designing for loyalty in a digital world

Designing for loyalty in a digital world

EXECUTIVE SUMMARY

Loyalty is not for saleConventional points-based loyalty programs are failing to build lasting brand

love in the digital age. Rapidly changing consumer expectations are pushing brands

to re-think how they engage and impress their audiences to keep them coming back.

Traditional loyalty programs have offered consumers rewards in exchange for their personal shopping data since the mid-1990s. Although this model has been widely adopted, with the average

American household enrolled in 29 programs, over time a lack of differentiation between points-based schemes has resulted in fading consumer engagement1. In fact, research shows that traditional loyalty scheme members are actually less loyal than non-members!2.

With the proliferation of user experience centered businesses like Uber, Netflix and Amazon, consumers have come to rate

convenience and ease of use as highly, if not higher, than cost-saving.

Our research explores how brands are driving consumers’ loyalty by saving them time, predicting their needs and tailoring

incentives to their preferences. We outline how the intelligent use of technology and user-centric design can offer greater value to consumers in-store and out compared to the traditional transactional rewards model.

1 Colloquy Census, 2015 2 TABS Group Consumer Value Study, 2015

RESEARCH RESULTS

There’s more to loyalty than points

Through our research, we found that loyalty programs fall into four distinct

categories, assessed across functional features and emotional elements.

We analyzed the 40 leading loyalty programs from some of the most admired brands in the US and the UK. We found

that best-in-class programs were designed to make the purchase experience easier, quicker, more personalized, and more enjoyable. Schemes focused solely on points and discounts failed to add the same amount of value to consumers and therefore are less affective at driving loyalty.

NO FRILLS REWARDS

Just the points Offers rewards and discounts only, with no

focus on the consumer experience.

UTILITARIAN

Saving time and effort Designed to make the consumer’s

purchasing journey easier but fails to create a personal connection.

CONNECTOR

Meaningful engagement Appeals to the emotional side of consumers, personalizing the experience and delighting

them, but doesn’t make the journey any quicker or easier.

HOLISTIC

Thinking about the whole experience Uses innovative digital functionality to remove friction and build personal connections with

consumers throughout the journey.

FUN

CTI

ON

AL

EMOTIONAL

LOW

HIG

H

LOW HIGH

REPORT:

Designing for loyalty in a digital world

DEFINITION

Brand loyalty Consistently choosing to purchase from the same brand rather than competing brands.

Traditional loyalty programs don’t cut it In a world of instant gratification, traditional programs don’t deliver.

Since the mid 1990’s, traditional points-based loyalty programs have rewarded consumers with points and discounts in exchange for their purchase data and loyalty. Consumers are failing to see value in this exchange anymore.

Research shows that there are an estimated £5.7bn worth of unclaimed points across the top 10 loyalty programs in the UK. Points take a long time to earn, are difficult to redeem and rarely provide a sufficient return on the effort made to collect them, so consumers aren’t bothering anymore.

Traditional loyalty program

The Telegraph, 2015

Estimated worth of unclaimed points from the top 10 loyalty programs in the UK:

£5.7bn

AWARENESS

Consumer receives points or rewards

post-purchase

PLANNING PURCHASE USE

We have seen three major shifts in consumer behavior that are impacting brand loyalty.

TREND 1

Consumers are spoiled for choiceConsumers have more choice across online and offline channels as new brands proliferate and consumers have access to every store in the world through their smartphones. Digital marketplaces and platforms like Amazon, Etsy, Pinterest, and Uber Eats provide more exposure to choice, resulting in decreasing consumer loyalty to any one brand3.

Two thirds of consumers say that the number of companies or brands they consider when making purchase decisions has increased significantly compared with 10 years ago4. As a result, research shows that 90% of the largest brands are declining in market share5.

3 AdAge, Top 100 CPG Brands Mostly Lost Sales and Share in Past Year, 2015 4 Accenture, Customer 2020 5 Catalina Marketing Report / IRI Worldwide, 2015

TREND 2

Expectations are higherBrands need to focus on convenience as much as price. In fact 86% of consumers are willing to pay more for a better consumer experience6. Younger demographics especially are used to getting things on-demand, with 56% of consumers aged 18-34 expecting a same-day delivery option from retailers7.

If companies don’t move faster, consumers will move on. Nearly two-thirds say they use online channels across sales, marketing, and service because of their speed and convenience, while just over half say they have become more impatient and want their buying decision process to be fast with minimal effort8.

