To help retailers and brands plan for 2019, Claudia Tajima and I are interviewing experts within Forrester for our series, “Applying 2019 Predictions To Retail.” Recently, we spoke to Michele Goetz about how artificial intelligence will affect retailers in 2019. This week, Claudia interviewed Emily Collins, principal analyst on Forrester’s B2C marketing team and an expert in loyalty, on her contributions to the 2019 B2C marketing predictions report. Here’s what Emily suggests retailers and brands can expect and should focus on regarding B2C marketing and loyalty in 2019.
Claudia: What should be top of mind for retailers today in terms of loyalty?
Emily: Across the board, retail has been undergoing loyalty renovations in the past 12 months. For example, J.Crew has launched a new loyalty program, and Nordstrom changed its loyalty program as part of a brand refresh. The Nordstrom program, Nordy Club, focuses more on creating a lifestyle brand, with personal shopping days and events rather than just rewards. Sephora also launched a community as part of its loyalty program, where customers give feedback and can connect with other beauty enthusiasts.
Yet another example is Restoration Hardware’s paid loyalty program, in which members pay an annual fee to receive discounts and access to design services. I expect other retailers might explore what a paid model could mean for their business. However, with a premium model where consumers are paying for membership to a program, it’s even more critical that retailers craft a compelling value proposition that drives high perceived value to the customer.
Claudia: What is critical for retailers to understand about the emotional aspect of loyalty?
Emily: Understanding the emotional aspect of loyalty gives brands a sense of how sticky their relationship is with a consumer. If brands want to use their loyalty programs to connect emotionally with customers, they need to understand their customers’ emotional state, needs, and motivations. In some cases, this may be something simple like making a customer feel valued or appreciated, [whereas] in others, it may be more complex.
One area we’ve seen brands put more focus on is around brand values. Patagonia is pretty well known for living the values of its brand and has been able to take controversial stances and see continued growth. Retailers and brands should ask themselves: If you have distinct values, how is that shown in your brand? If you have a loyalty program, how do your values connect to this? And how do you create this intangible connection?
Claudia: For brands that do not have the brand presence of a Patagonia or Nike, do you think value-based marketing campaigns are too risky? Or is it imperative today that brands take a controversial stance in their marketing?
Emily: Consumers are looking for brands to take a stance, but only a few brands have executed it well. And certainly, a brand should not take a stance unless it has strong and established values to back it up. Brands struggle when they are wishy-washy with value-based marketing. For example, Keurig, along with a few other brands, pulled advertising from the Sean Hannity television show when Mr. Hannity made remarks in defense of Alabama Senate candidate, Roy Moore. Keurig’s stance faced a backlash from angry customers posting videos smashing their coffee makers on social media, leading Keurig to back away from its initial stance to maintain its brand “reputation.” Compare that to Patagonia, a certified B Corp, which recently strengthened its mission statement to “We’re in business to save our home planet” and is taking action to align itself with other B Corps.
Claudia: What are some metrics or approaches to metrics that brands should use to measure loyalty?
Emily: When measuring loyalty, retailers must balance their desire for short-term impact with a long–term view of how their efforts impact customer behavior and perceptions over time. Marketers tell us that they typically track retention, sales or revenue metrics, and RFM [recency, frequency, monetary value] metrics, but it’s also important to include metrics that gauge the emotional side of loyalty — how loyal customers feel about their interactions with a brand. Survey-based metrics like NPS [Net Promoter Score], sentiment, and customer satisfaction are common here.* Loyalty is a two-way street, so it’s critical to create metrics that measure the value delivered to the consumer and not just what the consumer is doing for your brand.
Claudia: What recommendations would you make to brands and retailers weighing investment priorities for this year? What should be at the top of their list?
Emily: Brands and retailers should be investing in tactics and technology that improve their understanding of customers. Loyalty programs allow brands to collect a lot of data, but most of the challenges marketers have with regard to their loyalty initiatives include personalization, piecing together the customer journey, and managing data from a variety of sources. Before they can start thinking about shiny objects like AI, they need a way to turn that data into insights they can use. Examples include improving the experience of participating in the program itself (e.g., redeeming for rewards), reducing their overreliance on mass promotions, improving the overall customer experience, and tailoring communications and interactions to be more personalized and relevant to each customer.
Stay tuned for next week’s interview, where we’ll speak to Jennifer Belissent about business intelligence tools. For more information on where the retail industry is headed and how to prepare your business, join us for our complimentary webinar events: Future Of Retail Three-Part Series.
* Net Promoter and NPS are registered service marks, and Net Promoter Score is a service mark, of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.