What's Happening to Customer Loyalty?

According to a May 2017 Forrester Research report titled "How Consumers Really Feel About Loyalty Programs," 40% of consumers belong to a QSR loyalty program and 39% of consumers belong to a hotel loyalty program. The Forrester report further finds that loyalty programs influence where members make purchases (60%), what they buy (48%) and how much they spend (44%). Hospitality Technology’s research reveals that improving customer engagement and loyalty is a priority for both hotels and restaurants. More than half of restaurants (53%) and 46% of hotels rate this as a top strategic objective for technology initiatives and investment. In this executive roundtable, technology experts offer their insights into how loyalty has evolved as guests have become increasingly “digital-first.” They also share best practices for how operators must attract and maintain a solid loyalty membership base. Sponsored by ParTechWhat do consumers expect from loyalty programs now that was not a requirement years ago? PAUL RUBIN: Loyalty programs in the restaurant industry began as highly transactional programs. Participation typically followed a model in which something of value was given away in exchange for the customer signing up for the loyalty program and then earning “free stuff” in exchange for loyalty or repeat visits. The customer would generally receive copious amounts of email advertising once signed up, but the messaging of those emails would be general in nature – such as new product introductions and the like. Thanks to cloud technology, restaurant owners now have real-time access to loyalty program information worldwide. This access is critical for restaurant chains and enterprise management to allow customized configuration across all channels: in-store, online and on mobile devices, so that everything is streamlined for guests. Consumers now demand convenience like never before, so downloadable loyalty apps with personalized customer profiles that store behavior and order history are now critical as well. DANIEL CONNOLLY: Loyalty programs have become more competitive in recent years due to the proliferation of loyalty programs, advances in technology, changing consumer expectations and preferences, and increased costs. To win customers and earn their loyalty, companies have had to offer more benefits and services, add new ways to recognize guests, create accelerated pathways to redeem points for rewards, and provide greater accessibility to their programs through mobile apps. On the backend, companies have become more sophisticated in data analytics and with integrating their loyalty programs into key systems to provide more seamless guest experiences at every touchpoint. LIZ MILLER: Some loyalty programs have become incredibly smart about the individual customer. Brands have taken the time and made the technology investments to prioritize the rich treasure trove of data that loyalty programs can accumulate and have turned it into personalized, contextual, relevant experiences that not only reward a customer’s loyalty, but also take the time to engage in a real one-on-one manner. Consumers expect smarter programs. Loyalty programs are a social contract between brand and buyer. How must loyalty programs bridge the gap between restaurants/hotels and third parties? RUBIN: Strong loyalty programs will create a balance between the needs of the business and the desires of the guests. Programs that do not offer value to the customer will become obsolete, as customers will not find engagement in these types of loyalty programs. Similarly, programs that have no benefit to the business will not last either. Sources of big data statistically show that customers are willing to give their loyalty in exchange for value. Value does not always equate to “free.” It can also mean providing unique opportunities or providing extra convenience. Point systems tend to be the most opportune way to do this. Rewarding customers with points based on how many times they visit, the amount they spend, filling out easy surveys, or even how many new people they refer to your rewards program can all generate points to add to their customer profile. Provide your loyal guests with an easy way to access their points; either through your website, or better yet, your mobile app. CONNOLLY: Many companies have tried — with mixed results — to remove intermediaries from the equation in order to contain customer acquisition costs and maintain the customer relationship. One tactic to shape channel selection is to offer loyalty members special pricing and/or additional benefits or incentives for purchasing direct or to not award loyalty points (and sometimes charge higher prices) for purchases that go through intermediaries. These tactics have often frustrated consumers and have led to intermediaries creating their own loyalty programs. MILLER: This comes down to how these organizations agree to partner and share insights, intelligence and data. If the goal of the program is to understand and engage with the loyalty program member, then there is a call to action to ensure that all of that customer’s behavior and engagement with the brand, be it direct or via a third party, is gathered into that total view of the customer. Often times, it is hard to align channel partners be it from a baseline agreement to share intelligence to having systems align and connect. But if the goal is to close the gap, to put the focus on the individual customer, then both organizations have a vested interest in making the tough strategic calls and finding ways to share intelligence where it can and should be shared. What will loyalty programs of the future look like? RUBIN: