marketers understand the impact of different experiential rewards and engagement strategies in influencing a customer’s decision to make a purchase, move the item to a wish list or abandon the purchase cycle. The algorithm essentially compares multiple combinations of successful and unsuccessful reward, promotion, engagement strategies. The ones with positive influences can be further enhanced and the negative ones removed to optimize the process.

Use Cases

The data reveals that a certain segment of customers is likely to purchase a product after a free trial. In this case, offering rewards for sampling and trials to that select group could increase the probability of a purchase.
Your customer feedback suggests that product returns are spiking due to customers not realizing product value due to inconsistent usage. Offering rewards for continued product use can reduce returns and reinforce product value. This is a great use case for fitness trackers and electronics.
Millennials are sidestepping your brand due to limited product reviews. Rewarding customers for publishing trustworthy online reviews could attract new customers. This is a quick hack for brands with limited digital mindshare.

Benefits of Non-Transactional Rewards

Nurture Emotional Loyalty

Non-transactional rewards loyalty are a great way to strengthen the emotional loyalty of a brand-customer relationship. Emotional loyalty is a combination of three components (Affinity, Attachment & Trust) and together they underscore the reason why customers prefer a brand over the others, beyond the monetary aspects.

A study by Wunderman Loyalty states that 79% of customers will only consider shopping with brands that show they understand and care about them. By rewarding all kinds of engagement, not just transactions, you demonstrate that you care about your customers beyond their wallet share. The simplest and easiest way to get started on this path is to offer personalized rewards on special occasions (birthdays, anniversaries etc.)

Boost Engagement Rates

The biggest benefit of non-transactional rewards is by far the ability to sustain continued customer engagement outside of the purchase cycle. Unfortunately, most brands have a disconnect between their customer engagement strategy and their loyalty program. When layered together, they create almost endless opportunities like rewarding user-generated content, recycling initiatives, charity and donation drives, writing product reviews, product-related quizzes, or referring a friend. The rise of Smart Tags and IoT expands these use cases even further: for instance, brands can reward workout progress, going for a run in their new shoes, or minimizing carbon footprint.

Acquire Deeper Customer Insights

Non-transactional data allows marketers to glean a wealth of additional information about customers and their life outside brand interactions. Analyzing these data reveals what is important to program members, and allows marketers to craft more personalized and meaningful experiences that can further improve the engagement rates, thereby creating a positive feedback loop.

Tips to Incorporate Non-Transactional Rewards

Create a Lifestyle App

The best way to adopt a non-transactional reward strategy is to see your loyalty program as a dualistic entity: one with marketing and Customer Experience components. The points, redemption and transactional part of your program flow into the marketing bucket while the engagement and emotional aspects are part of the Customer Experience universe. The important thing to remember here is that the experience has greater longevity in your customer’s mind compared to discounts.

A great mobile app experience can serve as the linchpin that connects these two aspects of your loyalty program offers. Several brands like Walgreens, Starbucks and Amazon have cracked this coded fairly well. For instance, in addition to earning, tracking and redeeming points, the Starbucks app allows customers to place orders, pay for an order and even stream music on the go. Likewise, the Walgreens app offers extended functionalities like upload/refill prescriptions and pay for purchases in addition to its loyalty program.

Incorporate Gamification Elements

Gamification is essentially the application of game design elements in a non-game environment. From a loyalty program perspective, this involves status and tiers, levelling-up and unlocks, missions and challenges, goal setting, progress feedback etc. The idea is to boost engagement as well as the stickiness factor of the loyalty program. In a Bond report, over half (53%) of members said they were interested in using game mechanics and 81% of members engage with game mechanics when they are present.

Bakmi GM*, a legendary restaurant in the Indonesian culinary scene leverages gamification-based loyalty initiatives like Spin and Win, Pick and Win to improve customer engagement and loyalty.

Virgin Red is another classic example of a gamification-driven loyalty Program; it incorporates several game mechanics like virtual treasure hunts, leaderboards, secret vaults that can be unlocked for prizes, and daily quizzes to earn extra points.