6 Oracle CEI Survey, 2011 7 Trustev, 2015 8 Accenture, Customer 2020

TREND 3

Memorable experiences matter most77% of Millennials prefer a cool experience over a cool product9.

As consumers become more digitally savvy and increasingly barraged with choices, standing out with a captivating and memorable consumer experience can be a compelling advantage. Competitive prices alone are not enough to entice consumers to keep coming back. It’s about the whole consumer journey and making each interaction a moment of delight and authentic engagement.

9 Deep Focus, 2015

So which programs have adapted effectively to the new era?

RESEARCH

Our methodology In our research, we assessed 40 brands who have loyalty programs active in the UK or US, and who are ranked on any of the Superbrands, Fortune, Forbes or Interbrand lists of most valuable or admired brands.

We evaluated these loyalty programs across two dimensions of consumer value: functional and emotional. The functional factors focused on how the loyalty programs were designed to take friction out of

the consumer purchase experience. The emotional factors focused on how the loyalty programs were designed to bring the consumer closer to the brand with features that delight or surprise them.

We scored brand programs on the degree to which they addressed each factor through a heuristic scoring system.

FUNCTIONAL FACTORS EMOTIONAL FACTORS

Faster: e.g. shorter waiting time, no queues, faster delivery

Special: Delighting the consumer with special moments or surprises

We assessed the loyalty programs across six factors

Purpose: The loyalty program closely ties to the brand purpose, extends it, or complements it in a meaningful way

Personal: Based on data, give consumers personalised experiences and recommendations

New functionality: Enabling you to do new things that add value to the consumer experience

Simpler: e.g. use digital to enable easier steps in the journey, i.e. use smartphone functionality to complete actions

RESULTS

Loyalty programs are offering more than discount points NO FRILLS REWARDS

Just the points Offers rewards and discounts only,

with no focus on the consumer experience.

Through our research, we found that loyalty programs fall into four distinct categories.

UTILITARIAN Saving time and effort

Designed to make the consumer’s purchasing journey easier but fails to create a personal connection.

CONNECTOR Meaningful engagement

Appeals to the emotional side of consumers, personalizing the

experience and delighting them but falls short on making the journey any

quicker or easier.

HOLISTIC Thinking about the whole

experience Uses innovative ideas to remove

friction and build personal connections with consumers throughout the

journey.

FUN

CTI

ON

AL

EMOTIONAL

LOW

HIG

H

LOW HIGH

No Frills RewardsLike the traditional coffee-shop stamp cards, these programs allow returning consumers to accrue points and discounts through repeat purchases. These programs are easy to sign up to and always free, but provide limited differentiation and don’t do much to improve the overall consumer experience.

O2

Whole Foods

Nordstrom

M&S

Coca-Cola

Wyndham

Nando’s

Avios

MorrisonsMcDonald’s

Tesco

TRANSACTIONAL

TRADITIONAL

ONE STEP OF THE JOURNEY

Sainsbury’s

KFC

Southwest Airlines

CostaBoots

Subway

UtilitariansUtilitarians are the programs that focus on improving the experience from the functional side. While many activities are made easier or faster, the loyalty programs tend to miss the personal touch of the brand that could differentiate them from competitors. These programs focus on features that are easy to copy. They could improve by doing more to delight consumers or focus on building long-term relationships.

CVSAccorHotels

FASTER

EASIER

GENERIC

Delta Airlines

ConnectorsConnectors focus on putting their brand’s imprint on their loyalty program and on making the consumer feel special. They provide additional value to the consumer through personalized offers and exclusive rewards (e.g. early access to sales) that can forge stronger emotional bonds by delighting the consumer. These programs could do more to embrace digital channels and focus on making the purchase experience quicker and easier.

IKEA

Mothercare

Lego

PERSONAL

PURPOSE

SPECIAL

Waitrose

Pampers

Lancome

Virgin RED

Asos

MEANINGFUL REWARDS

HolisticHolistic programs score highly both on functional and emotional factors. These programs give the consumer something that makes the overall experience unique compared to competitors and aligns closely to what the brand stands for. They are innovative and foster loyalty with consumers.

