Mobile-first brand loyalty

Loyalty state of the union

Customer loyalty programs have been a favorite tactic of retailers and other brands to retain customers and maximize their interactions for decades. They’re a proven way to boost customer engagement and increase spend, and have adapted to be relevant across a wide range of industries and verticals. But with the advent of mobile devices and the proliferation of digital channels, there have never been more opportunities for brands to embed themselves in customers’ daily lives and interact directly with their audiences, and so brand loyalty programs have had to evolve rapidly to translate to mobile.

But while mobile has revolutionized how brands are able interact with their customers, most organizations have been sloth to revolutionize their loyalty program approach in a similar way. Just because loyalty programs are more accessible than ever before doesn’t necessarily mean they’re more popular—since 2008, McKinsey research has shown that loyalty membership increased 10% each year, with the average household subscribing to 23 total memberships. But of those, research also tells us that customers engage with as few as 8 of them on a regular basis, demonstrating that while it might be easier to subscribe to loyalty programs than ever, users find little use for loyalty programs in the long term.

So how can brands overcome this barrier to engagement and create more effective loyalty programs that transcend the competition? How can mobile become a true asset in the brand arsenal to engage customers more deeply and better demonstrate the lifetime value of a loyalty program? It might seem intuitive, but the simple truth is that loyalty programs that fail to resonate with users fail to accurately address users’ needs.

The best loyalty and rewards programs come from brands who truly understand their customers—not just the demographic data about who they are and what they like to buy, but instead the underlying psychological drivers for their behaviors. To remain relevant on mobile, brands need to structure their loyalty programs around what users actually want from a mobile context, and the best way to ensure alignment with users’ priorities is to start with a user-centric approach.

Loyalty programs that fail to resonate with users fail to accurately address users’ needs.

In this strategy guide, we’ll explore how any brand can build a more effective customer loyalty or rewards program that better engages with target audiences and takes advantage of the unique capabilities of mobile platforms. By rethinking customer loyalty for the age of mobile micro-moments, brands can capitalize on users’ attention and reap the benefits of rewarding customers for their everyday brand interactions.

User-centric, mobile-first loyalty programs

With mobile platforms, brands are empowered to know more about customers than ever before. Analytics helps inform customers’ shopping behaviors, location services reveals their haunts, and mapping these users against social media activity helps understand their preferences. But despite this wealth of new data and new tools that help brands get a fuller picture of their customers, most aren’t using any of this information to enhance their loyalty programs or bring new value to their customers.

From a brand perspective, the rationale for investing in a baseline customer loyalty or rewards program is clear. Customer spending has shown to be 46% higher among companies that offer rewards programs,¹ and even a 5% increase in customer retention can generate as much as a 100% increase in profit.² But in order to effect these kinds of results, a brand’s loyalty program needs to be tailored to better connect with customers than its competitor’s, and the path forward is user centricity. For instance, satisfaction with a loyalty or rewards program is 4.6 times higher when the communications tied to the program feel personalized or relevant to consumers.³ It’s a subtle distinction, but an essential one.

Today, loyalty programs are largely designed around the highest paying, most engaged customers. Those customers who spend the most are rewarded the most, and in many cases there are very steep curves between different rewards levels or tiers. But in order for retailers’ loyalty programs to survive, they need to be redesigned around nearly every customer, not just the most active few percent. It must be clear to first-time customers that the program would be valuable to them, and valuable straightaway—not just after spending an inordinate amount with the brand.

Amazon Prime is among the most popular loyalty programs in the world, and its members spend nearly twice as much on Amazon per year as non-subscribers.

Prime is unique in that it’s a paid loyalty program—$99 per year—and comes bundled with an enormous library that includes digital music, video, and ebook content. But Prime also makes its value immediately clear to first-time buyers: savings with Prime are calculated and trotted out on the product page, Prime is advertised as cutting shipping fees on the screen users enter shipping information into, and its library of streaming content permeates the entire site.

