Yearly health checks are recommended by health professionals to help everyone keep tabs on our health and wellness goals. In fact, those regular checks are generally connected to lower insurance and healthcare costs because they tend to notice the early warning signs of ailments before they become larger problems. Oftentimes, however, we wait to check our health until we already have a problem, or we are feeling poorly, leading to heftier costs, and lengthier treatment plans.
Kobie’s resident (academic) doctor, Dr. JR Slubowski, Associate VP of Strategic Consulting, would urge you to take the same approach to your loyalty programs by measuring program health regularly, but adds that taking a more “prac-a-demic” approach gives you a different perspective on how you see those measurements and data, ultimately opening you up to a healthier connection to your customers.
When it comes to ways to think about those programs, Slubowski describes his “prac-a-demic” mindset as taking the ideas of motivational theory and behavioral science and looking at them as a practitioner, with the understanding that “not all theories are created equal, especially when it comes to actually implementing them as part of your loyalty strategy or your loyalty program.”
Checking the Vitals
It is important to check your program health from two different perspectives: a financial lens and a member lens. Looking at it from a financial lens helps identify where you have budget, resources, and the ability to implement new features and benefits to drive increased engagement. On the other hand, considering program health from a member lens is equally important because without members, loyalty programs wouldn’t exist. It is crucial to consider both perspectives to have a holistic understanding of program health. Think about it like getting your physical, but only having your physician read your chart for the numbers but skip the personal conversation and connection with you in the room. Would you still receive a diagnosis that would be accurate? Possibly, but you would miss out on important details that could create a more complete picture of your health.
That’s not to say that the financial lens is not critical. It absolutely is. Understanding the financial health of a program is crucial for making a business case for innovation and new initiatives. At Kobie, we work with organizations to evaluate program health in four key areas: program penetration, investment allocation, cost efficiency, and revenue optimization. These areas help organizations determine the ratio of active and inactive members, answer questions surrounding program fund rate and ROI, whether high-value members are being rewarded, and whether the program has the ability to drive revenue.
Evaluations like these give organizations important data, but the program’s insights about customers should also be integrated across the entire business. A healthy financial foundation for loyalty programs is critical as it provides resources to optimize program performance and drive engagement with members, but how is your bedside manner?
While financials are an integral piece, cutting members out of the equation can lead to a loss of loyalty. Just like a doctor with no bedside manner, it is detrimental to leave emotions completely out of this equation. This is where emotional loyalty and the need to assess whether a program is fostering a deeper connection with its members is essential.
There is a spectrum for evaluating that program health, which includes transactional, behavioral, and emotional aspects and you really need all of them. The transactional aspect of a loyalty program focuses on the perception of financial benefits in the eyes of the member, but that can lead to inconsistent results and hinder the development of a deeper emotional connection. While including financial benefits may be necessary to stay competitive, they should not be the sole focus. Additionally, financial benefits are not as effective in preventing member attrition as previously believed and can even encourage switching behavior in hyper transactional environments.
In the middle of the spectrum, non-transactional benefits and engagement data play a significant role in determining program health. Here it is equally important to understand members’ perceptions of these experiences and benefits to get a complete picture. We need to consider both sides of the coin – engagement data and members’ perceptions – to evaluate program health accurately.
As loyalty marketers, we need loyalty to be enduring and resilient and should strive for an emotional connection and affective loyalty that goes beyond individual interactions or transactions. Checking our members “vital signs” can give us the right insights to create real and lasting loyalty.
Identifying with the Prac-a-demics
When you get into the “prac-ademics,” there are three other ways to better understand how well your program is performing: identification, conative loyalty, and brand love.
Identification is the connection between an individual and a brand, product, service, or company and is based on how much the individual identifies with that brand and sees it as a part of themselves. Some consumers identify so deeply with a brand that they choose to permanently mark their bodies with that brand’s logo. While that might not be the everyday consumer’s cup of tea, these individuals identify with their chosen brands passionately and their purchases become an integral part of their identity.
Identification is a powerful concept that goes beyond transactional loyalty. It is based on social identity theory, which suggests that our identities are socially constructed and influenced by the groups we interact with. According to Slubowski, these groups don’t necessarily have to physically exist; it’s enough for us to perceive their existence. “As long as you make that community salient and attractive,” he says, “identification will organically form.”
Loyalty programs have the potential to create identification and satisfy core human motivational needs. By building a sense of belonging within a community, loyalty programs can organically form identification. When customers have experiences like personal recognition by an associate, and co-creation with an associate, where they work together to create unique experiences, brands have the opportunity to foster identification.
Loyalty: Mind, Body, and Soul
There are approximately 36 types of loyalty identified in academic literature. Two common types are cognitive loyalty and affective loyalty. Cognitive loyalty refers to rational loyalty, where individuals weigh the pros and cons and make a logical decision to be loyal to a company or brand. On the other hand, affective loyalty is emotional and stems from individuals liking or even loving a brand because of the pleasurable benefits they receive from it. However, there is a third type of loyalty that is particularly interesting when it comes to measuring program health – conative loyalty.
Conative loyalty goes beyond rationality and involves a deep-seated conviction to exhibit loyal behaviors. People with conative loyalty exhibit these behaviors even when it is inconvenient or more expensive. They go out of their way to purchase certain brands and bring others with them who share the same passion and are fierce defenders in the face of brand criticism. It indicates a strong commitment to exhibiting loyal behaviors and goes beyond rationality or emotion.
According to Slubowski, “conative loyalty [leads] to repurchase behavior or purchase intent as well as intent to spend more…positive word of mouth and advocacy. So, as a way to measure your program health I would argue that if you’re looking at your customers and the depth of loyalty you’re driving, like all the way down to the soul, by conative loyalty then you’re probably able to get a good sense of how healthy your program is from a member perspective.”
How Kobie Diagnoses Loyalty
At Kobie, we utilize a proprietary tool as part of our Strategic Services to evaluate program health called Emotional Loyalty Scoring (ELS). ELS is a proven measure that has been successful across 40,000+ consumers surveyed. While Status, Habit, and Reciprocity are the primary drivers of ELS, emotional loyalty encompasses more than just these three factors. Measuring program health through a member or consumer lens can help track shifts in ELS over time. Additionally, having more drivers in play leads to better understanding and fostering greater loyalty.
While we understand these metrics, we also understand that the field is constantly changing, and we are exploring new areas beyond status, habit, and reciprocity to better grasp the complexities of emotional loyalty. Being industry leaders, Kobie aims to stay ahead of the curve in terms of product innovation and explore other ways to think about emotional loyalty.
Currently, market-based research techniques are used to collect this information through customer surveys. However, Kobie is striving to innovate in this space by exploring other methods such as AI and machine learning to predict emotional loyalty and identify conative loyalty, exploring ways to collect this information through zero party data and persistent gamification, and test and learn agendas to understand how different individuals respond and what that means for their emotional loyalty level.
Emotional loyalty can be a messy concept that can require constant effort to comprehend its nuances and complexities and Kobie is actively working towards understanding these intricacies and striving toward innovation.
The Final Diagnosis
Any thorough diagnosis includes as much diagnostic information as possible. Any time you leave out a piece of the puzzle, you run the risk of blaming the wrong ailment altogether. The same is true for understanding the health of your loyalty program. If you want to take a more holistic approach, you must look at it through the financial lens and the member lens. By integrating both, organizations can make informed decisions that drive customer engagement and foster deeper loyalty among members.
For more information about how Kobie can help measure and improve your loyalty program health, and to receive access to a full 40 minute session recording from JR, reach us today!