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Welcome to Loyalty 2.0: Because Loyalty 1.0 is no longer enough

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8th Aug 2011
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Anthony Monger takes a look at what’s changed since Loyalty 1.0, and what those numbers really mean.

With all this talk over the last few years of Loyalty 2.0 and its descendants, it is rare that anyone has actually stopped to question and define it.   In fact – shock, horror - a simple ‘Google define’ search brings up nothing.   How odd.
‘Web 2.0’ on the other hand; well we all know what that means, don’t we? Sure, it means websites that ‘do more stuff’ – simple. Another Google search confirms the functional advantages of a Web 2.0 approach over Web 1.0. Definitely… more stuff. 
Following the same logic, it stands to reason that Loyalty 2.0 (and upwards) must then do more stuff than Loyalty 1.0. 
So far so good. In order to differentiate, we need first to look at what Loyalty 1.0 did: it rewarded you for purchasing (or doing) something; it treated and rewarded everyone the same; and it probably rewarded you for doing something you were going to do anyway.
So what about Loyalty 2.0 and all the others then? This is where it gets awkward, as there seems to be no line in the sand where one version ends and another begins. Even as I write, some clever marketing company is probably dreaming up the next version – where are we up to now, 5.0? 6.0? Where can I get an upgrade?
The reason that it’s impossible to define 2.0, 3.0 and the rest is simply because when one comes out, someone else will claim to be the first Loyalty 5.0 agency and so on.
Loyalty as a strategic tool
For marketers and brand strategists, loyalty can no longer be seen merely as a short-term tactical (and mostly defensive) tool. Used this way alone, it will inevitably fail you in the medium-to-long term as the ‘halo effect’ wears off.  Now we’ve all moved on to more sophisticated strategies and technology, loyalty sits at the heart of an organisation’s strategy, spanning marketing, HR, IT and finance.
With the tools and services available brands can now…
  • Segment to a ‘market of one’ - Yes, John, 19, from Croydon, who likes skateboarding - you get a completely different reward to Margaret, 43 of Winchester, who likes gardening… and guess what? We’re going to talk to you differently too! And using dynamic segmentation tools, we know when you change your mind and preferences and can keep up to date with what’s right for you.
  • Think long-term - Online portals and catalogues are increasingly opening up the world of loyalty and reward, and if you’re working on a hosted flexible platform that you can adapt to your changing needs, so much the better. If you can add and evolve functionality as trends change and business opportunities arise, you can also avoid the inconvenience and cost of rebuilding in a couple of years when technology moves on.
  • Integrate - Think outside the old models - it’s not all about rewarding direct purchase. For example, you can use multichannel communications to reward your followers and fans for posting reviews and content about a product or service, or for inviting their friends to engage with your brand.
  • Act on insight - Organisations are getting better at collecting data from loyalty programmes, but many are still not doing anything decent with the data. An effective loyalty programme will allow you to harvest, clean and mine data to generate insight and formulate campaigns to up-sell and cross-sell within your segments, as well as attract new customers.
  • Keep it simple - Your audience wants to know: “What’s in it for me?” and “How do I get it?” If your programme is complicated or reads like an instruction manual, you’ll simply turn people off. So make it clear what you want them to do and how to do it – make it easy for them.   However obvious your claim and redemption process may seem to you, a fresh pair of eyes may be able to spot any potential sticking points or gaps. 
  • Engage your employees - Even if you get your offers right, with slick comms and accurate segmentation, if a customer walks into a shop to buy that pair of jeans and the customer experience is a let-down, then it all falls down. This is where mystery shopping CSI can help you: identifying strengths and weaknesses in service, and showing you just where recognition, incentives and learning programmes will bring you – and your customers - the most benefit.
  • Act 360 - Get this whole approach right and your customers won’t just stay loyal, they’ll engage with you more, buy more frequently (and at higher values), and recommend you more often, becoming your own brand soldiers. With this powerful army of advocates, you’ll find yourself back where it all started at Marketing 1.0, the most powerful version of all: ‘Word of mouth’.

Anthony Monger is a digital marketing consultant at Grass Roots.

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