Returning the favor Part 3: Collaborating in the loyalty market
Loyalty programs can be a powerful tool for building customer loyalty. Our blog series focuses on current trends and strategies in the loyalty market, and where brands can best start to build a successful loyalty offering for their customers.
One promising approach for brands to compete with generic loyalty programs is to build collaborations and even complete loyalty ecosystems. This allows them to combine a tight focus on customer needs with broad reach.
02 Jun 2023
Dinara Rosow & Tristan Ticken
Build your own loyalty programs through technology partnerships
Technology partnerships – especially in e-commerce – are making it easier for smaller retailers and brands to build and customize their own loyalty programs. E-commerce infrastructure providers such as Shopify offer a range of different applications that can be used to set up a rewards program in no time. Retailers and brands also have access to rich data and analytics on customer behavior and can further optimize their marketing efforts with the campaign tools offered.
The pioneer in loyalty ecosystems: Miles & More
A prominent example of a loyalty ecosystem is Miles & More, which offers its members a complementary network of partners covering all aspects of travel. From flights to car rentals to hotel bookings, the program provides members – each covered by a partner within the network – with almost everything they need to travel. Miles can be earned and redeemed with all partners. The result is a holistic offering that addresses the full range of customer needs around a specific theme and delivers offers that are relevant to them.
The opportunity for greater reach and relevance
Loyalty ecosystems offer several benefits not only to consumers, but also to participating partners. On the one hand, cooperation with other providers increases the reach of their own offers. Loyalty ecosystems therefore enable providers to become competitive at scale with their loyalty offerings compared to generic bonus programs such as Payback.
Where customers have more incentive to use the loyalty program, its relevance increases. In addition, ecosystems are much better at capturing and responding to actual customer behavior and habits.
Good ecosystems are designed to complement each other
In a loyalty ecosystem, it is not only the offers that should complement each other, but also the touch points with the participating customers. Whether e-commerce, brick-and-mortar, or different engagement opportunities per brand. In a well-designed ecosystem, interaction and access options interlock and are positioned along real customer behavior. A positive side effect: more customer touchpoints and, in the best case, a higher engagement rate across the entire partner network lead to a larger data base for the individual provider and offer better insights into customer behavior.
Collaborations: Greater than the sum of their parts
While building loyalty ecosystems and developing a holistic, well-coordinated offering can be complex, it is well worth the effort. In the long run, these ecosystems not only improve customer loyalty for all parties involved, but also increase customer lifetime value. Thematically aligned ecosystems can offer customers a balance of diverse yet focused redemption opportunities, which can increase the appeal of individual offers within the program.
The fourth and final part of the Loyalty Market blog series provides a comprehensive overview of Web3 technology as an opportunity space for developing a successful loyalty offering. It's also worth taking a look at the other posts on this topic. Part 1 provides a brief, up-to-date overview of the loyalty market. In the second part of the loyalty series, we took a look at the starting points for customer experience in terms of end-customer value.
The ultimate discipline: building a community
It is far more difficult, but all the more powerful for brand loyalty, to use intrinsic incentives to build a community around your brand. In Lululemon's case, they built an interest-based community that shared workout routines and took advantage of the exercise classes they offered. Belonging to a group of like-minded individuals who enjoy exclusive brand benefits, as well as integrating the program into their personal exercise routines, provides a value-based customer proposition for which participants are willing to pay a fixed annual fee.
Ultimately, any brand is likely to prefer a positive emotional relationship to a purely monetary, and therefore easily replaceable, cash back commitment. By focusing on customer and community experiences rather than price benefits as the primary end-user benefit, loyalty programs can create a genuine, emotional connection to the brand that cannot be exchanged for better benefits in the competitor's program.
The next part focuses on the potential of ecosystem approaches to loyalty program implementation. The fourth part provides an in-depth overview of Web3 technology as an opportunity space for developing a successful loyalty offering.
Header: Damien Tupinier via Unsplash