Social Media: The Emerging Battle Ground for Customer Loyalty

by Paul Rudo on 19/12/11 at 7:16 pm

Across industries, loyalty programs have exhibited strong resilience, the ability to impact the bottom line and strong adaptability. Their attractiveness has increased in the light of recurring cycles of recession.

‘Extraordinary circumstances demand extraordinary actions’-financial uncertainties are forcing organizations to be more dynamic, flexible and nimble while dealing with their customers whose expectations are nothing less than customized and personalized service. Compelled to understand, meet and exceed customer expectations, organizations are battling for the ultimate weapon-knowledge.

‘Deployable information’ is so crucial to the survival and continuity of organizations that they almost border on the ‘numinous’. To obtain this revered item of competitive differentiation, organizations are either launching new loyalty programs or revamping existing ones. Adaptation seems to be a constant for loyalty programs.

Despite ubiquity and proven capabilities, many loyalty programs worldwide are unable to deliver primarily due to their inability to cope up with the velocity of customer attitude changes, standout in the clutter of promotional offers and lack of differentiation. Organizations are trying hard to identify customer priorities, values and behaviors better than their competitors thereby shaping irresistible value propositions. With new entrants willing play for broke just to gain customer attention, the instinct is to transform loyalty programs into dynamic, fit-for purpose and competitive entities constantly fueled by information.

Advancing technologies are continuing to enable organizations to launch strategic loyalty strike capabilities. The ability to accumulate, process and deploy information from and via multiple sources including social media and mobile technology is enabling better engagement with customers. Connecting directly with customers is important to cultivate true, rational and sustainable loyalty. Loyalty programs are becoming more cerebral in nature with increasing usage of technology.

Analysts are burning the midnight oil to predict how tomorrow’s loyalty programs would evolve. Time is a dynamic concept, not a static one making forecasting a difficult task. However, most agree that the crucial factor that will change customer relationships and loyalty programs is SOCIAL MEDIA and this will be a main focus for organizations in 2012.

SOCIAL MEDIA:

Twitter, Facebook, Google + etc, have redrawn maps and divided the world into multiple communities. These have defied the age-old concept of segments and become nothing but a collation of fragments. Social media is also a theater of contradictions. In a public display of split-personality, participants seem to ‘scatter’ personal information on ‘social sites’ while fighting vehemently to protect privacy elsewhere. Easy access to these sites via smart phones 24×7 has ensured increased participation. This is the new exchange for information.

The reason for the stratospheric growth of social media lies in its underpinnings: inherent human need for relationships. Its power may be gauged from the fact that it has ushered in political revolutions in countries hitherto ruled by dictators. Its pervasiveness can arouse diametrically opposite feelings-that of ecstasy and agony. While the dictator fears it, the marketer loves it. Love it, hate it, social media is here to stay.

Time will ensure that in the future, all transactions will become social commerce as most purchases will be dependent on recommendations and opinions of fellow netizens. Shopping will become a social experience triggering a cycle of communication from prospecting, experiencing and review (opinions and recommendations) of every item purchased. Organizations will attempt to create a monolithic ‘social strategy’ for multiple platforms that can serve a core marketing strategy. The deciphering of constantly emerging data is indeed a challenge as organizations need to be able to bring little pieces of information from scraps of opinions and create powerful collages.

Apex players on social media like Twitter and Facebook represent the voice of the customer and proven to be more powerful than customer satisfaction surveys. Information emanating here helps in monitoring peoples’ thoughts about a brand and presents the opportunity to identify and enable course correction in a loyalty program by soliciting constructive feedback.

The future of loyalty lies in tighter integration between social media and technology. Contemporary technology is equipped to adapt to customer requirements dynamics and helps in pushing the envelope via new and radical loyalty program designs.

Southwest Airlines, Jetblue, Whole Foods and Zappos may be credited with creatively using social media as a loyalty building tool. Social media enables the initiation of dialogue with customers and helps in enriching and completing customer lifecycle and experience.

Technology enables the integration of communication with customers into structured loyalty programs by enticing input of positive experiences thereby generating powerful branding. It is expected that online platforms will be embedded with integrated widgets that will enable direct communication with homogenous communities comprising cohorts, enable members to seek clarity and send feedback almost instantly.

FRAGMENTATION:

As discussed above, communities are parts of a sum that presents tempting synergies. While people can be part of various communities, their choices are powerful simply because of their voluntary nature. Organizations can find not only segments but interest-specific fragments on the social domain which they can tap. The challenge is to tailor-make events and promotions appealing to members of individual communities. Even communication strategy will have to shift from broadcasting to authentic narrowcasting.

While this will indeed strain resources, the benefits will far outweigh investments. Loyalty programs will start identifying and creating fragments and customize communications to reap better participation from its members.

CO-CREATION OF OFFERS & PROMOTIONS:

By engaging customer fragments, organizations will be able to leverage the power of obtaining almost real time feedback on their preferences. This will result in co-creation of offers and promotions by the organization and its target customers. Marketers will not need to search in the dark seeking appropriate promotions. Many organizations will focus energies in using interactive collaborations with social networks to offer tailored offers and notifications of opportunities real time. This will improve the efficacy of online campaigns and promotions.

CONSOLIDATION OF PARTNER COALITIONS:

Emerging objectives of tomorrow’s loyalty program would resonate with the Olympic Games motto-Altius, Citius, Fortius-Faster (accruals), Higher (redemptions) and Stronger (revenues). Wider exposure to social media also means that members are getting impatient and seek greater options to accrue and redeem.

Not willing to be chained to a few large brands, they will also seek the convenience of smaller brands in a large heterogeneous coalition. The scramble will be to increase the value proposition, program brand equity, geographical utility apart from revenues and profitability. Needless to say that coalition model tends to give better returns to the loyalty program sponsor.

Contemporary new-generation technology platforms also enable partner boarding relatively easier, automate processes such as contract management, promotion management and partner performance analytics.

In summary, loyalty programs will become increasingly social in 2012 and beyond. The digital migration is gaining traction with organizations realizing the benefits of tracking campaigns, loyalty programs and customer satisfaction in real time. Organizational strategies will integrate social marketing into their marketing plans.

Increasing popularity of social networking has ensured that customer data extends well beyond traditional sources forcing organizations to constantly adapt their methods of capturing, integrating, managing, analyzing as well as applying insights about their customers.

The bold strategy of many organizations to spin-off their loyalty programs as separate profit centers vouch for their financial viability. Loyalty metrics will increasingly get linked to business outcomes such as shareholder returns, sales/margin, customer retention/churn, wallet/ticket size, market share, brand value, goodwill etc. Loyalty will increasingly become a key component of brand strategy and be considered an enabler of consistent brand experience with a compelling value proposition. Social media will continue to be the biggest facilitator of effective interpersonal communication between the brand and the member.

Typical loyalty programs are designed with singular motive-drive frequent purchases rather then create strong and deep relationship with members. In 2012, effective redesign of programs will see a paradigm shift in motives-from maximizing purchases to enriching brand equity and customer satisfaction.