Amazon

Starbucks

Walgreens

Pepsi

Hilton

Marriott

Sephora

Target

American Express

John Lewis NikeCONNECTED TO BRAND

PURPOSE

PART OF PEOPLE’S HABITS

Most loyalty programs are moving beyond monetary rewards

AmazonStarbucks

WalgreensCVS

Pepsi

Hilton

MarriottBritish Airways

Sephora

Nike

AccorHotels

TargetAmerican Express

Southwest Airlines

Lancome

O2

Whole Foods

Sainsbury’s

KFC

IKEA

MothercareLegoNordstrom

M&S

Coca-Cola

Costa

Waitrose

Virgin RED

Wyndham

BootsSubway

Nando’sAvios

FUN

CTI

ON

AL

EMOTIONAL

John Lewis

Morrisons

Delta Airlines

Pampers

AsosMcDonald’sTesco

UTILITARIANS HOLISTIC

NO FRILLS REWARDS CONNECTORS

We believe Holistic Programs are the most effective at driving loyalty. We have outlined three best-in-class case studies.

CASE STUDY

StarbucksStarbucks differentiates from other coffee houses because it considers the context of buying their product: being on the go. Its loyalty program is designed for the urban tech-savvy consumer who likes the ease of paying through the app and skipping the queue.

16 million active users and 20% of revenue exchanged through the app.

Receive points “The Star Rewards are almost as addictive as

the coffee itself!” - Robert H. app review

Automated journey steps / easier interactions

Check your balance and add funds to your

Starbucks Card (with debit/credit card or

Apple Pay).

Save waiting time in the queue

Starbucks identified a key pain point in the experience of getting coffee on the go: rush hour queues. With the

Starbucks app, you can order and pay before

you step into the shop saving time on queuing.

AWARENESS PLANNING PURCHASE USE

LOYALTY

80m out of 104m members are active.

CASE STUDY

WalgreensPharmacist Walgreens uses its loyalty program to keep their brand promise front of mind even after consumers have left their stores. The loyalty app integrates with users’ Fitbits and rewards them based on how much exercise they do. The app also has a ‘pill reminder’ tool that helps consumers keep on top of their medications and prescriptions.

Simplified journey Through pill reminders, Walgreens

makes it easier for their consumers to stay on top of their

medication.

Connection to brand purpose The purpose of Walgreens is to

enhance health. With their loyalty program, consumers collect points with healthy behavior, tracked by their Fitbit. This connects them to Walgreens in an emotional sense because they share a purpose -

improving their health.

Save time Get reminders and refill

prescriptions through the in-app label scanner,

saving time in-store.


LOYALTY

63m Amazon Prime members.

CASE STUDY

Amazon PrimeOnline retailer Amazon Prime flips the loyalty program premise on its head by asking its consumers to pay for it. In return they provide a bundle of valuable services from convenient next day delivery to instant access to amazing film and original TV series content.

Image sources http://www.broadbandtvnews.com/2016/11/08/amazon-increases-amazon-prime-price-germany/

Faster Free two-day shipping on millions of products

with no minimum purchase.

Rewards Free access to Amazon Prime video on demand, borrowing books from

the Kindle Owners’ Lending Library,

unlimited photo storage.

Connection to brand purpose

The purpose of Amazon is to build a place where people find and discover

anything they might want to buy online. All these Amazon Prime perks enable this to

happen.

Special Members get 30

minutes early access to Lightning Deals.


LOYALTY

Eight things to remember when designing your loyalty program

Eight lessons for growing loyalty

Last year, 89% of companies claimed that consumer experience will be their primary basis for competitive advantage (Gartner, 2016).

By focusing on understanding the consumer and designing a loyalty program that provides an enhanced experience, brands can build more long-term relationships. When building a loyalty program, it’s not only about making sure that interactions work smoothly and consistently from start to finish - it’s about making the whole

experience that much better than the competition, so the consumer no longer needs to consider where to make their next purchase.

Starbucks’ loyalty program keeps their consumers coming back by making the whole experience better from ordering your coffee in

advance and skipping the queue, to trying a Butterscotch Brûlée Latte before anyone else.

1 Focus on the experience

At the heart of each loyalty program is the collection of consumer data for the benefit of the brand. But many brands fail to design their

programs in a way that maximizes the benefits for the consumer as well. If a service gets to know a consumer better after each use, and adapts the products to their needs in the process, it becomes less attractive for the consumer to switch to another brand.

Ultimately, data should be used to make the consumer feel special - Asos A-List surprises you with 10% off on your birthday - and even more if you are a higher-tier consumer.

Remembering a user’s preferences and past behavior can help not

only to design a great experience, but to anticipate their needs and respond in the best way possible.

