Collaboration is the key to forging consumer loyalty

The value of loyalty programs – in which consumers gain points and upgrades from brands rewarding them for repeat business – is increasingly questionable, as consumers grow disengaged from a sea of indistinguishable programs designed around transactional brand relationships.

“The traditional customer loyalty scheme has become a ‘tired’ concept that needs to be reinvented,” notes Deloitte’s Customer Loyalty Consumer Review. The report found that most consumers cited good value for money and trust in a brand as driving their loyalty, with dedicated loyalty schemes a driver for just 26 per cent of consumers.

“Securing customers’ loyalty goes beyond having a loyalty program … getting the customer ‘experience’ right has become the differentiating factor for many successful business models. The right loyalty strategy should help to deliver that experience.”

Consumer concerns about unclear terms and conditions, and anxiety over the misuse of data, were highlighted by a 2019 report from the Australian Competition and Consumer Commission (ACCC). And loyalty programs are no longer the differentiator they once were, with Deloitte’s research finding consumers now expect to be rewarded for their loyalty as a routine part of their brand relationship.

“Loyalty is earned when there is an environment of trust and mutual respect,” notes Neil Balbirnie, global industry practice lead at Kognitiv, a B2B technology company steeped in loyalty management.

“Brands struggle for new ideas to generate reciprocal value and rarely focus on developing the relationship … they instead interact with consumers transaction by transaction, and don’t get the cumulative benefit of everything they do.”

Loyalty needs to be redefined, according to Balbirnie, and the loyalty experience recalibrated or reformulated. While many brands think their job is done once they solve a customer’s problem, that’s when the real, difficult work of building loyalty actually begins.

“The real opportunity is thinking beyond the immediate transaction or solving the initial problem,’’ says Balbirnie. ‘‘It’s the cumulative effect of ongoing interactions and genuinely getting to know the person you solved the problem for. As that conversation continues, and value gets built up for the consumer, new opportunities emerge and, over time, you will inevitably develop trust.”

COVID-19 has only prompted more consumers to take a long, hard look at which businesses have authentically stepped up in how they treat their employees and customers, and which add real, demonstrable value to their lives.

KPMG’s Julio Hernandez says in the firm’s 2020 customer experience report: “What was previously considered to be a great customer experience has no longer been good enough, and almost all businesses have been thrust into reorganising their approach to customers.”

The report found personalisation to be the strongest pillar driving loyalty in 19 of 27 markets, while integrity leads across six markets. Adds Balbirnie: “Aside from the acceleration towards digital interactions, what’s fascinating about COVID-19 is that it really shook up a consumer’s hierarchy of needs; particularly, a renewed focus on the brands and services that address our foundation needs around safety and security.

“The brands that focused on addressing their customer’s basic need like food and shelter have benefited tremendously. By extension, businesses that focus on serving the consumer and their communities, versus relentlessly selling, are standing out. That’s a profoundly different way of thinking and that requires a more collaborative and community-based approach.”

Additionally, we’re seeing a growing movement towards community and working together to create reciprocal value for everyone in that community. This community focus, Balbirnie notes, is a viable alternative because it enables a new approach called collaborative commerce. Working together in a collaborative way, organisations can pool resources, consumer data, insights and funds to build a more insightful, personalised and rewarding relationship with their consumers.

Rather than simplistic historical approaches to consumer personalisation, collaborative commerce favours serving consumers with more insightful and appropriate rewards by looking holistically at what they are trying to achieve, and how a ‘‘federation‘‘ or ‘‘ecosystem’’ of businesses can bring this value to the consumer collaboratively.

One example of a collaborative opportunity can be found in the enormous ecosystem surrounding mortgage lending and home buying. Consumers don’t just want a mortgage, Balbirnie says, they want a home. That reframing of how to serve a home buyer versus selling a mortgage creates more opportunity than would otherwise be found by focusing on a single transaction.

“If you think about all the different steps, brands and services a consumer has to go through, and deal with, along the home-buying journey why not simply collaborate across that entire spectrum? Remove that complexity and frustrations; that’s how trust and loyalty is earned. That’s the evolution we see in the market and the evolution consumers are demanding”

Data plays a crucial role in the process, and in particular zero-party data, or information that a consumer intentionally gives to a brand, but only if they recognise they will see a benefit.

“That is the fulcrum of earning trust, and why it’s so vital for consumers to see real value from the brands and businesses they interact with,’’ says Balbirnie.

While loyalty in its current manifestation will continue to spiral downwards in terms of consumer efficacy and engagement, he sees opportunity for brands embracing the loyalty value chain.

“Businesses and brands must seek to recalibrate their efforts, by working collaboratively, rather than combatively, and seeking to earn trust. Loyalty will flow from that.”