While an eventful decade is coming to a close, the ever-evolving world of loyalty and customer marketing shows no signs of slowing down. We polled leaders from across ICF Next’s loyalty and customer marketing practice on the major changes and trends we’ll see in the industry in 2020. Here’s to an exciting year ahead!
Artificial intelligence (AI) will deliver individual customer recognition in retail.
Stacy Kjelland, Partner, Client Success and Growth
Personalized experiences for your best customers will become a reality in brick and mortar stores. Think of the classic TV series, “Cheers.” The instant Norm walked into the bar everyone would shout his name, his favorite bar stool would be open, and his preferred beer would be waiting for him.
AI will enable this experience at retail stores near you by repurposing existing technology such as security cameras and security sensors at the store entrance. The most loyal customers won’t have to self-identify anymore. Imagine being greeted by first name when you enter your favorite store, having a dressing room reserved for you, then being offered personalized treatments such as a personal shopping assistant, free samples, recommendations based on what you last bought, and a preferred customer checkout lane. This experience will drive customers back to brick and mortar stores and amplify the human connections consumers are craving.
Deeper and broader integration of customer data will create a competitive advantage.
Mike Sund, Partner, Strategy
Leaders will rush to unlock data from the many sources that exist across their organizations and those that are externally available. But the real challenge will be the ability to effectively harness all of that disparate data to then activate them in real-time to predict behaviors and react to behavioral signals. These in-the-moment actions will anticipate customer needs to deliver hyper-personalized and relevant experiences.
Platforms are evolving quickly, as are their abilities to integrate customer and loyalty member data across the entire marketing ecosphere. Businesses that are early adopters and able to invest in systems that organize and store large amounts of data will be able to find actionable insights that lead to enhanced experience and engagement. Real-time processing and artificial intelligence will deliver personalized experiences at scale and across channels: on-premise, during website visits, digital advertising, social, voice, etc.
Along the way, as customer data capture becomes more robust, so will customer knowledge. Improved experiences will build customer trust – the data they provide gives them a direct and valuable benefit. This will in turn create a virtuous cycle of better-delivered experiences, more targeted media buys, and triggered communications that continue to drive business from existing and new customers.
Customer-powered cuisine will be on the menu.
Denise Holt, Partner, Strategy and Insights
The restaurant industry continues to evolve with a rise in people opting to eat at home, appreciating interactive moments, and having digital control over their experience. Restaurant delivery services have multiplied (i.e., Uber Eats, Door Dash, Grubhub) and greater competition is coming from meal kits (i.e., HelloFresh, Home Chef, Blue Apron). Food halls and incubators are giving small restaurants and food trucks a chance to test the waters and gain a following. And Kickstarter campaigns allow restaurants to crowdsource help from their most loyal guests.
Like many categories, the restaurant experience is going digital with more control being put into the customer’s hands. Digital kiosks and tableside tablets make ordering and paying easy. Mobile phone apps enable customers to order ahead, customize items, and earn and redeem rewards. Augmented reality allows customers to see a 3D image of food choices on the menu right in front of them.
In 2020, digital-enabled customer control will go a step further with some restaurants giving their most loyal customers the opportunity to create special menu items and/or vote on what makes the final cut. Giving loyal customers a voice demonstrates your appreciation for them and gives them something unique to talk about as they advocate for your brand.
Emotional loyalty: Leading programs will measure what they manage.
Emily Merkle, Partner, Analytics
In our study of loyalty drivers, ICF Next defined three types of loyalty, the most meaningful and lasting of which is emotional loyalty. With the idea that you can manage what you can’t measure, we predict that loyalty leaders will develop metrics to measure the effectiveness of their efforts to create emotional loyalty with customers.
Leaders will evolve their traditional measures of success that are behavioral or financial based to include new measures of emotional loyalty that may be more qualitative. More importantly, they will be forward looking, giving business managers a view to where their programs are heading. Examples of these types of metrics include trust, participation and advocacy. Do your dashboards include these?
Increased reliance on co-brand credit cards will make a slowdown tougher on loyalty programs than past recessions.
Ned Shugrue, Associate Director, Sales and Marketing
While we continue to experience the longest sustained economic recovery in history, eventually an economic slowdown will come. And while it is unknown whether this slowdown will come in 2020 or further down the line, one way in which the impacts of this recession will be different is that loyalty programs (and by definition, brands themselves) have become increasingly reliant on revenue generated by co-brand credit cards and other ancillary products.
In a recession, a dip in consumer spending will impact most brands. And with some brands generating significant revenue from co-brand card spend, expect to see these brands experience a double- impact from any downturn. Additionally, if credit tightens significantly (as it has in most recessions) brands could potentially also lose out on revenue generated from the acquisition offers consumers love.