Helping users understand how they’ll get value from the program has catapulted Prime to unprecedented success—of all the millions of customers who shop with Amazon, nearly 50% are Prime subscribers. Coupled with the fact that Prime subscribers spend twice as much, and it’s easy to see how Amazon affords to produce all of that original TV content for Prime customers.

Of course, Amazon is a unique case—it’s been the face of ecommerce for over a decade—but for traditional retailers and brands with a physical presence, the existential threat posed by Amazon and its contemporaries is very real. Either brands can find a way to give customers a firm reason to interact with them rather than Amazon—be it a personalized and compelling loyalty program or otherwise—or they’ll be replaced by a warehouse with algorithms built on top.

But the story is far from over. There are simple tactics and strategic approaches that any brand can adopt to modernize and optimize its loyalty program for mobile. We’ve identified three central pillars of mobile loyalty.

• Personalization. Designing the loyalty program around users’ psychographic drivers, based on user persona research that uncovers how customers truly want to be rewarded, can help ensure the program resonates deeply with a wider swath of brands’ audiences.
• Incentive-based design. Also known as gamification, building loyalty systems and apps around incentives takes the best learning from game design and applies it to the customer loyalty marketing space to boost engagement and keep users coming back for more.
• Mobile optimization. Taking advantage of the unique capabilities of native platforms helps ensure a loyalty experience that is designed for the devices people use most, and helps deliver an app that is able to justify its presence on customers’ home screens.

Personalization

Even traditional loyalty programs aim to be personalized—it makes intuitive sense for customers to feel as though the experience is custom-tailored to their individual preferences. But the degree of personalization is typically limited to the level of the customer’s engagement with the brand, and delineated by the amount of money they spend over time. Spend more dollars, earn more rewards.

It’s a straightforward mechanic that has served many traditional loyalty programs well, but in a mobile context, users have much higher expectations for personalized experiences. In the age of Google Now, which serves up highly individualized and even proactive content to millions of Android customers on a daily basis, even standalone brand apps have come to be expected to compete with world-class machine-learning algorithms. And for many brands, the scale and complexity of these systems is simply too much of an investment to reasonably justify.

But there are methods that can help any app impart the same sense of personalization without investing millions in machine learning. These mobile personalization tactics organize themselves into three arenas: the messaging users see, the criteria for which users are rewarded by the loyalty programs themselves, and the exact nature of the rewards or benefits they ultimately receive.

A conversation, not spam

Recent Pardot research revealed that upwards of 83% of customers find marketing communications to be distracting when they’re not relevant or contextual. In a digital context, marketers know that customers have become increasingly sensitive to these messages and increasingly good at ignoring them altogether. And yet marketing communications are essential to deliver an emotional impact to consumers: the brand’s ability to create emotion with personalized content accounts for 50% of customer loyalty.⁴

So how can brands personalize their messaging strategy without investing in the types of machine learning that Google has perfected? The answer, at least in the short term, isn’t individualization, but instead segmented personalization based on user personas.

Personas have been a consumer marketing buzzword for years, but have exponentially more relevance in a mobile product development context. Understanding users at a deeper level than their demographics—beyond age, income, or location—can get at the real psychographic drivers behind their behaviors and their engagement with the brand.

What does the customer expect to get out of the loyalty program? How does the brand intersect with their daily lives? What specific benefits of the loyalty program are they most excited about?

Understanding users’ expectations and psychological motivators can inform content strategy for messaging in a mobile context, and provides a degree of personalization that approaches true individualization. Delivering messages based on what users actually want, and sending differentiated messages to segments of the loyalty membership based on personas, can ensure that customers notice and find value from the messaging a brand loyalty program delivers. As is true across all digital and mobile products, a one-size-fits-all mobile loyalty approach is really one-size-fits-none.

“Criteria” is a plural word for a reason

The way a loyalty or rewards program is designed to engage with users can be optimized for users’ motivations and to boost effectiveness. To be successful on mobile, personalization for rewards programs means rewarding customers not just for the dollars they spend, but for the type of customer they are. Persona research can help in this arena, too. Identifying existing members’ routes through the loyalty funnel and mapping those paths through an understanding of user personas can empower brands to understand how each persona uniquely interacts with their loyalty program and build rewards models around them.

