The IoT and Data Sharing are Reinventing Loyalty

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The familiar triple play of cloud, social, and mobile laid the foundations of more personalized loyalty programs, but newer technologies are expanding the possibilities for loyalty marketers.

“If you think about what Amazon and Google have done, they're very good about collecting data about customers and using it in a very effective way,” says Jeff Hassman, CMO at Excentus. “If customers are engaged in your loyalty program they expect you to know what they're buying, where they're going, their interests, and that [you] wouldn't serve up communications that aren't relevant.”

This shift in consumer expectations of loyalty programs didn't happen overnight, but unlike other marketing trends that seemed to come out of nowhere, the seeds of more relevant, personalized loyalty were planted early in the loyalty marketing timeline.

“A lot of loyalty programs started in the grocery industry, without the capture of personal identifiable information. So, people were a number, but they weren't really tracking what people were doing, what they were buying, what their interests were,” says Brandon Logsdon, president and CEO at Excentus. “Loyalty programs were really just another vehicle to do promotions.”

While this may seem like a wasted opportunity, these early loyalty marketers had the right idea in concentrating their offers on their most loyal base. History tells that these rudimentary efforts did in fact come to expand beyond merely dumping emails on these loyal customers — instead offering rewards and collecting data to further improve those rewards.

When the big data boom happened, these efforts were only enhanced. But the role data has come to play in loyalty is well understood at this point. What's perhaps more interesting is where all of this data is coming from, and how it will change the way marketers do loyalty: especially in the connected home.

Connecting home and loyalty

Starbucks recently announced an integration with Amazon's popular virtual assistant Alexa. Users will be able to link their Starbucks account to the new Alexa voice ordering functionality. Commands include, “Alexa, tell Starbucks to start my usual order.”

“I absolutely think we'll see more and more of that because the other thing that's going to drive loyalty is the connected home,” Logsdon says. “Look at things like that Starbucks experience, or even the experience that Amazon is propagating with auto-replenishment. There's so many different directions that'll go.”

Alexa, Google Home, and the host of other virtual assistants hitting the market are an extension of the IoT; or rather, they are an evolution of it.

Having a smart thermometer, washing machine, or refrigerator is still a novelty for many consumers, but these technologies existed somewhat in isolation until thet push toward virtual assistants, which activate data and preferences from these disparate devices.

For marketers this means that access to new and deeply personal data points is but an Alexa integration away. “The Internet of Things is going to be a real gamechanger for loyalty, just like mobile has been to date,” Logsdon says.

And here is the conversation about data and loyalty again. Loyalty marketers use data to be better loyalty marketers. This is understood, and exciting new data is now on the table courtesy of the IoT and virtual assistants. However, the loyalty experience is perhaps best improved through the sharing of all of this data.

Loyalty and data sharing

There are a couple of ways brands are sharing data to achieve better loyalty experiences, and enhance rewards for their loyalty members: coalition programs and loyalty partnerships. The details that distinguish these two approaches are less important than the fact that consumers need more from loyalty programs than simple rewards and a their first and last name at the top of an email.

“Today we're looking at how we can surround the customer with partners that the customer is interested in, which, to me, is a form of personalization,” says John Bartold, practice leader of loyalty and customer experience at Epsilon. “The moment you focus on the individual customer and build offerings and services around [them], that is personalization. That's the ultimate side of loyalty.”

The reality is that, while consumers are loyal to brands, they are also highly empowered in the digital age to choose when and where they shop. No one company can realistically execute a robust loyalty program that rewards consumers purely on their interests when those interests aren't always aligned with the brand in question. So, loyalty marketers must band together to deliver.

Some industries achieve this through coalition programs. The travel and credit card industries are known for this. These programs bring together participating brands — airlines, hotels, and car rentals, for example — around a common currency, and offer members options on how to reward themselves. Customer data is shared among members of the coalition.

“The reason we like [the coalition model] is that it provides ease and convenience for the consumer, cost sharing and economies at scale for the retail partners, access to customers who wouldn't otherwise shop at a particular retailer's store, and the ability to leverage the coalition database,” Hassman says.

Coalitions were a popular approach for many years, but access to more data, and concern over who controls that data, made these types of loyalty endeavours less optimal for some industries, particularly in the U.S.

“We're still challenged in the U.S. to a certain degree on coalitions, and some of that comes down to data ownership,” Bartold says. “When you look at partnerships, there are more fluid arrangements with what [data] people are willing to give.” Brands retain full ownership over their data in partnerships, and the collaboration is aimed at improving a the customer experience in a more specified manner.

“We certainly think in terms of partnerships,” says Noah Brodsky, SVP of worldwide loyalty at Wyndham Hotels, a company that recently revamped its loyalty program to incorporate more personalization, and a more intuitive membership experience. “From a personalization perspective, we think about that a lot in the marketing and pre-arrival sense as well. How are we making sure that we send people communications that are relevant to what they're looking to do, whether that involves a partner or a specific brand.”

The new loyalty

“If you think of the travel journey, a lot of times you have an airline involved, a hotel, and you may have a car rental company. I think in the future we're going to see even more opportunity to personalize based on, say, a traveler's flight delay,” says Guy Cierzan, managing director at Olson 1to1.

Cierzan envisions a scenario where the car rental company updates the beleaguered traveler in real time with the status of their vehicle reservation, and the hotel chimes in as well with similar notices for the room.

Whether through partnerships or through coalition, brands must understand that — short of Google, Amazon, and Facebook — very few companies are positioned or equipped to gather customer data across the internet and leverage it on their own. Together, though, they may have a chance. But the goal must be to improve the loyalty experience. The key to that, as it has proven to be in other forms of marketing, is in personalization.

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