Loyalty programs of the future will be built holistically around data. Data, combined with the deep learning techniques of today’s AI technology stacks foreshadows that programs of the future will adapt more quickly and be more relevant to their participants. Techniques like A/B testing enable rapid learning so that programs can be optimized for participation while at the same time offering increasing value to the business. CONNOLLY: Loyalty programs of the future will be much more seamless than they are today and not just about redeeming points for rewards. Smart and pervasive technology along with location-based services will track purchases and preferences, proactively offering opportunities to redeem points for rewards, to be recognized for loyalty, and to receive little touches that make big impacts on the guest experience through personalization and customization. Because of technology, the loyalty programs will work more autonomously than today — that is, without much human intervention — to create compelling and memorable guest experiences. MILLER: AI and IoT will change how programs are delivered in the same way they will change how customer experience is delivered. You have tools to connect points of data, to identify when I am on property, when I am on the way to the airport, when a train is late. The question will be how you want to engage with me and if that engagement is of value to me. While delivery channels and methods will change, the expectation of the customer is and has always been: 'What’s in it for me?' That part of the loyalty agenda will never change. Why is a "one size fits all" loyalty program no longer of interest to consumers? RUBIN: The more data we have on a customer — where they live, demographics, birthday, purchase history, etc. — the more the program can optimize for that customer’s preferences. While there will always be a thematic component to the marketing campaigns driven through loyalty programs, the rest of the content can be tailored for each customer to keep the program interesting and of value. This, of course, keeps the restaurant’s brand interesting and relevant for each customer. CONNOLLY: “One size” never really fit everyone. It was just a convenient and cost-effective approach for hospitality marketers to work with large target market segments. Today’s marketplace and consumers are very different. There are more options from which consumers can choose to make purchases, and people are tired of being treated just like everyone else. Sophisticated data analytics tools now allow hospitality marketers to treat individuals as segments of one but on a large-scale, economical basis. Companies are figuring out that engagement, loyalty and lifetime customer values increase when messaging and service delivery are more personalized and customized. What should be key components of a true omni-channel loyalty program? RUBIN: Building a loyalty program in an omni-channel world can be a challenge. As the omni-channel methodology encourages consumers to shop consistently across one brand, as opposed to shopping amongst various fragmented channels, businesses can struggle with how to adapt to this model. The major, key components of an omni-channel loyalty program would be to digitize the entire experience for the consumer and adopt agile software solutions that utilize big data to create a personalized shopping experience for guests. With an omni-channel approach, businesses must tailor to each individual consumer in order to improve retention and gain long-lasting customer loyalty. Gaining valuable insight such as what drives consumer’s purchase behavior can be vital data that drives business and marketing strategies. The more seamless of an experience a business can create for its customers, the more advantages they will have over competition. CONNOLLY: A true omni-channel loyalty program will provide consistent guest recognition, access to information and services, and uniform experiences across all distribution channels and points of contact. Additionally, guests should be able to redeem points for rewards in real time in a hassle-free manner. MILLER: Omni-channel is about the bi-directional information exchange that connects a customer across all touch points … it is NOT about being in all channels all the time pushing a customer from experience to experience. The key component is the data and actionable intelligence that helps anticipate a customer’s needs and the creativity and content to meet the need and then in the next step, exceed expectations. Where is the hospitality industry missing opportunity in loyalty program structures? What industries do this well? RUBIN: I personally feel that the airline industry can improve in their loyalty programs and can create more value for consumers. Some airlines offer “premiere” or early boarding for preferred customers, which is genius. It costs next to nothing for the airline to offer this benefit to its loyal customers and yet it is an enormous value to the customers who have “earned” this benefit. The restaurant industry should focus less on “free food” and more on rewards that will make the experience more convenient and/or more enjoyable for their customers. CONNOLLY: The hospitality loyalty programs are relatively competitive to those found in other industries, such as airline, car rental and retail. Developmental opportunities lie within the realms of ubiquitous computing and predictive analytics to provide proactive guest recognition and services to consumers before they even ask. ParTech Inc. 800-448-6505 https://www.partech.com/

What's Happening to Customer Loyalty?

EXECUTIVE ROUNDTABLE

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