What If Loyalty, Is About Building Trust, Not Accumulating Points? An Interview with Justin Huckins.

Justin (00:00):

Why align values between organizations and customers? It's what builds trust. It's what demonstrates that you know each other. One really cool example of this and something that is emerging is what’s called green loyalty, which centers around the customers demand for sustainability, as well as customers demanding for loyalty. They're demanding for sustainable options and organizations to represent and demonstrate how they are supporting sustainability.

Jim (00:30):

Welcome to What If? So What?, the podcast where we ask what's possible with digital and figure out how to make it real in your business. I'm Jim Hertzfeld.

Kim (00:39):

And I'm Kim Czopek.

Jim (00:40):

And today we'll ask What If? So What? And most importantly, Now What?

Jim (00:45):

Loyalty is a powerful force in our society. We love movies about loyalty. The Godfather comes to mind, of course, we love loyal pets, dogs, not cats, sorry, Kim. We love our brand loyalty programs. But loyalty programs as we know them, are changing, and changing rapidly for a lot of reasons. At this time, I just found this in the New York Times, Duncan customers who used to spend about $40 to earn a free drink are now having to spend about $90 for the same reward. A lot of that's driven by inflation, but there are a lot of other things in motion. In the digital era, there are many, many ways to meet customers where they are and drive loyalty, true, genuine loyalty, and with so many possible options and so much more customer insight to work with Kim, I want to find out what if loyalty is about building trust, not collecting points?

Kim (01:35):

Well, Jim, first of all, I am a dog person, so I don't understand your reference earlier. But loyalty is tough. Organizations have had a tough time, I think defining what loyalty means to their own organizations because it's not an action like acquisition. It's building that bridge of trust and emotion and confidence and advocacy. You could measure loyalty in all sorts of ways, but the heart wants what the heart wants. I found a recent loyalty study that said 91% of respondents either are sometimes open to trying new brands or would love to try new brands. So what? I mean, do customers really want a relationship with the brand or do they just want the best product at the right price at the right time?

Jim (02:20):

Well, Kim, first of all, I forgot you do have a lovely dog, so I missed that one. Bad loyalty move on my part. Thankfully, we have someone to try and answer these questions. I want to welcome Justin Huckins, who's a director in our digital strategy team to answer the question and resolve this for us. So, Justin, tell us what is loyalty today?

Justin (02:39):

Thanks Jim. I'm glad to be here with you guys. I really appreciated the Godfather reference as it relates to loyalty as well. Simply put, loyalty is modern customer service. For a lot of organizations, they haven't made the plunge or the decision to invest in loyalty experiences yet, but they've really started to become table stakes for many organizations across the industry. Those who have chosen not to invest, those who do not view them as table stakes across the industry and across industry verticals are really in a place where they're watching their customers slowly erode their customer base, slowly erode. A lot of times when we think of loyalty experiences, we think of them narrowly.

Justin (03:17):

We think of them as programs, cashback offers, and point systems. But they've really become a lot more than that. They have really become mechanisms for customers to get emotionally attached to a brand and engage with them in unique, non-traditional, and fun ways. They're not just about creating loyal customers, they really show your customers that you're being loyal to them. That's why we call it Modern Customer Service. Organizations have historically invested in customer service to be loyal to their customers. Well, that's what these loyalty programs or experiences are. They're ways to show your customers, you're loyal to them. Some of the traditional means, the brick and mortar and customer service representatives, and call centers have provided, as organizations have moved to become more digital-first, it's become difficult to provide that same level of customer service. And that's where these loyalty expansions are the great equalizer because they give organizations a way to show customers they still care. But within that digital-first model and with a lot less overhead. Now, that doesn't mean that some of the traditional means of customer service are gone, there has to be a way to show loyalty to customers in a more remote world, in a world where customers no longer want to call into call centers, or there aren’t brick and mortar locations to go talk to a customer service representative. Loyalty is that equalizer, and it provides that medium. There are several examples of this.

Jim (04:46):

Hey, Justin. You said something that triggered me here and I want to be really clear about a point you made that you flip the tables. You've mentioned a couple of times that brands need to show how they are loyal to their customers. I think most people think of loyalty as something I have to keep doing. I have to be loyal, I have to keep coming back in order to get rewarded. But you've flipped the table maybe without knowing it. I think that's fantastic.