The good news is that savvy loyalty marketers will have existing levers to pull within their programs. Expect these brands to lean heavily on loyalty promotions to drive topline revenue and to replace some lost ancillary program revenue. Card marketers will have levers to pull, too. While the consumer credit market will be going after a smaller pool of consumers, acquisition offers for qualified consumers will become quite rich. And this, too, will have some mitigating effects for programs’ revenue performance.
Changing data privacy laws will create an opportunity to connect with customers.
Kristie O’Shea, Partner, Product Management
Data privacy will continue to be at the forefront of customers’ minds, and successful companies will find ways to build stronger relationships with them because of it. In 2020, we’ll continue to see new regulations released across the globe and at the state level in the U.S. Many of these regulations will be focused on providing greater transparency and getting explicit consent in a very straightforward way for what data is collected, why it’s being collected, how it will be used, and who it will be shared with.
Another common thread will likely be putting data owners in the driver’s seat by giving them the ability to immediately be forgotten should they choose to be. For global companies, data localization regulations will likely come into play where some data may need to remain in the country of origin. All of this change will introduce additional complexity with regard to compliance and data architecture, but successful companies will take this opportunity to optimize their data strategy to create a data practice that builds trust and delivers hyper-personalized experiences.
Loyalty strategy owners will retool programs, moving beyond focus on accounting to include brand and event elements.
Suzy Cox, Senior Partner, Client Success and Growth
As more companies begin to understand the difference between transactional loyalty and emotional loyalty (and as the value of emotional loyalty is more widely proven), we will see more companies retooling and/or rethinking their approaches to customer loyalty.
The definition of “loyalty program” will move beyond a simple accounting system toward a multi-dimensional relationship that still includes recognition of a financial connection, but also an acknowledgement of customers’ needs and values. The lines between companies’ loyalty efforts and their brand marketing efforts will fade and their “programs” will begin to include events and social platforms that allow customers to interact with each other, and partnerships that help emphasize what brands truly stand for. For customers who choose to participate with brands, the loyalty program will begin to define their total relationship with brands – from how their patronage is appreciated with points, to how the company “just seems to know exactly what they want and when they want it,” to how the brand makes them feel better about themselves and their connections to the rest of the world.
Sustainable loyalty will continue to rise.
Martin Tschofen, Partner, User Experience
There is an uncomfortable tension between loyalty programs and creating a sustainable future for our world. Our data is harvested, hacked, and misused constantly. The environment is under stress, and people struggle to make ends meet. And more often, people will look for brands that pay attention.
To combat this, progressive brands are finding ways to create, articulate and stand by a higher brand purpose that declares their commitment to an ambitious will beyond the product or service they provide. This purpose will be borne out of social priorities that matter – specifically to their loyal customer base, their employees, and the broader global community.
Think about Nike’s campaign featuring Colin Kaepernick. Running a seemingly significant risk to their business, the brand chose to run an ad to show solidarity with Kaepernick’s police brutality protest. Other brands are vowing to engage in mostly environmental endeavors, e.g. hotels’ ‘green’ stay options, where guests have the option to not have new towels and bedding each day.
Representative bodies and companies will also look to broker an industry response to tackle these pressing social and economic global priorities, bypassing individual initiatives in search of competitive advantage. Doing so will instead engineer a greater good, borne out of a coalition effort that scales a truly impactful response and makes a material difference.
Lifestyle loyalty brands will be brought to life.
Bruce Lahood, Senior Partner, Growth
Progressive brands are building their loyalty proposition around the needs and behaviors of their customers, not limited to the product or service they are tasked to in market. This broader offering earns brands a greater opportunity to be top of mind with their valued customers, intelligently using permissible data to serve up content, offers, partners, extended services, and recognition that are relevant to their customers' everyday lives.
Whereas some loyalty offerings tout a lifestyle proposition, most simply leverage a partner ecosystem that extends from their own product or service as a means of justifying their positioning. Consumers expect more. Simply showcasing a partner to authenticate the positioning is not enough.
What does resonate for a truly lifestyle-oriented loyalty brand are initiatives that tackle perennial consumer pain points. Namely, give me back time, give me choices, and make my life easier.
For example, through United Airlines’ partnership with Marriott Hotels, business-class customers flying from Newark to London will be able to have their checked bags delivered to select properties in the English capital. Passengers will proceed through immigration and customs as normal. Then, they need to look for a bag drop desk in the arrivals area of Heathrow and their bags will meet them later at the hotel.
Companies will start rewarding eco behaviors with the addition of green goals.
