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Why Personalization Drives the Most Effective Customer Loyalty Programs

Brian Cleary | June 19, 2018

Personalization increases customer loyaltyCustomer loyalty program membership has gone up, and yet the number of customers actively participating has gone down dramatically. A recent study of 28,000 consumers found that the average person is a member of more than 14 customer loyalty programs, but they are only active in about 50 percent of them. The discrepancy comes down to a problem of relevance. Traditional, generalized loyalty rewards are not viewed as relevant to consumers’ lives, which leads to declining engagement overall. When it comes to customer loyalty programs, it’s clear that one size does not fit all.

One of the best examples of the problem is something called a zero-cost loyalty program – a points-based system that provides rewards through an online auction. In one such program, customers received points for activities such as paperless billing, with the points acting as discounts on items in the online auction. Customers loathed the program for two reasons: generalized incentives that didn’t take their personal tastes into account and they still needed to spend money even after using points.

This means a zero-cost program isn’t truly zero cost. The brands running these programs pay for them by providing a poor experience and frustrating their loyal customers. It’s no wonder that, according to recent research, 71 percent of consumers claim loyalty programs don’t improve loyalty – consumers don’t find generalized rewards valuable. This presents a major problem for loyalty marketers, because these programs are a golden opportunity to reward repeat customers and retain them over time. To reverse the trend of customers pulling away from loyalty rewards then, brands need to increase the program’s relevance and personalize incentives.

Make Loyalty Programs More Relevant with Customer Data

Customers want personalized experiences with their chosen brands. In fact, recent research found that 79 percent of customers only consider brands that show they understand and care about “me,” and 56 percent are loyal to brands that deeply understand their priorities and preferences. Loyalty marketers need to understand this about their customers, and make the rewards they offer more relevant. To do that, brands need to consider two things: how are they rewarding customers, and how do they know which customers to reward?

One way to alter how customers are rewarded is by basing the decision on profitability. Airline loyalty programs are a good example. Say two passengers buy tickets for the same flight, but one makes the purchase 60 days ahead of time and the other buys their ticket one week before the flight. Although both are members of the loyalty program, the first person pays less than the second person for the same ticket. The customer who buys the more expensive ticket is ultimately more profitable to the airline and as a result will experience a different level of reward. Both customers may be loyalty program members, but they get different rewards based on how profitable they are for the brand.

To understand who to reward, brands need to leverage all that is knowable about the customer. This requires unifying all extant customer data, whether it comes from social networks, transactional information, website visits, mobile app activity, point-of-sale information, call center data, and so on. The number of data sources and types of data available are endless. When this information is blended together into a single customer view, or “golden record,” loyalty marketers can determine what rewards to offer to which person and through which channel. This even includes partner data from hotels or rental cars; if loyalty marketers see that a member is redeeming their points for rental cars instead of flights, then that could change the offer the customer receives.

Loyalty Programs and Customer Data Platforms

The right technology is a key component of building the golden record. Brands need a single point of data control in place to be able to understand which customers should receive what reward. Often the best choice is a customer data platform (CDP) – a new operational environment that ingests any volume, variety, or velocity of data from any engagement touchpoint. CDPs are designed to construct and maintain the golden record over time, which empowers brands with a constantly up-to-date single view of the customer that streamlines offer targeting.

With the power of a CDP on hand, loyalty marketers gain insight into the entire customer lifecycle. Better insight into the customer lifecycle, which includes transactional data as well as the customer’s needs, wants, and desires, means the brand has the information they need to provide targeted offers. For a loyalty marketer, this is transformative for retaining and even growing membership.

Right now, only 25 percent of customers are satisfied with the level of personalization in their loyalty program. Brands need to understand this, and recognize that one size doesn’t fit all when it comes to the rewards they offer loyal customers. Instead, they need to personalize incentives based on all that is knowable about their customers. Accomplish that, and loyalty marketers can and will retain more customers, provide better rewards, and ultimately improve business results.

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Brian Cleary
Brian Cleary

As RedPoint Global VP of Solutions Marketing, Brian Cleary is responsible for ensuring that the voice of the customer and RedPoint’s key markets are reflected in our technology roadmap, as well as RedPoint's go-to-market approach. Brian brings more than 20 years of success in directing product management, marketing, and sales strategies for emerging software companies and top-tier enterprise software vendors.