Brands need to evaluate how the structure of their rewards programs can be personalized to better connect with their users. Dollars saved for dollars spent is cold and impersonal, the type of experience that an algebra equation can provide. But loyalty experiences that introduce a bit of unpredictability, experiences that feel independently tailored to different types of users, are the kind that users will proactively seek out and continually engage with from mobile.

Having different loyalty paths that speak to the interests and priorities of individual persona segments can augment the personalized feel of the mobile loyalty experience, and help first-time users understand the immediate value that the program can provide. As users continue to engage with the program and volunteer more information about their preferences, the targeted experience can only get smarter.

Smarter carrots for smarter phones

Finally, there’s the matter of actually rewarding customers for their behaviors. The primary distinction is behavior-based rewards, versus threshold-based ones. Both can be effective tools in the brand loyalty arsenal, within digital products and within traditional channels, but building smart behavioral rewards is much more sophisticated an undertaking than defining limits for spending at which a coupon is awarded.

Basing the structure of a loyalty program’s rewards on user personas and audience motivations is similarly effective at driving increased engagement and retention among target audiences. Rethinking the very structure of an existing rewards program can seem a daunting task, but both new and existing loyalty strategies can benefit from a user-centered design approach.

Consider not only the quantitative interactions customers have with your brand—for instance, the dollars they spend or the number of monthly transactions they have—but also the qualitative interactions they make. Are they regulars at a specific brick-and-mortar location? Are they exceptionally loyal to a particular in-store brand or product line? Are they a customer who likes trying new items from the menu or mixing up their selections with each visit? Better understanding these interactions can help inform a rewards structure that is deeply personal and highly engaging.

The best practices of modern product development stress the importance of incorporating user feedback at every stage of the product development process. From the ideation and planning phase that relies on audience research and persona segmentation, to development which leans on prototyping and iterative user testing, through deployment with analytics that can help identify the experiences that resonate most, users themselves will always be the fundamental source of truth for effective digital products.

Best practices

• Segment content and messaging to be different based on customers’ psychographic personas.
• Use untapped data about individual users to inform highly targeted communications.
• Track engagement at an audience persona level to automate experiences that resonate most.

Incentive-based design

Gamification is another buzzword that has been heralded as the magic elixir for mobile apps’ engagement woes, and many companies are quick to recommend it for virtually any user interaction symptom. Seeing a drop-off of active users after the first week? Gamify! Can’t get users to convert after a complicated user flow? Gamify it! It’s a category of tactics that covers all manner of sins, but there is some truth to the notion that consumer brand apps can learn from best practices in gaming.

The best mobile apps that are grabbing headlines and featured slots on the App Store incorporate elements of gamification, better known in UX circles as incentive-based design. Incentive-based design rewards mobile app users the way games do, but in non-game contexts, playing off of users’ natural propensity to chase task completion, competition, achievement, and mastery. Tactically, this commonly takes the form of leaderboards, badges, points or tier systems, progress indicators, and more in some of the most popular apps.

So why are these tactics so pervasive in mobile app design? Because they work. Gamification strategies have been shown increase engagement metrics by 100% to 150% in mobile applications,⁵ and are deployed by brands to great effect in a myriad of industries. But gamification isn’t a magic bullet that will automatically boost effectiveness and engagement, particularly when it comes to branded apps touting loyalty programs. There are a handful of useful applications of gamification strategies that brands can lean on, and most of them lean on the existing game mechanics found in traditional loyalty or rewards programs for decades.

Maximizing minimal session lengths

Users are increasingly engaging with digital products in what marketers are terming “micro-moments,” the few-second interactions that millions of users make within apps in between meetings or as they’re waiting for their train. Considering that mobile session lengths hover at just over 60 seconds—less than half of the average session length for desktop—optimizing an app for micro-moments can help users be more efficient in their interactions with a brand and also feel more comfortable weaving those interactions into the fabric of their lives.

