12 Predictions for 1:1 Marketers in 2019
As 2018 came to a close and we turn the page to 2019, it is our tradition to pause and think about what the year ahead could bring. Like all businesses, the loyalty space continues to experience massive change, and this is not going to slow in 2019. Instead, we see an industry that is more central to the marketing mix than ever before, and more essential to the ways that customers experience brands. We’re excited for the challenge this elevated role will bring. As in years past, we tapped into a wide range of experts and practitioners from across our Loyalty & Customer Marketing practice instead of hearing what just one of our leaders sees coming in the year ahead. We hope to provide our readers with the same diverse range of opinions and expertise that we leverage to propel our business strategy and offerings. Read on for what we see coming in 2019:
Our team's views on the trends that will shape the industry in the year ahead.
Economy slows, loyalty grows Suzy Cox, EVP – Client Success & Growth
Many forecasters and analysts expect that in the next few years, the U.S. will experience an economic slowdown, if not a recession. The positive effects of the U.S. corporate tax cut will disappear, and ongoing Trump administration trade policies will continue to squeeze the economy. There doesn’t seem to be a happy picture abroad either. China’s economy has been cooling for some time and the impact of Brexit is likely to cause Europe to further slow as well. With that specter on the horizon, smart companies will turn to their loyalty programs to help them weather the squeeze a slowdown will put on their sales. Companies will increasingly realize that the best way to preserve their bottom lines is to protect and grow the customers they already have. Loyalty marketing will take on increasing importance and budget allocation in the coming year(s) as current programs look for ways to optimize their designs. Companies and verticals new to loyalty marketing will aggressively explore ways to launch solutions that help them drive repeat purchases and retention among their current customers. These reinvigorated or new programs will focus not just on giving value to their most valued customers, but also on how they can leverage data to enrich and deepen the experiences their most valued customers have while interacting with their brands.
Expect to see more pay-for-tier loyalty offerings Emily Merkle, Senior Director – Analytics
While the end of 2018 hints at a potential end to the 10-year economic boom following the Great Recession, whether a recession does or does not come, we expect to see an increase of pay-for-tier and paid loyalty offerings. If consumer spending does slow, paid programs, both overt and obscure, will help companies weather this period by both drawing members in with benefits and driving ancillary revenue. Of course, the paid program trend is nothing new, but what we are starting to see is that companies such as AMC are realizing they cannot simply copy the Amazon Prime program concept by offering only a for-pay loyalty program. We expect to see many companies looking to their loyalty programs for a greater source of revenue in 2019. We’re already seeing it with brands like Lululemon.
And while top-tier loyal members who may be doing less in 2019 will want to keep their status, companies will add pay programs one of two ways: 1. Overtly by personalizing their loyalty program through a pay-for-tier program with a free base or earned tier structure, to prevent isolating a base of their members while allowing members to purchase upper tier status. And 2. Obscurely, through the expansion of bonus earnings gained through the use of their branded credit cards, similar to Delta.
Consumers will further digitize their everyday while becoming more data and tech conscious Neil Tierney, SVP
It comes as no surprise that people are digitizing more and more aspects of their daily life. Through tracking and management of personal health using wearable devices and online medical services, consumers are bringing their health online. The banking industry is being highly disrupted by new digital challenger banks offering all the traditional services and more with greater convenience and integrating rapidly with players in other industries through open banking APIs. Digital wallet players like Apple Pay and PayPal, along with brand-owned payment solutions integrated with loyalty programs, are making a strong impact on the payments industry. While consumers are finding greater convenience and efficiency through technology, they are now more conscious about their technology use and its impact. Mobile operating systems now offer tools to help users understand how they are using their devices and help them make changes where wanted. Some digital platforms like Facebook and Instagram are even launching their own usage tracking features. And consumers are not only more conscious about tech, they also spend more time learning about a certain brand, product or service before making a purchase. They highly value brands that tell them all they need to know about their offering and share educational content to help them get the most out of it.
Facial recognition technology will empower businesses to revolutionize the customer experience Kristie O’Shea, Senior Director – Product Development
Extraordinary brand interactions and transactions need to be seamless, smart and include a heavy dose of personalization. In 2019, facial recognition technology will present a treasure trove of capabilities to do just this, especially for loyalty program members who already opt-in to sharing their data in exchange for program features they find value in. The mass adoption of facial recognition software is being accelerated thanks to it being included in personal devices, such as the iPhone X. Brands will be able to use this technology to automatically recognize loyalty program members, present personalized offers, provide white-glove service, and complete secure payments simply by recognizing a loyal face. It’s also a great way to bridge online and offline customer experiences. Imagine that you forgot to get a birthday gift for your mom and her birthday party is in one hour. You need the gift now and don’t have time to search the shopping mall. Instead, you place an order at your favorite online retailer and choose the in-store pick-up option. Using the facial recognition software on your smart device, you are automatically logged into your loyalty account, your available reward certificate is automatically applied, you receive an offer for free gift wrapping, and your payment is processed, all with a handful of clicks. When you walk into the store, the associate is alerted, they hand you your perfectly wrapped gift, and a “thank you” for being a loyal customer.
