Everything I Was Taught About Loyalty is Wrong

Been reading a lot of predictions about what’s ahead for retail and retail technology for 2018.

Some point to the continuation of an ongoing trend line. Some state the obvious.

And some point to a major market transition that will re-shape the industry landscape.

Forever.

Let’s discuss another one that is very important—long-term.

This year we’ll see acceleration of the big strategic shift from loyalty programs to affinity development.

It’s unfolding beneath the waterline. Dive a bit into the deep, and you’ll find it at a very exciting intersection of instant-easy payment, value-added services of all types, and the social value of tiered membership.

You see this trend in recent encouragements of Forrester analysts: “cultivate emotionally loyal customers, not bargain hunters.” You read it in eMarketer studies that urge the finding of “quality customers with the highest potential lifetime value.”

For those in the realm of Amazon, you see it in Prime, estimated to be active in 56 percent of US households by year-end. For those in China, it’s found in Alibaba or WeChat or innovative brick-and-mortar leaders such as Suning.

You see it in McKinsey’s recent work that redefines retail customer personalization. Well away from coupons and markdowns.

You see it bare-faced and bold in behind-the-scenes consultant work that encourages senior brand executives to retain and build on a base of multi-channel, high-wallet-share, high-margin shoppers.

And you see it in the bitter reality of today’s discount- and rewards-based retail loyalty programs…

3.8 billion memberships and little loyalty.

According to a September overview in The Economist, US residents this year held 3.8 billion loyalty program memberships, which equals nearly 12 memberships for every man, woman, and child in the fifty states. Roughly half are never used. According to Capgemini, these billions of memberships generate – overall -- very little brand quantitatively realized brand fidelity.

(In fact, within recent years, financial analysts have encouraged at least one major retailer to give up on a card-based loyalty scheme that in discounts and other giveaways was costing roughly $800 million per year.)

Bottom line:  in a world where internet ubiquity provides nearly limitless choice, the shopper is simply demanding more.

Affinity’s about the head and the heart.

Affinity is more than purchasing loyalty. It’s about emotional connection – felt in the heart as well as the head. It results not in the redemption of a coupon, but in an unquestioning selection of a retail brand, and all that it offers and represents. Across all channels.

Here are three things to think about:

  • How can you make payment and the POS process so absolutely easy and secure that shoppers don’t have to think twice? And I’m not naïve -- yes, I know there’s affection for credit cards and major investments in existing technologies and security concerns and on and on and on. But Amazon is figuring out Go, just as Ali and JD.com and Suning and F2 are figuring out instant payment on the other side of the Pacific. Moreover, Millennials and Generation Z will embrace it.
    • When that happens, BOOM. Which, young Ms. Shopper, do you prefer? The easy route, or the hard one?
  • What value-added services – ranging from installation to set-up to rare products to deep subject-matter experts to hospitality-entertainment opportunities – do you offer? A survey several years ago of consumer electronics shoppers found a great hunger for expertise that ranged from recommendations on go-withs to so-called “recipes” for connected home solutions to how-to seminars.
  • What special membership -- with benefits – is offered to top shoppers? Few are immune from the lure of an “inner circle.” In fashion, it’s first access to new looks and trunk shows. It could be cooking classes, market seminars with buyers, back-stage passes at sponsored concerts or sporting events.

Big changes underway. 

Let me know what you think. Join me on LinkedIn and Twitter.

#IamIntel.

Published on Categories RetailTags , , ,
Jon Stine

About Jon Stine

Global Director Retail Sales at Intel. Jon Stine leads Intel’s global sales and strategy for the retail, hospitality, and consumer goods industry sectors. His CV includes leadership of North American retail consulting practice for Cisco Systems, and a prior stint at Intel, where he founded the company’s sales and marketing focus on the retail industry. His perspective on technology’s value in the industry has been shaped by advisory and project engagements in the United States, across the European Union, and in India, Australia, and the People’s Republic of China, and from 15 years of executive sales and marketing experience in the U.S. apparel industry, working with the nation’s leading department and specialty stores. At Intel, his current areas of research and engagement include the future of the store in this new digital age; how and where retailers turn data into competitive advantage; the role of technology within the new cross-channel shopper journey, and, the critical business and IT capabilities that industry success will demand going forward.