A fork in the road: Brand loyalty during the digital transition

A fork in the road

How brand loyalty could either be enhanced or diminished in the digital transition.

The on-going digitisation of everyday life is providing the world of marketing with the first wave of opportunities to exploit the many new ways that are emerging to interact with customers in a timely and intimate way. In theory, “always on” customers will be contactable with relevant messages wherever they are, providing a 24/7 opportunity to get the right message to the right person in the right place at the right time in the right way. 

However, as with every previous revolution in customer data and channels, there lies the opportunity to nurture these new possibilities for the long term benefit of brands and customer relationships or, as normally seems to happen, to allow short-term promotional activity to prematurely flog them to death.

The arrival of ever more data about consumer’s behaviours, attitudes and aspirations together with a rapidly expanding array of communication channels to talk with them should provide the opportunity to understand and reach out to consumers with a relevance that could previously only be dreamt of. The early signs are good, as the advertising industry has already begun to migrate from a ‘shotgun’ approach, hoping to hit the right target with the right offer by peppering the audience with messages, to more of a ‘rifle’ approach, where the right message is targeted at the right consumer based on real understanding of their needs.

A new golden age of marketing

As recently as only a few years ago, we could only hope to understand so much about our target audiences, and to be able to get our messages to them wherever and whenever was the most appropriate. Looking to the future, we could be about to enter a golden age of marketing, where the right message can always be delivered to the right person at the right time in the right place in the right way, and to put the icing on the cake, we’ll be able to measure how the message worked as well. Achieving good ROI for marketing expenditure could well finally become more of a science than an art.

The potential implications for the future of Customer Loyalty are equally profound. The loyalty industry has always been at the forefront of both understanding customer behaviour and using this understanding to deepen relationships for the long term benefit of both companies and their customers. The potential to use new sources of data to understand customers even more and new communication channels to reward their behaviours more rapidly and relevantly bode well for the industry’s ability to help companies build lasting, mutually beneficial relationships with their customers.

So why a fork in the road? Surely on the above evidence the future for marketing as a whole, and the loyalty industry in particular, looks rosy? It does; but as with every era of technological development, there is a danger that industry gets carried away with what’s possible at the expense of what’s really wanted by consumers. The challenge as ever is to temper our enthusiasm with a thorough understanding of what is best for customers in the long term.

In an ‘always on’ digital future,  we may soon have the ability to send messages to consumers at any time, wherever they are….at home, on the move, before entering the mall, before entering a store, in the store, after leaving the store and so on. It’s already starting to happen. We may also know who a consumer’s friends are and use that knowledge to try and influence their behaviours by recommending products that their friends like …it’ already starting to happen.

Our industry is already ‘pricing in’ these new revenue streams, but many of the assumptions behind the business cases may be a little premature. If we added up the revenues that digital advertising models built on these new capabilities are promising the markets, they would exceed the current total advertising spend by a factor of several. There is currently an assumption in the market place that consumers are both willing and able to be in receipt of an endless stream of targeted messages wherever and whenever they may be, whatever they may be doing. This is a potentially dangerous and naïve assumption.

However relevant a message may be, there will clearly be times, places and occasions where consumers will prefer not to receive it. Recalling the scene in the movie Minority Report where the lead character John Anderton, played by Tom Cruise, walks through a mall deluged by a torrent of messages imploring him by name to purchase from each store gives you an idea of how technology may overtake our ability and desire to respond. Similarly, the major questions currently being asked about the ability of social networks to monetise their connections raises related issues. As Sir Martin Sorrell, the CEO of marketing group WPP recently stated: "I'm not sceptical about social media, I'm concerned about when you monetise it. If I'm talking to you and I send you a commercial message how do you feel about that? If I say 'buy this' or 'do that', it's not the right context."

The key challenge for marketing is to embrace the digital transition with both hands while showing enough restraint to avoid killing this new goose that lays the golden eggs.

The key principles of loyalty; trust, personalisation, reciprocity and a longer term perspective have never been more important.

Scenarios for the Future of Loyalty Management:

To enable us to understand how the future of loyalty management could evolve with these new many capabilities becoming available, Aimia has undertaken a detailed Scenario Planning exercise to assess the key uncertainties and possible outcomes that lay ahead.

There are clearly many imminent changes ahead for the way companies connect with and reward their customers. Aimia has conducted an extensive analysis of the major drivers of change in Loyalty Management, including economic, technological, social and political factors, and has distilled them into two key axes of uncertainty that will shape the future. The future for our industry is dependent on how these two key axes of uncertainty evolve:

Axis of Uncertainty #1

This uncertainty will be resolved by the degree to which data is brought under control by companies and/or individuals.

Currently ‘Big Data’ is one of the most talked about issues in modern business and marketing. Current thinking tends to focus on what companies can do with all this data, but as this new data rich, data driven world emerges, there are many unanswered questions. Who will get access to what data, how will legislation evolve, will the value of data become more explicit and the degree to which consumers will be able and/or willing to take ownership of their own data.

Axis of Uncertainty #2

This uncertainty will be resolved by the degree to which brand relationships shrink or deepen as a result of more plentiful data and opportunities to ‘nudge’ customers.

New sources of customer data, and new communication channels open the possibility of a golden age of marketing, where companies deliver relevant, timely messages to consumers, building deep, long lasting relationships. However, early signs suggest that these new sources of data and channels also create the potential for ever more bombarding of consumers with short term messages, potentially driving consumers to gradually drift towards more deal based behaviours and weaker brand relationships.