As apps have begun to be designed around these interactions, appropriate design thinking around shorter session lengths has actually been shown to boost engagement and user retention in the long term. Helping users accomplish the one frequent task that makes the app valuable to them—say, checking a balance or making a quick payment—with as little friction as possible will delight users and help earn the app’s place as part of their daily stable.

Within the realm of loyalty or engagement programs, this means making common tasks related to reward criteria as frictionless and expedient as possible within the user flow. Identifying key red routes is an essential part of design planning and content architecture before launching an app, and understanding personas can help inform these decisions even more.

Intersection with loyalty programs

Traditional loyalty programs already make extensive use of gamification mechanics, and were doing so long before mobile gaming became an industry force to be reckoned with. For that reason, many loyalty and engagement programs already have these components built in—reward levels and tiers, progress indicators toward next rewards, and badging systems for qualitative interactions are all common among loyalty programs today.

But there’s no reason brands should draw the line there. Many loyalty programs operate like a virtual punchcard, rewarding users automatically for ten visits and resetting the card after they’ve redeemed their reward. But brands need to consider not only how these existing experiences can be modified to play better to gamification mechanics, but also how they can be presented differently to reward gaming pathways in a mobile context.

Consider the simple punchcard, and how it might be presented differently to introduce some variability and game mechanics into the user experience. Maybe each punch becomes a tile on a game board, and users progress toward an end state that holds their mysterious reward. Maybe each punch unlocks a new badge—a random one each time, or one tied to the item they’re purchasing—and fills out a virtual lapel that users can boast about to friends on social media. No matter the end-user representation, it’s important to note that none of these approaches necessitate a change to the actual loyalty program itself, but instead just present it differently to play to gamification mechanics.

American Airlines: capitalizing on game mechanics

In the early 2010s, to mark its merger with United, American Airlines ran a social and digital promotion called the AAdvantage Passport Challenge. The program included a digital “passport” that travelers could fill up with stamps awarded for the places they travel, quizzes they complete about the history of the airline, and social activity. Ultimately, users were encouraged to share their completed passports to social media and show off to their friends.

The simple program was enormously successful: participants earned more than 70% more stamps than expected, and the ROI produced by the program for American Airlines was over 500%. The campaign was smart to tap into the customers’ psychological need to fill up an empty passport page with stamps, and capitalize on their desire to be social about their traveling. The promotion took a simple mechanic—blank pages in a passport—and aligned earning badges with tasks people already wanted.

Consider that airlines themselves have some of the oldest and most popular loyalty programs in any industry with mileage rewards programs. These engagement programs are successful not because users particularly like one airline over another, or because the benefits are so dramatic, but instead because they successfully align the program’s intentions and KPIs with the customers’ motivations. Frequent flyers want to demonstrate that fact to their friends. If American Airlines give these customers an outlet to showcase their endeavors, they’ve found a sweet spot in customer loyalty within which both the brand and users win.

Best practices

• Reconsider how existing components could be represented differently to be more gamified.
• Ensure that criteria for reward or advancement is aligned with users’ motivations.
• Make sure that mobile apps and loyalty systems are lightweight and fast for users to interact with.

Mobile optimization

Among many audiences, mobile platforms are customers’ primary interaction point with brands—their mobile device is how they research products, make purchases, communicate with customer support, and more. And as tablets become more common and the mobile form factor becomes the primary computing device for many users, mobile platforms will oftentimes be the only interaction these customers have with the brand. So as the channel users will grow to engage with most, expectations for brands’ mobile apps have never been higher. How can they earn their place alongside the Instagrams and Snapchats of the world?

It’s important to remember that just because a brand offers a mobile app on the iOS App Store or Google Play Store doesn’t mean that audiences are going to use it. Most consumers only have around 36 apps on their smartphone, and use only a handful of those on a regular basis. Once you control for popular third-party apps like Facebook and Gmail, the opportunity space for branded apps looks increasingly slim. How can brands ensure that the apps they build will stand out among the crowd?

