The Future of Loyalty: Designing Brand Experiences that Elevate, Enhance and Engage
These days, it’s not enough to offer a simple points-based program to entice customers to stay. Personalised experiences, community spirit and shared values all contribute to creating a culture of belonging that is far more rewarding than points can be.
There was always something rather undignified about coffee-shop loyalty schemes of the past: rifling through your wallet to produce a dog-eared piece of card in order to receive a rubber stamp from a harried barista. Fortunately, most loyalty programmes are mobile-first now – a quick swipe of an iPhone meaning that not only do you get your sixth coffee free, but Starbucks now knows exactly how many times a month you buy a flat white, which of its locations you frequent, your name, age, email address, and what you like to eat for lunch.... But at least it’s friction-free, right?
When it comes to brand loyalty schemes, today’s consumers expect there to be an exchange of personal data in the process. But they have higher expectations for personalisation, benefits, and experiential rewards.
In the wake of the pandemic, many industries are rightly concerned about how best to protect their profit margins and retain their existing customers. Harnessing consumer data to make the customer experience more engaging and personal is key – but brands must consider four angles when developing successful loyalty schemes in 2021 and beyond. Consumers are mainly concerned about:
Rational Benefits: Am I getting a decent return on the data I’m sharing?
Emotional Benefits: Am I receiving truly memorable experiences?
Social/Community Benefits: Is there a community I can feel like I’m part of?
Ethical Benefits: Is the brand aligned with my personal values? Does it make me feel good to be associated with them?
As an experience design consultancy, we look holistically at all the different ways brands interact with their consumers. We’re fascinated by what makes a customer loyal and how brands can shape their offerings to enhance this loyalty. During our research, we happened upon some interesting insights around Cult Behaviour, as well as some more practical analysis on the future of loyalty in hospitality, retail and lifestyle.
Here’s what we found to be shaping the future of loyalty in 2021 and beyond.
Points Are Impersonal
Sure, receiving a percentage off your next booking or purchase is nice. But more tailored perks, like exclusive events, early access or personalised products, are memorable. Programs that balance monetary benefits with experiential offerings provide value by appealing to the customer’s heart, as well as their head.
According to insights from the Data & Marketing Association (DMA), a third of customers (34%), especially millennials and the Gen Z cohort, are looking for more bespoke benefits.
In the luxury hospitality space, some groups, including Ritz-Carlton, Shangri-La, and Waldorf Astoria offer points-based schemes. But other groups, including Aman, Mandarin Oriental and Four Seasons, focus on ‘recognition’ over rewards.
Four Seasons builds loyalty through personalisation, relying on its digital services, particularly its app, for comprehensive data capture. It aims to anticipate and respond to guests' very specific and customised needs.
The Four Seasons app allows guests to seamlessly ‘curate’ every moment of their stay, from ordering newspapers and room service to booking spa treatments. Perhaps more exciting is the ‘chat’ feature, which enables guests to communicate live with e-concierge teams at more than 100 locations before, during and after their stay.
Things could be about to change at Four Seasons, though, with the group hinting at a possible loyalty program in December last year. An email signed from the brand’s president of global operations, Christian H. Clerc, promised subscribers: “in early January 2021, we will be introducing new Elite benefits to enrich your experience, wherever you travel with us.”
With business travel on an extended hiatus, this might be a step towards capturing the loyalty of leisure travellers.
Like The Four Seasons, Mandarin Oriental has historically been opposed to points, with its recognition scheme being less about earning status, and more about rewarding engaged travellers.
“Fans of MO” is free to sign up for (so far), and elevates guests’ experiences by offering a choice of ‘privileges’ when booking online. Rather than accruing points that can be put towards free nights, the focus is on enhancing guests’ stays –– so the brand can capture and measure valuable preference and travel data among its customers.
Partner benefits extend perks beyond the hotel walls: for example, free shipping with Farfetch or a complimentary gift when shopping with Jimmy Choo. These perks are specifically designed to evolve over time, to keep the service offering fresh and engaging.
Ecosystems Are on the Rise
In September last year, Mandarin Oriental Hotel Group and The Oberoi Group announced a ‘long-term strategic alliance’, designed to appeal to loyal guests of both brands. The groups’ portfolios are geographically complementary, so the alliance will expand the reach and scale of both groups across the globe, without any sign of a merger at this stage.
Members of the brands’ respective recognition programmes “will receive superior recognition, exclusive experiences and offers, as well as invitations to bespoke events” at over 50 luxury hotels globally. Together, the two brands will also work on innovation, and sustainability initiatives; as well as upskilling staff with learning and development programmes.
Brands who understand the space they own –– and the spaces they don't –– can diversify their offering with strategic partnerships that cater to different audience needs and moments.
But what about partnerships across sectors?
We’re all familiar with Amazon, and its in-house loyalty ecosystem (Prime, with its fast delivery, video streaming and other rational benefits).
In order to promote loyalty –– and growth -- brands are seeking to emulate the Amazon effect. We’re seeing a rise in loyalty ecosystems, with brands creating programmes of complementary products, services, and experiences. McKinsey expects some brands to go further, with multiple companies across sectors developing joint loyalty schemes around a unifying customer value proposition.
“Even as companies move toward connected offerings, it will be hard for any one player to replicate the size and scale of an ecosystem like Prime’s in any one sector, let alone across sectors. As a result, companies will need to think creatively and strategically about partnerships across categories, including with would-be competitors.”
We can look to China to see how this space is evolving. Alibaba’s 88VIP offers an array of experiential benefits through an ecosystem of partner rewards.
88VIPs receive memberships to Alibaba-owned platforms including video streaming, travel and food delivery, but it also partners with external brands, including Marriott and its Bonvoy rewards scheme.