Guy Cierzan, Managing Partner, Loyalty and Customer Marketing
The building desire for individuals to minimize their carbon footprint will drive the travel and hospitality industry to incent loyal customers to minimize their travel and impact on the environment through the purchase of carbon offset credits or choosing more eco-friendly options for their travel and accommodations. The call to eliminate airline loyalty programs may be extreme, but airlines will need to go the way of energy providers in terms of incentivizing behaviors that are environmentally responsible. Good examples of doing so include eliminating the mileage run to maintain status and giving customers a choice to purchase carbon offsets as a means to reach their goal. Additionally, airlines could link the purchase of carbon offsets to the goals needed for status levels similar to dollars spent, or number of legs and air miles flown.
The same types of behaviors can be rewarded in the hotel space with points being rewarded for green decisions such as choosing to forego housekeeping services and fresh towels.
Brands will continue to build tribal brand alliances with like-minded brands with shared values.
Dan Sheehan, Senior Partner, Executive Creative Director
Forbes Magazine contributor Nikki Beard in “Tribal Marketing and the Need for a Radical Redefinition of Brand” writes that tribes arise when consumers are identified more on the basis of collective behavior than on shared demographics. Beard gives credit to the internet and “increasing global connectivity” as key reasons for this tribal group behavior. One of the things that drives this intensive tribal brand loyalty is the development of brands that stand for something like protecting the environment. Future brand partnerships will demonstrate relevance on these shared tribal beliefs, as opposed to the category relevance they have traditionally relied on. Brands will continue to explore opportunities around new customer-centric ways of building brand affinity through supporting like-minded multi-brand communities that share value sets with specific tribal beliefs.
The secret to building lasting loyalty is establishing trust. Trust is inherent in groups of people who share the same values and beliefs. Whether it’s an online community, a social network, or a political affiliation, these communities reinforce what we believe is right, and this sense of belonging drives active participation within a community of other like-minded individuals. Brands will need to identify new forms of partnerships that take advantage of common values aligning to the needs of the tribe. Through these relationships, brands can strengthen the bonds of trust and deepen the connections they have with individuals and the tribe, building lasting relationships and affinity.
Loyalty will increasingly turn to partnerships to improve the member experience.
Tom Madden, Senior Partner, Client Success and Growth
Loyalty program partnerships have been around as long as loyalty programs have existed and were once all about points and miles. At first, these partnerships were a cost-effective way for other industries to capitalize on airline programs without having to offer a program of their own. It worked. As a matter of fact, it worked so well that mortgage companies, grocers, dry cleaners, telephone companies and literally thousands of other companies joined in the loyalty partnership game by teaming up with your favorite airline, hotel group, or car rental company. The focus was all about any and all ways members could earn points and miles. This is still the focus of most loyalty partnerships today.
However, while points and miles are still a part of the partner offering, they no longer have to be the primary value proposition. Instead, loyalty partnerships will evolve to be more about improving the member’s experience outside of the areas the brands can control. An airline can only control the flight journey. A hotel company can only control the stay. But when they join forces and add a transportation partner (i.e. Lyft/Hilton and Lyft/Delta), partners will work together to improve the member experience from home to destination and back home again.
In 2020, many new loyalty partnerships will be about simplifying and improving the member experience throughout the entire customer journey. Oh, and you will get even more points and miles!
Mobile payments will continue to rise across Europe, further cementing the path to becoming cashless societies.
Andrew Kelly, Partner, Sales and Growth
According to Allied Market Research, global mobile payments will reach a whopping £3.5 trillion by 2023, with China’s WeChat Pay and Alipay dominating the payment platforms pack in 2019, accounting for over 1 billion active users each. In Europe, mobile and contactless payments are already surpassing Chip and PIN transactions (By contrast, some 90% of US consumers still prefer cash or non-digital methods.).
Europe is home to some of the most cashless societies on the planet, with Sweden, the UK and France the top three ranking nations in the region. In 2020, this digital payment adoption explosion will continue across the continent, where we will see a number of European nations follow suit. Research by Visa Europe showed that 68% of Europeans used a digital wallet in 2017, and that 92% of the European Millennial population say they’ll fully adopt mobile payment technology by 2020.
In the UK, digital and contactless payments will continue to eclipse traditional methods in a monumental way. In August of this year alone, Britons spent £6.9 billion via contactless payments, an increase of nearly 14%.
But while the vast majority of consumers in Europe will benefit from a digital and much lighter wallet (or forgo one altogether), some of the most vulnerable consumers will be left behind. The elderly, those living in rural areas and others reliant on cash will soon find themselves in cash deserts as the rate of ATMs close and one in ten bank branches refuse to handle change. This will seed further resentment and widen the chasm between the digitally savvy and cashless, to whom UK brands are catering, and the cash dependent, whose muffled protests will fail to stem the tide of digital change.