[*Capillary has an active engagement with the brand]

Invest in the Latest Loyalty Tech

Non-transactional rewards that are not contextual or value-driven will fail to spark customer interest. That’s why data should be at the core of a great loyalty program experience. Retailers should be able to integrate data from multiple sources like in-store, social media, website, app and customer helpdesk, not just purchases. A slew of technologies like CDPs, DMPs, CRM and advanced AI should work in tandem with your loyalty program to blend customer’s digital avatar with brick and mortar store behaviour to create the famed Segment of One. Once you have access to behavioural and transactional patterns of a customer, it becomes a whole lot easier to drive hyperpersonalized and contextual rewards at scale across online and offline channels.

Wrapping Up

The lines between the Brand, the Program and the Customer Experience are increasingly blurring but the Program remains a critical part of a customer’s relationship with the brand. As the Brand and the Program have become more intertwined, a new paradigm has emerged – one where the Program is an extension of the Brand and serves to enhance the Brand experience.

Marketing to a Generation of Attention Deficit Customers

Posted on September 21, 2020 by Gitanjali Mittal

Emotional Loyalty : The Key to Retaining Connected Customers

Posted on September 9, 2020 by Dominic Machado

Except for supermarkets and convenience stores, most retailers see a customer an average of 5-6 times a year. The ongoing digital explosion will likely reduce the frequency to 2-3 in the coming days.

Unfortunately, traditional loyalty paradigms are built around the number of transactions and repeat purchases. To make it worse, even as customers’ behaviour and purchase journeys have become increasingly complex and non-linear, retailers are still stuck with a one-dimensional view of customer loyalty.

Rethinking Loyalty Program Paradigms

In the last few decades, customer loyalty got heavily tied to discounts, points and promotional offers – basically a purely transactional or functional form of loyalty. The biggest reason for this is sheer convenience – it’s easier to nail down the rational aspects like repeat sales, basket size, and customer lifetime value (CLV). However, this only provides a one-sided view of loyalty – for instance, a customer might detest a brand but continue purchasing their products due to lack of choice (Comcast?).

There are critical downsides to measuring customer loyalty from a purely transactional standpoint. And these downsides are becoming increasingly accentuated in the digital world.

Today’s ever-connected customers have hundreds if not thousands of choices at any given point. And as humans typically do when presented with a lot of choices – they rely on several factors like brand experience, emotional connect, convenience, price and reviews from friends and families to guide their choice. With so many variables on the table, how do brands begin to predict customer behaviour?

The answer lies in seeing customer loyalty with a dualistic mindset: one with an emotional as well as a transactional nature. And with each passing day, it’s becoming imperative for brands to view customer loyalty from this new vantage point.

What is Emotional Loyalty

Rather than give you a long-winded and boring definition, we’ll try to explain emotional loyalty with an example. Imagine a tourist exploring a new city. After a long day of sightseeing, he feels drained and craves a coffee and sights:

Phew, I badly need a coffee, is there a Starbucks nearby?

That sums up emotional loyalty – it’s a fast and almost instantaneous positive preference for a brand with zero rational or logical deliberations. Unsurprisingly, Starbucks also has one of the best loyalty programs in the F&B space.

Components of Emotional Loyalty

Affinity

A customer feels an affinity for a brand when they deliver great goods and the branding matches their lifestyle. It’s important not to confuse ‘Affinity’ with ‘Loyalty’ . A customer might feel an affinity for a brand but it doesn’t mean he/she will be loyal to it. In a sense, ‘Affinity’ lies closer to ‘Preference’ or ‘Liking’. For instance, customers who only have an affinity for a brand will easily switch to a competitor with a better product or lower price.

Attachment

As the name implies, ‘Attachment’ implies a connection to a brand. A large part of attachment is tied to how a company engages with customers. Make the effort to build meaningful connections through highly personalized communications that are relevant and useful to the customer to strengthen this aspect of emotional loyalty. Another great way to improve the brand attachment quotient is by rewarding engagement, in addition to transactions, and recognizing premium customers with exclusive benefits and acknowledging their status in every communication.

