Improve the relationship of trust with your customers through Loyalty (I)

On average, Spanish consumers sign up for approximately 20 loyalty programs, but are active in less than half of them. This is largely explained by the commoditization of loyalty programs.

This has led to the emergence of so-called 'switchers': points mercenaries who, despite being registered in the program, would go to the competition if offered a more attractive discount. And with the pandemic, they have only increased: 4 out of 10 customers say they have tried new brands as a result of an incentive and/or discount.

We know that retaining is cheaper than attracting, a mantra especially in the current economic crisis and that applies transversally to all sectors: human resources, catering, travel,....  It is therefore still essential to work on the loyalty strategy.

Brands tend to build the relationship with the consumer from the fear of abandonment (increasing the RFM: Recency, Frequency and Monetization), but as in any relationship, the secret is to work on trust. Designing a loyalty program involves defining what trust is in our category to achieve this two-way engagement between brand and consumer beyond the last visit, repetitions or average ticket.

Lemonade Insurance, for example, identified the eternal problem of conflicts of interest between insurers and policyholders in the event of a claim and decided to add a third party to the relationship to enhance trust. When the user signs up, he chooses his favorite NGO and Lemonade allocates a % of the customer's premium to cover his fixed costs and the rest is donated to this NGO. In this way, it manages to remove itself from the conflict of interests so that, in the event of a claim, the "fight" becomes between the insured and the chosen NGO.

For supermarkets, the key is in the defining categories such as meat or fish that customers only buy "in trusted places"; for love-brands it could be getting the customer to share their consumption experience on social media... and this is how we will be able to define which consumer actions deserve to be rewarded by our loyalty program.

With this clear premise, there are 3 levers to approach the definition of a loyalty plan:

1. Towards loyalty ecosystems. There is a growing trend towards the creation of ecosystems. The clear example is Amazon, which has not only understood that its value proposition is convenience with the creation of the Prime ecosystem: Now, Video, Whole Foods, etc., but is also monetizing it. But not all brands can be Amazon. Aware of this, many players are working on building partnership ecosystems: more than 40% of 2019 top-brands according to the Financial Times made at least one collaboration with another brand to improve the customer experience together.

 2. Omnichannel purpose. During loyalty program deployment it is imperative to ensure omnichannel consistency, especially with training to the teams involved in problem solving that will play a key role when the customer must decide whether to repeat    or not.

3. Start small and learn fast. Last but not least, analytics will be key to iterate the program, identify consumer profiles, potential synergies with third parties, why churned customers leave us and the impact of the program on the bottom line.
Studies show that cultivating emotional benefits and bonds minimizes price sensitivity and increases x3 the likelihood that a customer will recommend the brand, so understanding the optimal balance between transactional and emotional benefits, immediate rewards vs. future recurrence is key to ensuring a sustainable program.