2 Use data to personalize

3 4Eight lessons for growing loyalty

Traditional programs often expect consumers to fill in long forms to order a loyalty card, and understand complicated points systems to figure out how much money they are saving. The key

is to make the whole experience smooth sailing for the consumer. Enrol them automatically with their first order. Avoid complicated points systems. Don’t make them work hard to prove they are a loyal consumer, so that they feel truly special when you notice their love for your brand and reward them.

At booking.com, travellers who book through the site six times are automatically enrolled on their .genius program which not only gives a 10% discount to hotels that are part of the program, but also makes the consumer feel special by giving them perks

like a free drink upon arrival and free airport shuttles.

Make it easy

Services that become more valuable the more you use them, such as storing extensive sets of preferences and data, can be effective at dissuading consumers from moving to a competitor. Similarly, by

solving recurring pain points in their journey, brands give consumers a strong reason to stay loyal. Amazon often wins because consumers never have to re-enter data such as frequently ordered items, payment details or shipping preferences. But it can be taken further through anticipatory design - a combination of data analysis

and user-centric design.

Some of the most successful platforms do this really well, such as Spotify and Pinterest because they hold so much information on consumer preferences, they are making it extremely difficult for their

loyal users to even consider going somewhere else, where they would have to build their music or pin libraries from scratch.

Make it hard to walk away


The strongest loyalty programs create network effects when consumers engage with your product, and enable the most loyal consumers to become brand ambassadors. This can be achieved by

rewarding consumers for referral, social media promotion or other types of engagement. Consumers are increasingly used to being an active part of a product, rather than passive users, through their regular use of social media.

Some brands have succeeded in emulating TripAdvisor’s community contributor model. TripAdvisor users are encouraged to review restaurants and hotels on the site to gain points, reach new levels and show off their expertise with unique and fun badges. UK telco TalkTalk incentivizes consumers to provide answers to other

consumers’ questions through points and badges.

5 Make consumers work for you

Loyalty programs should be an extension of the brand promise, strengthening what the brand stands for. If it doesn’t

feel like a natural fit, it won’t make sense to the consumer.

Walgreens, for example, integrates its brand with people’s health behavior by rewarding them through their Fitbits, and relieving key frictions in the consumer journey through pill

reminders and easier prescription refills. By rewarding them for their healthy choices, Walgreens reminds its consumers of its brand throughout the day, even when they’re not directly consuming.

6 Extend your brand proposition


Consumers are becoming increasingly concerned about whom they share their data with. The value exchange needs to be transparent and communicated clearly to the user, so they are

fully aware of what they’re entering into. In addition, data security should be a top priority for any brand launching a personalized loyalty program. Build functionality that allows consumers to pick and choose what data they share.

During recent years Facebook has moved power to their users by allowing them to choose what information to share with third party apps. This type of functionality addresses privacy concerns, and should be considered in loyalty programs to clearly demonstrate to the consumer the value exchange

between shared data and program benefits.

7 Show transparency to gain trust

Technology continues to re-shape and provide more and more exciting options for brands and how they can interact, build

experiences and sell to their consumers. However this ever-changing environment makes it increasingly difficult for brands to keep up with their rising expectations.

Understanding the changing landscape of new technology and

how they integrate into consumers’ every-day lives (such as voice-based services like Amazon Echo and Google Home) is essential for brands that want to provide a consistent experience, whatever the channel. Brands that recognize this and keep their finger on the pulse of leading tech trends will

have the advantage of crafting future-proof experiences.

8 Let technology lead the way

INVISIBLE INTERFACES

Voice driven interactions remove friction and make it easier for

users to engage with products.

ANTICIPATORY DESIGN

Automating the whole task of buying (e.g. through subscriptions) or simplifying choice

through personalized search results.

PLATFORMS AS PRODUCTS

The future of loyalty is making people part of your brand,

allowing for network effects.

NO-FUSS DELIVERY

Driverless transport makes delivery a no brainer, making anything

accessible to consumers instantly.

CONNECTED SERVICES

Through open APIs, services integrate with each other through a central AI (e.g. Google Home) and create one

holistic, frictionless experience.Image sources: https://www.amazon.co.uk/echo https://nest.com http://venturebeat.com

Stepping into the futureTo determine the future of loyalty, we need to understand the future of technology and design. To inspire you, we identified key trends for 2020 that can help design an engaging consumer experience that will deepen your brand’s relationship with your consumers.

Thank you