Trust

Trust is the most important element in the emotional branding strategies. It’s essentially the framework on which Affinity and Attachment are built upon. Brand communication and customer engagement are critical in establishing trust. To create a sense of trust, offer authenticity, great support, timely communications, respect for customer privacy and ability to provide feedback.

How to Measure Emotional Loyalty

Marketers typically track behavioural loyalty metrics like conversion rates, customer value, basket size to gauge the effectiveness of a loyalty program. However, it’s equally important to analyze emotional loyalty metrics that gauge intent, sentiment, perceptions, and customer experience :

Net Promoter Score (NPS) :

Envisioned by Fred Reichheld of Bain & Company and Satmetrix Systems, NPS measures customer responses to the famed single question: “How likely is it that you would recommend our company/product/service to a friend or colleague?”. It is a highly popular framework due to its simplistic nature and how the score calculations are clearly defined. However, that simplicity can often hide the root of the problem. For instance, brands with very dissimilar distribution of Detractors, Passives & Promoters could arrive at the same NPS score. Therefore, NPS scores should always be used in conjunction with other Customer Experience metrics and business results.

Customer Satisfaction Levels :

Tracking customer satisfaction levels through simple surveys can offer brands a sense of how customers perceive the brand. These informal surveys allow marketers greater freedom in tackling specific issues and reporting them. Granted that they might not offer the clear metrics and apples-to-apples comparison NPS offers but they can reveal abstract and often hidden insights. For instance, when Expedia aligned Customer Satisfaction with other loyalty metrics, it discovered a key insight: customers are frustrated when offered two one-way flights at a lower price than a roundtrip due to the hassles with changing flights. This helped Expedia to streamline the booking process thereby elevating customer satisfaction.

Sentiment Scores :

Sentiment Scores are a good way to unearth the overall brand perception and customer intent. The common way to do this is through text analysis of internal and external customer feedback (blog comments, surveys, call center transcripts and social media data). Sentiment analysis generates a word cloud that uncovers what’s working well and what are the most painful aspects of the customer journey. A word of caution: Sentiment Scores are perceptions and might not directly translate to action so it’s important to overlay them behavioural metrics like repeat sales, churn rate etc.

How to Nurture Emotional Loyalty

Building emotional loyalty requires an integrated and dynamic mix of activities and interactions between your brand and customers that will drive personalized engagement at every touchpoint. Here’s how successful loyalty programs build affinity, attachment, and trust among customers:

Create unique, personalized experiences

From premium rankings to exclusive event passes, customers expect unique, personalized rewards and experiences that make them feel special and appreciated. Ensure your loyalty program offers these one-of-a-kind rewards by leveraging loyalty data to understand customer preferences and interests. Alternatively, offer early access to sales or limited-edition rewards to make customers feel good and build a greater emotional attachment to the brand.

Anticipate your customer’s needs

Just as customers expect a more personalized experience, they also expect brands will leverage customer data to predict their next likely action with a brand. Brands can add value for customers by demonstrating they understand their needs and are committed to creating a better brand experience for them. Enterprise loyalty program platform like Loyalty+ offers predictive modelling capabilities which capture customers’ contextual and behavioural data and leverages it to predict next-best-action in the customer’s journey.

Prioritize data security

Make data security a top priority— invest in loyalty management best practices that protect customers against fraud and spam. Doing so ensures great customer experiences while driving greater trust with brand advocates who know their data and privacy are respected.

Encourage two-way communication

A strong emotional relationship requires honest communication. The same holds true for emotional loyalty. Allow customers to connect with you to provide their feedback and opinions. This creates a sense of being valued, appreciated, and respected; creating attachment and trust. Conduct VOC polls and surveys to validate your product concepts or messaging while generating data that can be used to create more relevant, targeted experiences that will resonate with your target audience.