17 Apr The Value of Loyalty Data
When people think of loyalty programs, it often brings up the issue of purchase frequency. So much so, that the pioneers of loyalty – the airlines – called loyalty programs FFPs, or Frequent Flyer Programs. The idea was to give people a reason to come back and purchase flights more frequently by accruing virtual currency value such as points or miles.
While repeat purchases drive revenue in a big way, the value of the data provided by loyalty systems is often overlooked, and yet this data often can be leveraged to drive relationship marketing and effective customer experience (CX) strategies.
Why is data collected from a loyalty program so valuable? Because the program incentivizes customers to maintain the same identity in their dealings with the brand, which in turn presents opportunities for understanding individual behavior, personalizing brand communications and generally driving a much more intimate dialog with customers than is otherwise possible.
Let’s look at a simple example. Grocery stores have discount programs that are usually based on entering a phone number. All one has to do is enter a registered phone number into the POS system and they will receive discounts. However, there is really no incentive for people to use their own personal phone number – the discount can be obtained by using any registered phone number, including those of friends, family, and so on.
On the other hand, with a program which offers points or other types of rewards, customers have an incentive to identify themselves with each interaction, and use their own phone number, or whatever other form of identification the system recognizes. This improves data accuracy and creates opportunities for segmentation and personalization as mentioned above.
Beyond the analytics value of data, the pure accumulation of rewards has an additional, and quite simple, benefit – it gives the brand a very relevant topic of conversation with its customers. People are much more likely to notice a message that says they have a reward, or that gives them a statement of rewards, or that they have reached a new tier, etc. The open rate on such emails is usually higher than that of other communication, and it is a great excuse to keep the brand in front of customers.
Finally, the idea of tiering in loyalty results in what we like to call self-segmentation. In other words, we know who our best customers are because they have, through their loyal behavior, floated up to our higher tiers. Again, this is data that is provided by the mechanics of the program, without the need to go hunting through analytics systems, trying to link credit card hashes together and so on. We are not discounting the value of analytics here, however, we are noting the relative ease of access and accuracy of looking at loyalty tiering as a segmentation tool.