Simply put, unless a brand’s app is providing real value over and above what a mobile website could offer, it shouldn’t exist. The easiest question to ask about a theoretical digital product is what about the idea necessitates a mobile app. Is it using the customer’s location consistently? Does it need to deliver push notifications to provide the user any value? Unless the experience relies on the unique capabilities of native platforms, it probably shouldn’t be an app at all.

Unless a brand’s app is providing real value over and above what a mobile website could offer, it shouldn’t exist.

Beyond that foundational question, there are some best practices that can help ensure branded loyalty apps are impactful on mobile native platforms. In fact, the native operating systems themselves are designed to facilitate just this kind of system-wide engagement: both iOS and Android offer a wide range of opportunities to extend apps and be relevant to users across the device. Crucially, this toolset goes beyond just distributing a pass that works in the iOS Wallet app.

Using mobile to be more accessible

When many brands consider the “mobile wallet” concept, their focus is narrowed to the Passbook-era distribution of passes with barcodes that could be scanned at the point of sale. But Passbook hasn’t been Passbook for nearly a year now—it’s Wallet, and Apple has included new features that give brands even more tools to extend their apps into users’ daily lives. Geo-fence–sensitive Passbook passes were a great way to remind users of their coupon or membership card directly on the iOS home screen when they were nearby a retail location—and in iOS 9, they still are. But Apple is making big strides with Apple Pay, and has introduced tools that allow brands to come along for the ride.

Beyond passes, iOS 9 introduced Value Added Services Protocol cards that operate just like Apple Pay cards and can be distributed by third-party native apps. This means that brands’ rewards cards can coexist within Apple Pay alongside users’ credit cards, can use the NFC antenna on iPhone 6 and 6s at the point of sale, and can facilitate transactions that use customers’ rewards points from directly within Apple Pay. This is yet another channel that brands can access to make their engagement programs a valuable part of customers’ lives, and also gives users a new opportunity to use their phone’s cool new features.

But loyalty programs go beyond spending money, and so iOS and Android offer tools to extend them across the operating systems, as well. Making engagement programs more valuable means extending their functionality to other corners of the system, and extension points on both platforms help put valuable information in customers’ hands immediately—even if they never touch the app itself. Home screen widgets on Android can provide a bird’s-eye view of essential progress indicators, and Notification Center widgets on iOS offer an at-a-glance view of rewards or coupons earned. Building new experiences for form factors like Android Wear or Apple Watch can help make information instantly relevant, and both offer multiple areas to update users with micro-moment–ready data points.

And, of course, there are push notifications. Funnily, while push notifications are frequently the first tactic people recommend to boost user engagement and augment retention, abuse of push notifications are also one of the fastest ways to get your app deleted. However, smart use of push notifications with targeting and messaging informed by persona research can offset any negative user perceptions around notifications and have the desired effect. But going one step further, some of the more sophisticated brands on mobile have made use of interactive notifications to offer users quick actions to common tasks, actionable from their lock screen or wearable device. It depends heavily on the nature of the engagement program, but allowing users to complete common tasks from the notification itself capitalizes on micro-moments and helps deliver real value to users.

Using mobile to be more contextual

Apart from making loyalty and rewards information accessible to mobile users, it’s critical that brands optimize their mobile experiences to be contextual based on the user’s present circumstances. The best messaging feels not only relevant to users based on their interests, but also contextually applicable to their current objectives or tasks throughout their day. And some of the best sources of data that can inform this kind of contextually relevant messaging is where the user is.

Geo-location, and geo-fences in particular, are a massively common tool in brands’ arsenal to understand when users interact with physical brand spaces over time. But beyond sending a notification when users are nearby, brands can use geo-location to understand how they fit into users’ daily routines and when communications are most relevant. This isn’t just when they interact with the retail presence, but also how: based on location data sourced over time, apps can begin to understand how the brand fits into customers’ daily routine and time messaging when it’s most relevant.