Justin (05:11):

Absolutely. It is a rethink in many ways when it comes to loyalty because brands are thinking about how do I get my customers to be loyal to me, versus how do I represent loyalty to them? Looking at the customers is the way to gain them for life, to remain loyal to them, show them that, and demonstrate it. So, loyalty is returned with loyalty. There's a lot of examples of this too. One of the examples that, probably more than anything, shows loyalty to customers is what we see happening with a lot of C-stores, restaurants, coffee shops, and grocers. They're working to create emotional connections with their customers by demonstrating to them that they get it. When it comes to things like inflation and the cost of goods increasing, it's hard to watch the news these days without that being the primary topic. Goods are going up. Inflation interest rates, all these things. So, actually just the other day my wife shared with me that butter has gone up to $5 for a pack of butter, which to both of us seemed shocking in that how much it costs compared to what it cost several years ago. So what these C-stores, restaurants, and grocers are doing is they're providing ways to earn discounts on food, gas, and other goods that have increased. One of my favorite examples is Kroger Rewards. It has been around for a while but they have really started to actively try to provide financial relief via their loyalty experience with their fuel rewards program. So, the program is set up in a way that whenever you go to purchase groceries, you earn points. No-brainer there. But the interesting thing is how those points convert. They convert to money off at a gas station. So, on a monthly basis, we get about a dollar off per gallon usually twice a month. As loyal Kroger customers, that provides us a big relief at the gas station, and they're providing a lot of other customers huge relief at the gas station because knowing they're spending more on goods, but they're seeing a return on the cost of gas, which is pretty high right now compared to its historical average. So, they're working to provide a way to show customers, Hey, we get it. We're going to help you save money at the gas pump by you giving us your loyalty. So, we're going to be in return, loyal to you. Another example that's in the automotive industry, with the rise in interest rates GM Financial, Nissan Ford as examples. They've introduced these experiences that provide points and discounts and cashback just for using their services or paying your bill on time. And those points can be used to pay your bills later on, as you pay your bill on time. You can actually pay your bill with points. You can buy accessories or purchase future service needs. And this has helped cut down or to reinforce that they get it, that customers are struggling with interest rates. If you pay your bills, we're going to help give you some relief from that.

Kim (08:03):

That seems like a much more valuable reciprocity in giving me your business. You could think of it as a discount, but it seems more tangible to pay with points versus getting a free candy bar with your next purchase free cookie, that kind of thing.

Justin (08:23):

Oh, a hundred percent. One of the things that I like to say at least it's loyalty is a competitive person. Loyalty is a zero-sum game. There are winners and losers and, as you said, it's about what type of monetary value or otherwise you're providing your customer, if you're just giving them a free candy bar, they really don't see the value. They really don't feel that you get it or that you are providing them loyalty. It's viewed as somewhat of an afterthought. Why? It's a zero-sum game, as you either retain or retain your customers with an engaging loyalty experience that provides them tangible, solid benefits. This is for both existing and new customers. Or you lose them by having a subpar loyalty experience, only giving them a candy bar when they spend a thousand dollars with your whatever it may be. You lose them because they really don't view that they can trust your brand, that you really are representing loyalty to them. But the reality is, they expect loyalty. That is part of the change in customer expectations. That's why these loyalty experiences aren't necessarily options, they're necessities. That's cross-industry. It's not just narrowed to one industry. Customers expect it. Why do they expect it? They want organizations to show their loyal to them, as I've said, but they also want these organizations to align to their values and engage with them. It's become so important because there's so many options out there, and loyalty experiences everywhere. Also, the idea of quality and Customer service alone, the more traditional customer service means driving your brand. Those things have become subjective. I mean, we all see the various metrics in ways that people are saying quality but it's subjective and it's opinion based. It's hard to equate quality as your driving force anymore to maintain loyalty to your brand. You have to show ways that you're aligning with the customer's values.

Kim (10:28):

So, Justin, we talked a lot about loyalty benefits to the customer. Beyond the obvious, what are the benefits today for organizations to drive towards that loyalty play?

Justin (10:41):

There's a lot of traditional benefits. So there are things like attracting new customers, retaining new customers, getting new products in front of customers, and using customers to market your brand. Honestly, I'm one of those people where if I hear about a strong loyalty experience, or a bad one for that matter, I share it with the world. Everyone's going to hear about it, my opinion is true of many of what I think of it, and if there's one I really like. I try to explain it to the extent to get more buy-in from my friends and family around those experiences. Those traditional means are still important, but there are other really important benefits that are provided to customers. For example, community building around your brand. Most successful loyalty experiences are in us, particularly connecting to the customer's values and building trust, which are finding ways to get customers talking to each other. When you get the customers talking to each other, you find out their values align, and when their values align. It builds even more loyalty in your brand and you're getting people connected, kind of building a community, if you will, around your brand. So that's an important one is getting those social elements in there that help build that community. Interestingly then, this is one that applies both to the organization and the customer. You can segment profitable and unprofitable customers, and you might ask yourself, well, why does that matter to customers? Well, when you integrate your loyalty experience with the purchasing process, you gain a better understanding, a better knowledge of your customers. You can utilize data to determine what kind of customers are engaging with loyalty experience, knowing your customers more and providing them with a more personalized experience. You can also understand what customers are purchasing, and what customers are just participating in your loyalty experience, but they don't actually buy anything, and you reward those who are the purchasers, the customers who are both engaged but are purchasing. By understanding who is purchasing, you can provide them additional offers that are tailored to them to drive even more loyalty and purchasing because you're showing them that you know them, just by the basic practice of segmenting profitable and unprofitable customers within your organization. So, it's a twofold value. The last benefit, and this is probably one that I'll bring up, is the most important one. One of the biggest benefits to your customers, which also benefits your organization, is it's easier to sell to known, loyal customers than to new customers. The more customers interact with your loyalty experience, the more they relate to your brand, become more educated in it, and most importantly, once again, build more trust. In turn, customers stick with the brand even longer and create more lifetime value, and that lifetime value is equated to those customers who've been with you for a bit, and who will stay with you for a bit. From a customer perspective, you gain more lifetime value. From an organizational perspective, you gain more lifetime value. It's a due-fold benefit.

