Guest column by Jason Lark, managing director, Celerity
In exchange for occasional perks – including discounts, exclusive brand access or advanced notice on sales – customers will regularly and gladly surrender their personal information to brands. In today’s data-led world, this information is like gold dust and the key to brand advocacy: small wonder that Amazon, which once lacked credibility in the jewellery industry, has slowly become a major player in the space.
But then the General Data Protection Regulation – the European Union’s greatest shake up in privacy legislation for years – came into full effect, and everything changed. The new law redefines how and to what extent the personal information of EU citizens must be protected and is applicable to all organisations – wherever they are in the world, if dealing with European customers.
With the post-GDPR dust now settled, it’s as good time as any to reflect on what the new loyalty gold standard looks like for jewellery retailers.
Loyalty 1.0 – points and rewards
At this level, a common one for many brands, there’s no end user differentiation. All customers get the same ‘earn and burn’ opportunities (customers are rewarded for a certain number of visits or spend). The ‘earn’ could equate to discounts, early entry to sales, or early access to new jewellery ranges. The main limitation to 1.0 is that it typically only rewards you once you’ve spent money with a brand, so is driven purely by transactions.
Unfortunately, this points system is also easy for consumers to forget when it comes to how many points they have, when they expire and what exactly they get for them.
Loyalty 2.0 – individualised marketing
Loyalty 2.0 is defined by its use of multiple channels, for example an app and a website. But the separate channels are just that – separate. They don’t talk to each other, and the loyalty programme works in isolation. All loyalty is points-based, and again the points are based only on the transactions that consumers have with the brand.
More advanced loyalty initiatives such as gamification may play a role in loyalty 2.0, but they are likely generic in nature. For example, the brand may proactively encourage customers to spend their loyalty points, keeping front of mind, but the reward or benefit for doing so may be generic and impersonal.
We also find loyalty 2.0 is indicative of limited channel potential – for example, a jeweller might use direct mail (DM) as a marketing medium, but they won’t encourage sharing of the programme on other channels because of the siloed structure of the loyalty programme.
This is where loyalty 2.0 falls down. Direct mail can be one of the most expensive channels a brand uses and therefore they need to maximise return on investment (ROI) from mailers through interaction encouragement (e.g. via social sharing). Then they can increase ROI from the consumer advocacy.
Loyalty 3.0 – engaging customers
In stark contrast to loyalty 2.0, loyalty 3.0 relies on two-way cross channel communications. Again, in more practical terms, this would normally mean a customer uses a social media platform to initiate contact with a brand that then responds via another channel. A more common example is the customer starting the communication with a complaint – maybe a necklace is defective – then, the next time they log into their account, they have discounts on future purchases waiting for them as compensation.
One-to-one segmentation is required for loyalty 3.0, but this comes with technical challenges and requires data integration to form a Single Customer View (SCV) of every customer. Brands often struggle with too many data ‘buckets’ within their organisations – and have particular trouble pulling information from online and offline ‘buckets’ to build their SCVs.
Data layer products ease this headache as they are designed to pull data from different systems; bigger brands invest in data management platforms specifically to address this issue. These platforms also help with data latency, which is a must if you’re aspiring to loyalty 3.0. You cannot work with out of date customer data, as purchasing behaviour often changes – you need a dynamic system that updates customer preferences as the customer updates them in real time.
Rewarding engagement and interaction is required for loyalty 3.0. Rewarding for interaction is about valuing their time as much as valuing their money. If they spend time on your channels then you should identify, recognise and reward them. You can benefit from the additional data and insight created by engagement with your brand long before a purchase, and brands should be using loyalty to encouraging more meaningful interactions earlier in the lifecycle. Looking beyond jewellery, Abercrombie & Fitch is an example of a brand that do this well – providing rewards for app interaction, friend referral and profile completion.
Personalised rewards are also required for loyalty 3.0. A good example of this in action is a cosmetics company that built a preference centre enabling customers to identify their favourite lipstick colour, hair colour etc. The brand gets a fantastic marketing resource and their customers get personalised rewards in the shape of hair products and cosmetics ideal for them. In a post-GDPR world where it’s more difficult than ever to collect and store data, brands can win the loyalty battle by offering hyper personalised rewards. Data is a transaction, but consumers are still happy to part with it if it enhances their brand experience and personally benefits them.
The future – loyalty 4.0
A lot of loyalty programmes are about points systems designed to encourage users to purchase again – so where next? What does loyalty 4.0 look like? Ultimately, it’ll be defined by individualisation, not personalisation.
Personalisation is focused on combining two or three data sets, whereas individualisation is about combining hundreds of them. Loyalty 4.0 is entirely individualised: all data will be correctly and legitimately captured, and every user journey personalised. But ‘loyalty’ is not an all or nothing scenario, and huge gains can be made as jewellery brands level up.