88VIP members are instantly upgraded to Marriott’s Gold Elite status, with the option to become Platinum Elite once they stay eight nights in four consecutive months. Marriott said that 88VIP members have made twice as many bookings than non-88VIPs since introducing the partnership. These highly active consumers are often early adopters of emerging trends, providing an avenue for brands to test newly-developed products.
Ecosystem-centric loyalty programs, while in their nascent stages, will provide huge value for brands by giving them much richer data and the ability to compete at scale.
Bring the Consumer’s Story to Life with Data
Today’s consumers aren’t stupid. They know that loyalty programmes are designed not only to keep them loyal to one brand but to build up a bigger picture of their spending habits and use data to maximise profits. Many of us are willing to accept this exchange of information as long as it’s mutually beneficial: 51% of millennials say they’re happy to share personal information with companies if they get something in return.
One brand that consistently uses the data itself as the reward is Spotify.
Spotify continues to lead the pack in music streaming, and its creative use of data to personalise the experience means that users feel emotionally invested in building up their listening history. Its algorithm serves up Daily Mixes, Discover Weekly playlists, and an annual ‘Wrapped’ summary, which comes to life as a beautifully-designed journey through the user’s music habits throughout the year.
With 286 million monthly active users and over 50 million tracks, Spotify has perfected the art of making the customer feel seen as an individual. Its powerful AI engine uses mass amounts of data related to song preferences, search behaviour, playlist data and geographic location to create machine learning algorithms that ease discovery of new music genres and artists.
This incredibly personalised approach builds trust, which is vital in maintaining loyalty.
According to Prophet’s Brand Relevance Index, which places Spotify as the #2 brand in the U.S after Apple, 80% of customers say that they are more loyal to brands that continue to find new ways to be relevant in their lives.
Over the course of the pandemic, Spotify released Group Listening, letting multiple users listen to the same music at the same time, even when apart.
Spotify understood that its audience was missing concerts and social events that would often be soundtracked by their users’ playlists. It understood those challenges, and came up with a solution that demonstrated empathy and gave users an entirely new way to interact with the app.
Spotify proactively engages in establishing trust signals that keep their customers loyal. But with big data, comes big responsibility. It will be interesting to see how Spotify balances that power to avoid alienating their user or artist base. A recent patent application that could lead to the brand creating its own AI-generated music raises valid concerns for artists, particularly in the context of its less-than-lucrative payouts compared to physical music sales.
Loyalty Thrives with Gamification
Some brands achieve addictive qualities by encouraging a lifestyle people aspire to.
Nike’s member’s club fitness app, Nike Plus, lets users unlock exclusive discounts and content by being more active –– for example running more miles or completing five new strength routines.
UK health insurance provider Vitality rewards its policyholders for keeping fit by lowering premiums and providing additional benefits like cinema tickets for staying in shape.
Fitness subscription apps like Fiit and Peloton gamify the process of using their product by encouraging competition and activity with live classes and dynamic leaderboards; and both have created engaged communities that have thrived in the absence of gyms.
Peloton in particular focuses on the emotional benefits brought about by joining the club. “On the most basic level, Peloton sells happiness. But of course, we do so much more.” John Foley, Founder
Of course, the £2,000 price tag of the bike must help to keep consumers loyal, if only to justify the purchase before it becomes an expensive laundry hanger.
Much like with Spotify, there’s power in the data that fitness apps collect – not just for the brands themselves, but for the users. Brands should use this data to enhance the user experience and create motivating, personalised and community-driven experiences to inspire repeat behaviour and create an emotional connection to the brand.
Paying It Forward
In recent years, it has become more important for brands to not only align themselves with charitable causes, but live and breathe the values associated with them. Consumers these days want to be associated with brands that have a social conscience. Often, this is the hardest benefit to prove, unless it’s baked into the foundations and values of the business. No-one wants to be associated with ‘greenwashing’.
“87% of consumers agree that they would be more likely to buy a product that offered a social or environmental benefit.” Source
Some brands are tapping into this to drive preference and loyalty.
The North Face created the Clothes the Loop initiative to prevent clothing from going into landfills. Customers drop off unwanted clothing (from any brand) to one of their retail or outlet stores to benefit their partner, Soles4Souls. In return, customers receive $10 off their next purchase.
Kind Traveller offers discounted rooms to users who donate at least $10 nightly to a charity affiliated with an individual hotel.
Ethical benefits are an important consideration when designing a loyalty program: brands must be prepared to take a stand and stand by their commitment, or it could end up costing them more.
Loyalty doesn’t always have to be built on insider access to the consumer’s brain: deeper forms of ‘fandom’ can be nurtured when the roles are reversed and audiences are given an insider’s view of an organisation.
The Warner Bros Studio Tour is a prime example of an experience that has been designed to deepen fandom by allowing engaged fans or curious people an insider’s view of Harry Potter’s wizarding world. It divulges insider knowledge and “secrets” that are the social currency of fandom.
Chanel actively keeps the myths associated with its creator, Gabrielle 'Coco' Chanel, alive and these myths feed the brand narrative to this day. The fashion house’s Mademoiselle Privé exhibition took fans into the world of Chanel, with an accompanying app to download that visitors could use to book immersive experiences and workshops.
People form intimate communities and emotional bonds around a brand when they are granted access to its secrets. This kind of storytelling, a steady reveal of legend or myth, is made even more powerful when it’s an aspirational or cult brand.
Rather than thinking of loyalty as a transactional, points-based process, brands of the future must think of how they can use data in creative ways to enhance the customer experience in rational, emotional, social and ethical ways.
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