What Guest Loyalty in the Digital Era Really Means

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What Guest Loyalty in the Digital Era Really Means

By Christopher Kronenthal, President and CTO at FreedomPay - 09/23/2019

It’s widely acknowledged across many service industries around the globe that there has been a fundamental shift in customer loyalty and behavior during recent years. We now live in a world where customers expect and demand highly personalized, high-touch and genuinely rewarding goods and services.   

While customer retention and loyalty are intrinsically linked, they are not interchangeable terms. Customer retention simply means that a customer could or is likely to revisit your business in the future. Loyalty, on the other hand, means a customer will not only be utilizing your service in the future, but will also advocate for you and refer your brand  to their friends and colleagues.  With globalization resulting in a highly competitive marketplace, customers can often be spoilt for choice, meaning ‘genuine’ intelligently driven loyalty is more important than ever.  Indeed, recent studies show, approximately 54% of loyalty memberships are inactive[1], implying that while the desire to be part of a loyalty program is there, something is putting consumers off from engaging with a scheme. These factors include the practicality of actually using the rewards program, the value of the rewards being provided and the convenience of claiming rewards.  A large percentage of merchants are often ‘stuck’ with traditional programs that are linked to card ownership or the discount mind-set.

So, how do businesses adopt a model that provides meaningful rewards, quality services and convenience? How can technology not only facilitate this requirement but make it an integral aspect of a business model?

One of the trends currently seen in the hospitality sector is that savvy, forward-thinking merchants are rolling out programs and systems that essentially treat loyalty as a pseudo-currency. It’s not an especially new concept; take the Merchant Consumer Exchange (MCX) as an example.

Founded in 2012, the MCX was created by a group of U.S. retailers to develop a merchant-owned mobile payment system, called: CurrentC.  CurrentC allowed the retailers involved to get rid of interchange rates used by card networks, but it was the unique features of the ‘app’ that piqued the interest of customers.

The app included rich features such as tracking receipts, assisting users to locate specific retailers, but most importantly displaying coupons and loyalty program details. By making the most of the data available through the transaction details logged in the app, retailers were able to create and provide unique incentives; discounts and special offers, to increase in-store spend.

The CurrentC rollout was suspended in 2016, following poor results and feedback from its limited trial. But the premise was enough to register an interest by some of the big players in the market, resulting in Chase acquiring MCX in 2017.While the project was ahead of its time, it did demonstrate that loyalty should not be considered as an afterthought, and that creating a system offering unique and personalized loyalty rewards was an enterprise worth pursuing.

The premise of a multi-merchant loyalty ecosystem has burgeoned into a key tool for major players in the hospitality sector. Hospitality Technology recently published feedback of two of the globe’s biggest hotel and lodging providers on the success of their respective loyalty programs. Both are flourishing, and both have resulted in increased membership numbers and customer engagement. A major reason for this positive feedback is that each membership programs include key partnerships with providers operating in overlapping and relevant sectors.

This focus on collaboration rather than the competition has resulted in a multitude of large merchants with large consumer bases and significant levels of loyalty points asking payment systems to tie merchants together. As these merchants form collectives and build a shared consumer base it essentially means that loyalty points are being used as an alternative currency.

This self-contained network of merchants can then invite other large loyalty point bucket holders to join and participate, thereby sharing the benefits - as well as the rewards - of a collaborative loyalty program.

The benefits for both businesses as well as customers are significant; businesses can reduce the risks associated with loyalty point liability on their balance sheet, and with a centralized and connected loyalty platform, merchants can use analytics and software tools to turn data into positive interactions and accelerate personalized services. This data ensures that they are capable of providing a loyalty program that never becomes stagnant, while customers get a dynamic, engaging and tailored loyalty program that feels genuinely active and rewarding.

However, there are caveats. In order to get loyalty to really work, companies need to implement a holistic platform solution and not just an additional loyalty point solution. Large businesses have numerous challenges when it comes to the delivering a payment, such as complex legacy systems, governance issues and regional legislation requirements.  Without the right digital data architecture, merchants and businesses can remain ‘stuck’ in siloed decision making.  

Companies who are not focusing on platform innovation or dealing with restricted data flow and poor customer recognition find it increasingly difficult to earn loyalty and maintain commercial success. But those who are willing to embrace the technological advancements available, building on their capability to deliver virtual currencies, partner networks and new customer-centric loyalty program, will be the ones who define the next wave of loyalty investment and keep their businesses ahead of the curve.

About the Author

Chris Kronenthal is the President and CTO at FreedomPay and a payment industry security expert, bringing world-class experience to the software development processes and compliance solutions of FreedomPay. He is widely recognized for his expertise in managing and architecting global ISV solutions and omni-channel environments.

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