Why are the big brands moving away from published Loyalty?
If you asked anyone this question a year or two ago, the answer would be something like “Are you crazy? They aren’t!” If you ask that same question today, the response is more like “I’m not really sure why”. Recently, brands like Macy’s and Target have started to roll back their loyalty programs. For instance, Target is getting rid of its Cartwheel perks program and Macy’s is no longer making customers sign up for their credit card to get perks. The question that most people have is, “Why?” The answer is: they’re creating hidden or below the line programs.
We all know that the retail environment is changing and the way that retailers engage with and incentivize their customers has to change along with it. There has been a shift in power. In this day and age, the power is in the hands of the customer. The customer expects brands that they spend money with to understand them, engage with them in a personalized manner and anticipate their needs. Moreover, customers these days have an emotional connection with a brand and want to feel valued. This concept applies to loyalty programs as well.
The traditional, published, tiers and points loyalty program is becoming antiquated and far less impactful. A customer goes and signs up for a company's loyalty program. They know the program exists and they know that with each purchase they are working their way towards a new status within the program or a new offer. This used to be a fantastic way to encourage customers to spend more, come in more frequently etc. There are a few issues with this approach to modern loyalty, and they’re the same issues that are causing companies to move to a hidden or below the line style of program.
For starters, if you have three tiers in your loyalty program, that means that you’re assuming that you have three different customer segments and that each individual within those segments should be eligible for the same offers and marketed to in the same way. If you genuinely believe that your company has three customer segments and that’s it, then maybe this is a great approach for you, but I would venture to guess that those of you reading this post know that you have more than three customer segments. There are companies out there with hundreds if not thousands of customer segments and each of those segments deserves to receive an experience and benefits tailored to their unique characteristics. The only way to do that is to gain a real-time 360° view of each customer so that when you observe an action that makes an individual eligible for a new series of offers or one specific promotion, you can send it to them right away. Fluid customer segments are key. Your customers are taking actions every day that should make them eligible/ineligible for certain content/offers/incentives, and it’s important to recognize that right away.
There are a few other reasons that companies are moving to a below the line style of program. By moving to this style of hidden program, brands are able to make customers feel like they’re anticipating their needs by serving up product recommendations, sending surprise and delight offers and rewarding non-transactional behaviors. The only way this below the line style of loyalty is possible is if a brand has a real-time 360° view of each customer, which in turn enables brands to drive different customer journeys and unlock offers/experiences without having to enroll in a loyalty program. There are a few companies doing this today and some of them will surprise you. Chick-Fil-A has a secret menu that can only be unlocked by completing specific actions, but the actions aren’t known to the public, so in order to be eligible to gain access to that menu, you have to prove your loyalty in multiple ways.
The loyalty landscape is changing. The consumer wants to experience a surprise and delight style of loyalty. If you’re going to compete, you have to find innovative ways to reward and incentivize all of your customers, not just the best ones.