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Under the Radar: Ten Trends Loyalty Marketers Might Not See Coming in 2013
Today's loyalty marketers are struggling with major trends that are redefining the industry. Issues raised by social media, mobile marketing, consumer acuity and an uncertain economy are all competing for 2013's attention and resources. But as we plan for the future, are we getting distracted by the wrong problems?
While business leaders strategize on how to manage location-based marketing, social media and the fiscal cliff – all while struggling to connect with customers who are rapidly losing interest – they may be missing 10 industry-changing trends that are emerging under the radar. Those companies alert enough to recognize and act on these events will have more power not only to engage customers, but also to influence behavior, and boost business performance over corporate rivals.
Trends that influence relevance
Health = wealth: Changing demographics and rising health care costs have created a health economy. But what separates aging Baby Boomers from previous generations is that they will grow older for a much longer time, and continue to be a viable part of the spending economy. More consumers, meanwhile, are focusing on living healthier due in part to rising medical costs.
Companies are already nudging and rewarding employees to live healthier in many ways. This creates opportunities to partner with retailers and brands and support healthy behaviors with related rewards for the whole family. Initiatives can, for example, offer the customer access to a free tai chi class or a coupon for calcium supplements.
Rewards for non-purchase activities: You can blame helicopter moms, social media, reality TV or all of the above, but today's consumers have sharply higher expectations to be recognized for seemingly small deeds and accomplishments. Loyalty programs are built on rewards for spending, but now this model is increasingly supplemented with rewards for certain actions and for sharing them with others.
The key is to recognize specific types of behaviors with rewards that speak to that action. For example, a grocer can give a shopper points for purchasing a jar of tomato sauce, but it can double those points if the consumer makes a family meal with it within two days (and sends a photo via Facebook or Twitter). If the meal is considered heart-healthy, the grocer can send a coupon for cross-category products, such as olive oil or pesto sauce.
Friend, blend, spend (the open-loyalty economy): Loyalty programs have become commoditized due to an absence of head-turning innovation. And what is the most universal commodity of all? Cold, hard cash. Without much differentiation between programs, consumers are demanding that their programs offer an increasingly cash-like redemption process. Marketers are responding by offering more variety in redemption options, and simplifying those with cash or near-cash rewards.
The result is an increasing “open-loyalty economy” of points sharing, pooling and universal redemption. Similar to peer-to-peer payment programs such as PayPal, Venmo and Dwolla, the open-loyalty economy enables people to exchange currency with trusted friends and businesses. Young tech-savvy consumers in particular are embracing this technology, leading us into a future in which points look more like currency.
Augmented reality: In the 1960s, people used hallucinogens to enhance reality; today, a computer does it. Augmented reality is the use of computer-generated sound, video, graphics or GPS data technology to heighten one's sense of reality. Anyone who ever test-drove a BMW on his desktop or tried on clothes through Lands' End's virtual models has experienced augmented reality. It is a fairly specific innovation, but its capabilities are broad, and it has the power to penetrate any brand activity. (In fact it was first created by the military in the 1990s to improve human performance.) Interactivity is key to the technology, which translates to engagement.
To effectively offer some form of augmented reality, a brand must first identify its most important user experience, and then determine if the stores, offices or website make it easier for consumers to visualize themselves in that process. Marketing organizations that find ways to integrate augmented reality into their programs, through automatic contest opt-ins, aspirational point-earnings games or even cause-related activities, will have an edge as this technology advances.
Trends that affect customer engagement
The Rise of MomPopolies: Social media has been a great equalizer for many small brands, which have used Facebook and other platforms as soapboxes from which their loyal customers can sing their praises. Add online transaction-processing technologies and a small dress shop in Petaluma can compete with Macy's in Cincinnati. The result is what we call MomPopolies – Mom and Pop establishments with as much engagement power as some of their national rivals, but with the ability (and panache) – of being hands-on local.
