By Rabih Farhat, Related Founder & Managing Partner
The business world was already undergoing several structural shifts prior to the Covid-19 pandemic. Digital Transformation had witnessed a noticeable acceleration starting in the second decade of the 21st century, as businesses increasingly sought to leverage digital technology — such as mobile, cloud, and analytics — to improve customer experience and operational efficiency. The global market for Digital Transformation was valued at $589.7M this year, and it is expected to cross the billion-dollar mark by 2025. The pandemic simply sped up an ongoing shift to digital.
Meanwhile, Millennials and Gen Z had been bringing about a generational change in consumer behavior, marked by strict digital demands and irregular needs. They are connected and mobile (and expect to be treated as such), more budget-conscious, and less brand-loyal than their predecessors.
In this new normal, two particular trends stand out as having a major disruptive effect on the business landscape: The rise of the Software-as-a-Service (SaaS) delivery model, which provides businesses with higher productivity, scalability, and agility; and the subscription economy — in many instances, subscription businesses grew 5 to 8 times faster than traditional businesses over the past 9 years.
Key Trends That Are Shaping Loyalty
Loyalty marketing is undergoing a radical transformation as well. The increasingly competitive nature of the market has made embracing strategies that leverage emotional connections a prerequisite for survival. To be able to successfully deliver on this opportunity, loyalty marketing programs should look to capitalize on the following trends:
Customer-centricity and Personalization
Brands must avoid bland consumer engagement strategies in favor of building authentic, relevant, and, most importantly, unique connections and experiences with their customers. Customers really do value personalization — 96% of marketers report that personalization aids them in advancing customer relationships.
Developments in the application of Artificial Intelligence, in particular, are having a pronounced effect on loyalty marketing: Machine learning algorithms are getting better at generating critical insight into the behavior of customers, predicting what they are likely to want for a hyper-personalized customer experience.
Platformization and Democratization of Software
Loyalty SaaS platforms allow businesses to access cutting-edge technologies with little to no upfront cost or investment in maintenance; there is no such thing as outdated code with SaaS. Solutions are typically easy to use, can be customized effectively and deployed quickly. Using SaaS platforms does lead to increased growth — an additional 19.63% on average.
On the other hand, API technology is helping accelerate innovation by opening up SaaS platforms to new use cases, generating new routes to market, and paving the way for further disruption.
Tokenization & Blockchain
Tokenization can help create a unified loyalty currency, one where ‘happiness’ — instead of miles, points, or discounts — is the unit of value. Using blockchain, companies within a network could enable consumers to redeem tokens seamlessly between loyalty programs. This way, consumers can develop loyalty to several brands at once. For the consumer, this means that there will be no more individual rules to follow, no multiple loyalty cards to juggle, and no multiple passwords to remember.
Blockchain’s peer-to-peer nature also represents a significantly more secure and transparent mechanism to store and transfer points.
Empathy, and Humane Technology
In this time of distress, corporate giving and philanthropy have never been more needed. Accordingly, loyalty programs have been progressively adopting more humane approaches, where technology is used to deliver real value: by serving a human need instead of exploiting human vulnerabilities for profit.
Loyalty can and should stretch beyond self-serving exchanges and promote social change. Mission-driven loyalty programs, for instance, programs that allow customers to redeem their loyalty to support a cause, are examples where technology and loyalty marketing are used to inspire people to make an impact in their society.
The growing movement to digital has virtually forced every company to reimagine how it operates. While technological developments are driving this transformation forward, at the root of it, it is the changes in consumer behavior that are steering it. Today’s business environment is uncertain; it is fraught with difficulties, yet filled with opportunities. It is high time we evolved loyalty programs.