Control of personal data shifts to consumers Martin Tschofen, Senior Director – User Experience
In a world where consumers are continually tracked by every app, site, and store, companies are hoarding and profiting from our data. Most of this happens without the consumer’s knowledge. And while policies like GDPR are starting to change this, in many cases this utilization and monetization of consumer data is being done without the consumer’s consent. But in the year ahead, we expect to see the control of personal data begin to shift. Europe has already made great strides toward giving users control over their data and U.S. public opinion and proposals are moving in this direction. And beyond just control, further in the future, imagine a world in which consumers not only control such data, but are able to transparently profit from their own data choices. For example, when airlines overbook a flight, each passenger can now decide if the price to give up a seat is right for them. As such choices become normalized, it will be possible for individuals to choose to release their data at a transparent price point under their control. This will provide both greater opportunity and possibly increase inequality for consumers.
Gen Z will prove to be more loyal than millennials Samantha O’Hara, Junior Strategist
For years, marketers have all been shamelessly focused on millennials. But in 2019, expect to see a turn of attention to a new generation, Gen Z. Born between 1995 and 2012, the oldest of the bunch are graduating college and entering the workforce and by 2020, they are expected to represent almost 25% of all consumers in the United States. Anecdotally, Gen Z is considered by some to be less brand loyal than older generations, possibly due to their perception of not getting the benefits they want from brands. Gen Z wants the brands they shop to be ethical, offer discounts, and provide a seamless omnichannel experience. This generation grew up with technology and are more likely to write product reviews online, engage in gamification techniques, and be more active on Pinterest, Twitter, Snapchat, and Instagram than millennials. In 2019, the brands that give Gen Z what they want will in return earn their unwavering loyalty.
You’re going to hear more about Blockchain, but it may not be a real loyalty application just yet Vlad Vukojevic, Senior Technical Director
Like many innovations, Blockchain is currently a solution looking for a problem to solve; any problem really. And while the applications of the solution are evolving rapidly across various industries, in 2018 the Blockchain community and the loyalty industry came together in the first ever blockchain loyalty conference to explore the possibilities of blockchain in our space. The reality is that current applications of blockchain technology in cryptocurrencies and the challenges this application solves for are fundamentally at odds with the business objectives of loyalty programs. Just one example is “fungibility,” the ability to easily trade or exchange points into cash or another currency. While this ability may prove attractive to customers, it is at odds with a program’s goals to generate brand affinity and redeem points for the brand’s products.
In 2019, we expect to see a deepening of understanding of loyalty program principles by the Blockchain community. Blockchain is a real technology, with real potential, and the overall trends toward decentralization will only continue to fuel its growth. And while there is certainly potential for Blockchain to become a useful technology in the loyalty space, just as in many other industries, the technology is still in the early stages of evolution and lacks the scale to support any serious loyalty program today.
CPG brands will “grow up” in their direct-to-consumer journey Andrew Kelly, VP – Sales & Marketing
2018 was a tough year for the consumer packaged goods industry, which has historically relied heavily, if not solely, on third-party retailers to sell their products with little to no direct access to customers or their data, preventing any meaningful retention efforts. Two significant shifts are taking place that are forcing them to evolve their marketing strategies, and quickly. On one front, big retailers are beginning to invest more heavily in their own private labels, and stealing share. Meanwhile, ecommerce and subscription startups are popping up at a frenetic pace and, in some cases, quickly claiming large chunks of the market, offering better customer experiences and more personalized offers that cater to more digitally savvy consumers.
2019 will be the year CPG companies make notable strides in successfully establishing 1:1 relationships with their consumers, with a lasting impact. Not only will we see a much more aggressive acquisition strategy from CPG brands in order to land-and-expand in key categories, we will see significant internal investments in direct-to-consumer efforts to stave off competition. Most interestingly, this will be coupled with CPG brands increasingly “going physical” through pop up shops and storefronts that allow them to enhance product presentation, entice new customers and collect customer data.