As a result of these two axes of uncertainty, four interesting and equally possible future directions, or scenarios, for our industry can be assessed.

What will loyalty management look like in 5 years’ time?

Future 1: Offer Anarchy

In this future the increasing volume of customer data created by the digitisation of everyday life remains freely available and only loosely controlled by companies, governments or consumers themselves. Consequently the opportunities presented by ‘always on’ customers tend to be over-exploited by many vendors leading to highly transactional deal-based behaviours, limited loyalty and frustrated, over-messaged consumers.

For an indication of the possible feel of such a future, the recent flurry of generally badly targeted ‘Daily deals’ activity, that has quickly exhausted many consumers patience would be a good example.

Future 2: Pay to Play

In this future, we envision a market where data is increasingly acknowledged to be both valuable and powerful by companies, governments and consumers alike. Consequently, it begins to be controlled and traded as a valuable commodity requiring business to pay to access customers through increased rewards. Consumers will increasingly offer their data, attention and expenditure to the highest bidder, changing the economics of many existing financial, marketing and loyalty systems.

We are already seeing the early signs of the personal data market emerging, as new businesses launch to help consumers harness both the insight and value of their data and government initiatives such as the UK’s ‘Midata’ legislation begin to encourage businesses to share the data that they hold with their customers.

Future 3: The Hunt for Affinity

Potentially the future could evolve towards an environment where consumers and brands realise that despite a huge background of data driven, and only partially relevant communications and offers, it is possible to search out meaningful relationships that offer more relevance, value and affinity. In this future the total brand experience can start to overcome market noise, allowing strong longer term relationships to be built on more than just short term offers and rewards.

For many retailers who are already beginning to feel at the mercy of price comparison sites and the emerging consumer behaviour of ‘Scan and Scram’ or ‘Showrooming’ where they browse in store and then search for the cheapest price online, this broader focus on the total brand experience will be crucial to their future. However, it will be hard for such messages to stand out against such a backdrop of noise and offers.

Future 4: Real relationship

The final possible future is the one that we should all strive to build. In this scenario, winning companies build deep trusting long-term relationships with customers, who in turn share their precious data to deepen the relationship yet further. It becomes a truly virtuous circle of partnership to help consumers manage a complex environment, and achieve value and satisfaction from their commercial relationships.

Just as consumers have learnt to rely on browsers to make sense of the internet, and price comparison sites to achieve value, so we believe they will increasingly look for those brands that they can trust to help them make sense of and value their expenditure and data.

Due to the uncertainties that lay ahead, the scenarios are currently all equally likely to evolve, but any senior executives concerned about the longevity and prosperity of their business will understand that getting the correct contract with customers about the use and value of their data, together with a relevant and permission based contact strategy will ultimately build a better future.

If the industry gets this right, the new possibilities  to better understand consumers by ‘Connecting the Dots’ of the various types of data that are now available about them, and the exciting new capabilities of mobile and social interactions should provide marketers with not just new channels, but a significantly expanded opportunity to build relationships, engagement, and long term loyalty.

Getting it right will require constant analysis of the marketplace and consumer sentiment to ensure that engagement is being optimised for the long term. Findings from a recent research study conducted by Aimia demonstrate some of the key themes that will shape how best to seize the tremendous opportunities that lie ahead. This research demonstrates that a majority of consumers are happy to share their data with companies and are pleased with the possibilities of better targeted digital messaging that this could create…

…but some are already showing signs of becoming overwhelmed by the sheer volume of communications that they receive…

…and there are also some times and places that some consumers don’t want to be approached.

For the digital transition to deliver all that it promises, a new contract of trust and permissions will need to be developed between companies and consumers, and the loyalty industry is well placed to lead the broader marketing industry in this. For many years, the best loyalty schemes have demonstrated how a mutually beneficial long-term relationship can be built between companies and consumers, bringing recognition, rewards and personalisation to consumers in exchange for sharing data and loyal behaviour.

The broader marketing industry would do well to take note of this model as it begins to contemplate how best to navigate the future. There will unfortunately be an inevitable temptation towards short-termism as the possibilities to use new sources of consumer data and new communication channels tempt some to over-message and even turn a blind-eye to sensitivities about personal data. If this does occur on a broad scale, it could lead to rapid consumer disillusionment and subsequent withdrawal of access and permissions. How much better that we show restraint and respect for consumer’s permissions and preferences from the start, using the new tools to enhance our ability to deliver relevant messages at relevant times, and avoiding over-messaging and intrusion.

As we sometimes say at Aimia, the secret to successful long-term profitable relationships is to do things for and with consumers rather than to them.

Marketing, as ever, remains a discipline that aims to match what a company can offer as closely as possible to the needs of consumers. As the digital transition gathers speed, there is potential for a golden age of marketing where understanding consumers is easier, and conversations with them are increasingly relevant. Understanding how to effectively and responsibly use this new data and the new channels in the right way will present enlightened companies with unparalleled competitive advantage and long-term customer loyalty for the future.

Martin Hayward is Head of Global Digital Strategy, Aimia. Martin recently joined Aimia’s global leadership team having worked with the group as an independent consultant for the past two years. Prior to working with Aimia, Martin held a number of senior roles including serving as dunnhumby’s director of strategy and futures and as executive chairman for WPP's The Henley Centre. Hayward is a frequent speaker on and has authored a number of books with a focus on customer loyalty and marketing. In his new role, Hayward will lead the company’s digital strategy and be responsible for delivering revenue, innovation and development in a digital context across all regions and business lines.

This article was taken from the June issue of Market Leader. Browse the archive here