But location is more granular than GPS. Tools like iBeacon can help brick-and-mortar retailers understand customers from a micro-location perspective and begin to draw conclusions about how audiences interact with their physical spaces. iBeacon doesn’t have to seem like a toy—while many brands have dabbled with beacons to limited degrees of success, others have begun using the hardware to understand how users flow through a physical retail space and deliver targeted messaging to customers in a specific retail context. iBeacons aren’t magic—they certainly can’t do all of the things that many mobile marketers seem to want them to do. But they aren’t toys either, and a strategic beacon deployment can help retailers improve the in-store experience for customers and more intelligently target messaging to them even after they’ve gone home.

Walgreens: using mobile to be more personal

Taking advantage of everything mobile platforms have to offer doesn’t need to be a wholly technical endeavor. In fact, Walgreens’s smart use of native technologies has empowered them to introduce new rewards criteria to their Balance Rewards program that tracks users’ physical activity and overall wellness to offer new rewards based on customers’ healthy lifestyle choices.

Walgreens is way out in front when it comes to their mobile loyalty program—they were among the first to adopt Value Added Services Protocol cards for use in Apple Pay, and offer a suite of native loyalty apps that boast a richer feature set than many competitors’ flagship apps. But by sourcing data from Apple’s HealthKit and Core Motion in iOS 8, Walgreens has been able to catalog a snapshot of users’ physical activity throughout their days and map those behaviors to rewards within the Balance Rewards program. And this is an experience that would be impossible without direct native access to the iPhone’s motion co-processor, a feature that no mobile website could deliver.

What’s remarkable about this feature of Walgreens’s program is that it’s rewarding customers for behaviors that are not only qualitative, but also don’t interact directly with the brand in any measurable way. It’s simply a way for Walgreens to reinforce its image as a brand that cares about its customers’ healthy lifestyle choices, and encourages ongoing loyalty among those users who have similar priorities.

Best practices

• Look for opportunities to extend the loyalty experience and provide value on mobile—outside the confines of the app.
• Define a messaging strategy that is proactive and contextual to users’ actual needs.
• Remember that, in order for customers to adopt it, a mobile app UX has to be exponentially better than the website’s.

Looking ahead

As brand loyalty programs and mobile platforms continue to evolve, the features of each that will be relevant to brands will be inextricably linked. New technologies, new approaches, and new marketing trends will inform the roadmap of engagement programs going forward, and the best practices outlined in this strategy guide represent only a few positive first steps into that future.

From personas to personal

Segmented personalization is steadily evolving into true individualization, so every brand loyalty experience is as unique as each customer. If that sounds ambitious, consider the degree to which cloud computing has become more democratized and accessible to users and brands in recent years. While user persona segmentation is still the best way to optimize digital experiences for users’ psychographic drivers, the mobile industry is trending away from segment-based personalization to machine learning–assisted individualization, so that in the future, every brand loyalty experience is completely different from person to person.

From channels to channel

As brands seek to tick off all the checkboxes necessary for the current “omnichannel” strategy—having a strong digital presence in responsive web and native, which matches a strong physical presence in retail locations, which matches a concerted marketing automation push, and so on—a new trend is emerging at the convergence of all these channels. From a customer perspective, they’re not preoccupied with what channel they’re using to interact with their favorite brands. They perceive every channel as an extension of the same brand. As organizations shift to deliver a more cohesive, more seamless “one-channel” strategy that bridges all these experiences, customer engagement and loyalty programs will be a common thread that permeates all of these digital and physical initiatives.

From mobile to everything else

The Apple Watch isn’t the end of the story. Within the super-category “wearables” is a plethora of varied technologies and experiences, each vying to become the next big digital platform that revolutionizes every aspect of our lives. To say customers will ever want to engage with brand loyalty programs from a virtual reality headset might seem ludicrous, but brand marketers in 1995 couldn’t have conceived of an experience that might compel a customer to carry a brand’s software product with them on a cell phone everywhere they go. As these technologies evolve and gain traction, many of the same engagement principles will continue to apply, although the tactics necessary to reach consumers might depart wildly from the conventions we’ve become accustomed to in 10 short years of smartphones.

From the blog

• Incentive-based design • April 2016