Hyper-personalization will be an expectation, but will ultimately limit choice as algorithms continue to tribalize consumers Dan Sheehan, Executive Creative Director
It’s now the norm that the data shared through loyalty relationships informs algorithms that help create personal experiences that align us with the brands we love. And in a world where we are inundated with choices, personalization can make our lives better (or at least, a little easier). But with the ubiquity of highly personalized marketing and messages, it is now more important than ever to hyper-personalize customer experiences in creative ways and to connect with consumers on an emotional level.
While many brands will deliver against this mandate, the reality for the consumer will begin to set in: In this world where algorithm-inspired filter bubbles help us make decisions by defining experiences that are personally relevant to each of us, we are trading for ease and familiarity at the cost of missing exposure to new opportunities that could ultimately be better or more exciting. In 2019, consumers will become more aware of these costs, the downsides to which we are already seeing in political discourse and media echo-chambers. Consumers will begin to exhibit an awareness of the fact that they may not be seeing the best offers, but rather those which are “good enough” for their response. And while the problem will become obvious, much like the challenges we face with social echo-chambers, the answers will be few and far between.
Grocery shopping: From dreaded chore to day-brightener Denise Holt, VP – Strategy & Insights
Today’s customers want to be efficient, to check off their lists, get value for their money, receive personalized service, learn something new, become healthier, find inspiration, be entertained and impress their family and friends. In 2019, retail grocery chains will make substantial investments in technology and partnerships to deliver on these skyrocketing shopper expectations. In fact, we’re already starting to see it. Hy-Vee recently partnered with Orangetheory Fitness to help shoppers get their workout in while getting their groceries (after which you can eat a Wahlburger-branded menu item at the in-store Market Grille). Mariano’s took a cue from trendy food hall Eataly by incorporating in-store, high-quality dining experiences to inspire shopper’s inner foodie. And Amazon acquired Whole Foods, not only giving itself a brick-and-mortar foothold but leveraging its own delivery expertise to capitalize on the grocery-delivery boom.
Watch for brick-and-mortar grocery stores to battle against online delivery by becoming lifestyle destinations in which the shopping component of the trip will be effortless. This will be powered by loyalty data-driven, tech-enabled list fulfillment, leaving customers plenty of time to enjoy in-store amenities and activities that make life more productive and maybe even a little fun.
Loyalty players come together to combat fraud Tom Madden, SVP – Client Services
It’s no secret that a significant portion of our lives are now spent or captured online. As consumers, we provide our data (both willingly and unwillingly) just about everywhere in this digital world. This includes personal data, preferential data, purchase data, and so much more. While the value of data has never been higher, also has the risk to the security of that data. Data breach announcements are happening on a weekly basis, from larger retailers, to government entities, to loyalty programs. And with these breaches, comes the ability for fraudsters to steal from our accounts. That’s why it can feel like there is little we can do to reduce loyalty fraud.
With loyalty program participation at an all-time high, and with loyalty point liability totaling hundreds of billions of dollars, it’s no surprise fraud is estimated to cost billions to loyalty program operators. These costs are stolen directly from businesses’ bottom lines. In 2019, finance leaders will begin to get serious about fraud prevention efforts for loyalty programs of scale. Internal fraud reduction efforts will continue to grow as organizations become more sophisticated in identifying and addressing fraud. Additionally, in order to help prevent fraud, loyalty providers will begin to work together to defend their members, share best practices, and create joint fraudster lists to take this crime-fighting to a more effective level.
Know thyself—Brands try experiential rewards. Most will fail, but for some, there is nothing better Mike Sund, VP – Strategy
The case for adding experiential rewards to your loyalty program can seem compelling. After all, experiential rewards seem like they’re cheaper since your brand already delivers an experience. Plus, experiential rewards can lead to greater emotional loyalty, the goal of any brand. Unfortunately, those assumptions generally aren’t true. It might seem as though they will help to manage the cost of a program, but to really understand the cost, consider the following:
- Experiential rewards should be personalized to be meaningful. However, personalizing rewards requires that the experience be delivered on a 1:1 basis and that comes at a cost.
- Experiential rewards don’t scale well because they are constrained by the ability to administer them.
In 2019, we expect to see many brands try to stay “on trend” and roll out experiential rewards that will ignore these simple truths. And for many, it won’t make a lick of difference. But despite the limitations mentioned above, there is still a place for experiences in the reward structure, albeit only a select few brands can and will successfully implement them. For brands that are built on customer experience, the loyalty program should also support that experience. And for brands like airlines or hotels, the experience is inherently part of the product. The same goes for some retail brands; think playful, experiential retail brands like Sephora or Ulta. The simple truth is that for some brands, until they can conjure truly unique and meaningful experiences for program members, a transactional reward structure will remain the primary incentive for their members.