By Joseph Taylor, Senior Vice President of Strategic Consulting and Operations, Epsilon
Yes, we know loyalty programmes are designed to retain customers – the clue’s in the word ‘loyalty’– but by going beyond its stated purpose, you can build an even stronger, more profitable business and unlock the full value of your data. And this is because your loyalty programme is the key to driving a more effective acquisition strategy and recruiting higher-value customers who can become regular loyal spenders.
Over the last few years, we’ve seen a total shift in paths to purchase as online becomes a critical sales channel. While in 2019 e-commerce represented 14.1% of global retail sales, by 2021, this was nearly 20%, and by 2025 it will be close to 25%. And as more embrace online, customer bases are changing. This makes loyalty programmes even more essential for understanding these new dynamics, knowing what customers value, and personalising your engagement to build stronger relationships.
The importance of first-party data
But the traditional ways of operating are changing as the foundations on which digital marketing is built crumble. The imminent removal of device identifiers and the eventual death of third-party cookies means marketers must seek new approaches to targeting and measuring their digital campaigns. And as more people are accessing the web using multiple devices (and browsers, email addresses and social media accounts), correctly identifying these individuals online is getting increasingly difficult.
To overcome these challenges, acquiring first-party data is becoming critical for e-commerce businesses. And while building out your first-party data is essential to powering your loyalty programme, it’s also creating an opportunity to fuel your new customer recruitment strategy.
So how do you go about unlocking the potential in your loyalty programme to drive acquisition? Well, there are three key steps.
1. Have a strong foundation of first-party data:
It all starts with the data. First-party data is the bedrock for understanding your customers as individuals, and as traditional identifiers disappear, this data is becoming increasingly critical. But gaining first-party data is not a one-way street: it’s a two-way value exchange. Customers must gain something in return for sharing their data, be that exclusive offers, freebies, or greater personalised experiences. So ensure you’re building a loyalty programme with a strong value proposition that encourages data sharing and helps collect your first-party data in a privacy-compliant, transparent manner.
2. Build your online identifiers:
Next, it’s about customer insights. By mapping your first-party data to a scalable identity graph from an identity partner, you can build your own bespoke identity graph. This will give you greater customer insights, allow you to create custom audiences and drive real-time personalisation. It can be used to identify both existing and non-customers as they browse your sites or apps and connect offline touchpoints. While cookies are really device identifiers, your identity graph reveals the individual behind the device, helping you deliver more relevant marketing. And by linking your profiles to a persistent ID, individuals can be recognised even when identifiers change.
3. Leverage these identities to find new audiences across the broader market:
Finally, it’s about activating the data. By using the characteristics of your best customers, lookalike modeling allows you to find new audiences that match their traits. Then, by working with an identity partner offering wide market reach, you can understand the market potential for your target group. Armed with these insights, you can then develop acquisition strategies to target these new opportunities.
Looking beyond loyalty
In essence, it’s a quality play. Focusing your acquisition approach on recruiting customers offering the highest potential value means your customer quality will improve over time, you’ll onboard more loyal customers into your loyalty programme, and their lifetime value will increase. It then becomes a circular process with your loyalty programme feeding your acquisition strategy, which then feeds back into your loyalty programme.
And there’s no need to stop at acquisition. You can leverage your loyalty programme data to reactivate lapsed customers by finding and communicating with them across digital channels and encouraging them to buy again. It’s all about innovating and realising the value of your data, then leveraging it to support different business objectives.
And utilising data across your organisation can only be a good thing. It fosters greater communication between departments, helps build internal relationships, breaks down barriers and creates a stronger business.
Ultimately, a loyalty programme should be more than just a retention programme. It offers marketers a new way to leverage the known profiles of your existing top customers to acquire more like them by prioritising quality over quantity when planning your acquisition campaigns. Broadening your thinking around how your loyalty programme data can be applied unlocks the full potential of this critical asset, creating business value beyond just retention while providing an essential solution for when third-party cookies finally die.