Large corporations that ignore their smaller competitors' power to leverage brand integrity are missing an opportunity. The data that large corporations collect can be used to design the type of tailored experiences that can give a major chain a local face. A sales associate can know, for example, if a shopper recently purchased a pair of Kate Spade shoes, and that today there is a sale on Kate Spade bags. There also are opportunities for national brands to align with MomPopolies and benefit from each other's strengths – using the power of big data to deliver a localized experience, assortment, price and service.
The New Partners: Canada, Europe, South America and Asia have coalition loyalty programs, where scores of brands are organized under one loyalty program and consumers earn and redeem rewards across all program sponsors. While this model does not yet exist in the United States, some major brands have partnered with others that make sense, such as supermarkets and fuel stations. This partnership strategy is paying off, and growing.
Brands should look beyond the looks-good-on-paper partners – those with scale, market density and compatible services – and consider other less-obvious qualities. For example, does the potential partner target a different but desired customer base, operate in a hard-to-penetrate market, or excel in a specialized technology? The most profitable partnerships are those that will yield benefits for all parties.
Data scientist shortage: When we think of loyalty, we think of marketing, but the professional need is in data analysis. The statistics prove the point: 97% of companies with revenue of more than $100 million are pursuing expertise in business analytics, according to a recent Forrester Research study. Yet McKinsey & Company forecasts that the data analytics field will face a shortage of professionals by 2018.
We are approaching a critical junction: Data analysis is where the jobs will be, so who should be at the wheel? Organizations that award scholarships or produce joint case studies or research in this field will have a crack at the best and brightest, while also guiding the industry's future. Loyalty operators and universities should partner up.
Regulation rebound: Every data marketer knows that the industry is destined to face legislated changes in how it collects and analyzes data, but we're not talking much about the positive role that marketers can play in defining the changes. There are small movements, but opportunities still abound.
With headlines focusing on instances where new rules are not being followed (such as Google's recent $22.5 million fine for using cookies on Safari), those organizations that choose to lead collaboratively stand to become the trusted, go-to experts. At a time when consumer trust is eroding, this quality is at a premium. Marketers who want to lead should diligently keep abreast of key legislation, while remaining transparent about how they collect and use data. And they should explain these practices in straightforward language that consumers can understand.
The economy's effect on creating value
Glocalism: The term Glocalism technically means the adaptation of a product or service to each location or culture in which it is sold. But under the radar, Glocalism also signifies how regional businesses can be altered by events that take place far away. It is the butterfly effect on fiber optic wings — the technologies that have enabled us to become a global economy also tether us to the issues that occur worldwide, whether that is a tsunami, a factory fire or a failed currency.
Businesses, like people, need a first aid kit in emergencies. For organizations, first aid comes in the form of crisis management. The best start to any kind of crisis management plan is assessing the organization's ability to respond to unexpected events. Marketers should create their own war rooms, which may include data reserves, back-up systems, and crisis communications strategies to respond proactively in real time.
Economic fear and control: So the United States is headed toward a fiscal cliff, and because of glocalization, all of the world is watching. But as leaders hammer out the pros and cons of revenue cuts, tax increases and loopholes, marketers can't lose sight of the fact that the incentives that influence consumers – driven by their inherent tendency to be value conscious – remain largely the same.
Consumers still want to experience greater value, they want to pay less, and they want to earn more. The difference is that they want more today than they did three years ago. They also want to feel like they are in control of their own budget, and that they are ahead of the game. Marketers should bake these needs into every single marketing strategy – regardless of the fiscal cliff.
From tried and true marketing tactics to incorporating augmented reality into programs, marketers need to have a variety of techniques in their toolbox to continue to create relevance, engagement and value. And facing a steady decline in consumer interest, loyalty marketers would be well served to make a resolution for the New Year: Innovate to stay one step ahead of customer expectations.
Carlos Dunlap is COLLOQUY Editorial Director.
12/14/2012 12:00:16 PM
Robert P wrote:
Great article Carlos. I have seen an uptick in the rewards for non-purchaseswhether they are for Facebook Check-ins or other forms of social media exposure. Social media hits, likes, shares, reviews and check-ins all have a value to a brand or merchant and it will be interesting to see how it plays out over the next year or two.