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How Loyalty Evens the Data Collection Playing Field

From Fossils to Oil

Just over fifty years ago, on October 29, 1969, ARPANET—the precursor to the internet as we know it today—was born. At its inception, ARPANET involved four machines across four locations in California and Utah, and it was primarily used for academic research purposes. Just over ten years later, ARPANET had expanded to a couple of hundred machines across the US before it was formally shut down in 1990 and succeeded by the internet. Interestingly, the slow adoption of ARPANET did not afflict the internet; The World Wide Web standardized the internet, and more-affordable technology soon followed that was then adopted at a much more rapid pace.

In fact, fast-forward a bit and Intel calculates the world had two billion “smart” devices in 2006, versus 200 billion as we enter 2020. This explosion of internet-connected devices has ushered in a new era of productivity wherein 2.5 quintillion bytes of data get created each day. (To be clear, that’s “2.5” followed by 18 zeros!)

Over the past decade, many businesses have come to understand the enormous potential lying dormant within these unprecedented amounts of data. In fact, those who have quickly leaped at the opportunity to corner their consumer data as a strategic asset have solidified their data advantage within their industry, like Netflix and Stitch Fix have done; the former uses account profile data to not only customize TV and movie selections but also to steer its billions of investment dollars into original content that will most likely yield the highest returns, while the latter leverages data science along with human stylists to deliver a personalized apparel shopping experience with a Da Vinci-esque precision that keeps people coming back for another Fix.

These practices have turned Netflix into a streaming content behemoth, while simultaneously allowing Stitch Fix to penetrate the apparel industry at a much faster rate compared to other retailers…or to buck the trend of similar e-commerce players evidenced by its rise in market valuation since its IPO. The elegance herein lies in the fact that in order to even become a customer, one must immediately hand over the privacy keys—you can’t (legally) watch Netflix without registering, and you can’t receive a customized Fix without providing your preferences and allowing the tracking of your eventual choices.

In other words, for both Netflix and Stitch Fix, you must log-in before you can enjoy and participate.

 

Enabling the Drilldown

Unfortunately, most businesses do not have value propositions that require all of their customers to automatically sign-up as card-carrying members. Instead, they have a product or service that customers desire, but any attempt to collect data gets met with increased scrutiny from large segments of customers (and regulators). For better or worse, consumer awareness with regards to owning their personal data has reached new heights thanks to various cultural shifts—from Cambridge Analytica to Google’s dubious location tracking practices, consumers remain on high-alert these days compared to even ten years ago when it comes to entities to whom they give their data.

Enter loyalty.

Creating a loyalty program directly addresses the criticism that companies like Google face when it comes to tracking consumer behavior by establishing an exchange system wherein consumers, now members, get compensated for providing their personal data. With a loyalty program, suddenly data collection escapes from the back-alley shadows of web beacons and partial credit card matching, instead presenting itself to your consumers, smiling with a gift in-hand.

 

Getting the Most Out of Your Data

For those who have already gone through the process of launching a loyalty program, you already understand the importance of having a value proposition that sufficiently compensates members for your new ability to not only track their behavior over time and across channels but also to use members’ data for targeted marketing efforts.

Still, we have often seen socialization and promotion of the loyalty program’s benefits shrink at a company even though it touches virtually all stakeholders across a company’s business units. Even more disturbing, if not at the program’s launch, then as it matures and increasingly gets viewed as an ever-growing liability instead of the valuable asset it truly is. Ensuring that everyone from store associates to your c-suite intimately understands “Why loyalty?” must remain a top priority. Ideally, this directive starts out as a top priority even before any program launches, but it certainly should take center stage as the program matures and comes into its own because, in the end, loyalty enables us all to do so much more.

This last socialization exercise likely represents the missing piece for many of us out there who, in some way, either manage their company’s loyalty program or are responsible for seeing it into existence. Launching and managing a loyalty program already takes up so much time and lots of resources, but companies can only realize the ultimate benefits of loyalty if they consistently leverage their treasure trove of data to tell a story. When done right, that story will involve how your loyalty data has revealed a more customer-centric path for the company to follow, positively transforming the business into one that takes action on what consumers tell you through their purchase behavior and any preference data enabled by the program.

Interestingly, this powerful story you will tell starts out with one simple question: Would you like to sign-up?

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Hugo St. John