Jim (13:42):

We haven't used this word in a while, empathy. A known customer means I've got empathy, right? So, just reinforcing the value of empathy.
Kim (13:49):

You give what you get. You give what you get.

Jim (13:51):

Thanks. Right?

Kim (13:53):

Stay top of mind. Kind of back to empathy and the basics of customer satisfaction, right?

Jim (13:59):

So, Justin, a few ideas on how people are doing this today. what's happening out there?

Justin (14:05):

Yeah. Well, the first one's kind of obvious which is monetize it. And Kim brought it up previously, if you're giving a candy bar when somebody is spending a significant amount of money, it's not necessarily going to provide them value. So, monetize loyalty by giving cash back significant discounts or something for free. People love anything free, right? Credit cards have been doing this for quite some time and doing it. Successfully with point systems or cash back mechanisms when you use your credit card, you get cash back. It seems very simple. It's like, hey, this has been in place for a while, but it still holds true. Monetize it for your customers. That's probably the most evident and easy one to grasp.

Justin (14:51):

Other ones are celebrating your customers. So, another example of this would be when your customer has their birthday or an anniversary with your brand, celebrate them. This builds a relationship with your customer. The empathy piece. This builds trust with your customer. My wife and I go on a circuit on our birthdays where we go to Baskin Robbins and I love coffee. So, any coffee places or any places that are going to give me birthday freebies via their loyalty experience, I'm going to go there. We've taken entire days just to go see how much free stuff we can get for the fun of it around our birthday. Guess what? Brands pop into our minds, the ones that provide us an opportunity to celebrate with us. So that's a big one. We've talked a little about that personalized experience. Organizations should be leveraging loyalty experiences to cross-sell upsell products via personalized offers. Again, we talked about lifetime value. If you integrate your loyalty experience with a purchasing process, organizations can learn what customers are purchasing. This helps provide them with that personalized experience, bringing more lifetime value. It helps during the rainy-day seasons, where their seasonality, every industry has situations where there's slowness or seasons where there's slowness. Understanding your customer allows you to provide them with offers that are personalized to them during those slow seasons, helps drive your organization's or an organization's revenue and again, helps the customer feel like there's a relationship there. You know me, I know you we're loyal to each other. We have trust. Last but not least, align values between organizations and customers. It's what builds trust. It's what demonstrates that you know each other. One really cool example of this and something that is emerging is what's called green loyalty, which centers around the customers. It demand for sustainability as well as customers demanding for loyalty. They're demanding for sustainable options and organizations to represent and demonstrate how they are supporting sustainability. So, one of my favorite examples is Verizon. Verizon has incorporated this into their loyalty experience called Verizon Up. You can claim offers, and I claim offers to plant a tree via some of the organizations that they partner with, or clean up the ocean, or even humanitarian efforts like, let's help feed children in a country where there's food scarcity, or provide water where there's water scarcity. If you can align to the values, the things that your customers care about, and learn what your customers care about. It all goes back to that same idea of building trust aligning values and building a relationship between the customers and the organization.

Jim (17:26):

Thinking differently, I think just thinking broadly. I think this is maybe a good start, Justin. Just to help us all think about how we build trust in all kinds of relationships. I'm actually thinking about how I bring, we build loyalty even within an organization, we're between teams. I hope this is a rather good start for thinking differently. Well, hey Justin, thanks a lot for joining us today.

Justin (17:35):

Oh, thank you guys for having me. It's been great.

Jim (17:37):

Awesome. I would maybe leave us with a little step forward and ask yourself, why are your customers coming back to you? Do they trust you? Are you aligning on values? Are there other reasons they're coming back or not?

(17:50):

Find out. And then keep doing that. And we hope that you will also be a loyal listener to this podcast, so please like, yes, that you knew it was coming. Please like, rate, subscribe, share, and of course keep asking What If?, So What? And most importantly, Now What?

Jay (18:06):

You've been listening to What If, So What?, the Digital Strategy Podcast. From Perficient with Jim Hertzfeld and Kim Czopek. We want to thank our Perficient colleagues, JD Norman and Rick Bauer. For our music today, subscribe to the podcast and don't miss a single episode. You can find this season along with show notes at perficient.com

Thanks for listening.