Loyalty marketing is undergoing a period of revolutionary change – change that will require a new generation of leaders to evolve the industry to leverage today’s powerful analytical tools to build strong relationships with best customers. In this month’s sponsor spotlight, we ask new Maritz Motivation Solutions president Drew Carter about the transformation of loyalty from a marketing program to a strategic imperative that sits at the center of both the brand promise and the customer experience. His message: Watch out, because the pace of change will result in both unprecedented challenges and unmatched opportunities in the decade to come.
Q. Can you tell us a little bit about your background, and what attracted you to join Maritz Motivation Solutions?
Carter: For the past six years, I’ve been at AlixPartners working with companies on digital transformation by helping them move from intuition-based to data and insight-based business decisions. One of the biggest levers available to companies seeking revenue growth is marketing – in all its flavors, from brand marketing, to transaction-level marketing, to employee engagement and sales force effectiveness. The work I’ve done for clients to improve marketing effectiveness typically focuses on all elements of performance-based marketing, including loyalty programs. I’ve also helped clients understand how to incorporate data science and machine learning into their marketing strategy to drive growth.
That’s the arena where Maritz Motivation Solutions competes. When I spoke with Steve Maritz and got to know the company, three aspects of the business strongly attracted me. First, Maritz offers a world-class software platform that drives relationships with more than 100 million customers and can serve as the foundation for operating complicated loyalty programs on a global scale. Second, I was impressed with their client base of marquee brands that add value to the business. Third, Maritz’s ability to execute on strategy is unmatched: our decision and behavioral science teams can drive ROI better than anyone, and our creative groups are first class. These abilities enable us to be both a turnkey solution provider and a strategic partner to our clients. At the same time, there’s so much market share available and so much white space for us to help clients activate additional value from their marketing efforts. This combination of capabilities and opportunity is exciting, and I’m happy to be a part of it.
Q. What are the major challenges you see brands facing today in trying to earn customer loyalty?
Carter: A loyalty program should start with a brand positioning. In the past, I’ve seen companies identify an economic challenge and think that a loyalty program might be the solution. The CMO assigns someone to create the program, and that person proceeds to check the boxes: we’ll have a points program, we’ll give away stuff, and we’ll be done. The result is something like what happens with kids playing the telephone game – by the time the company gets to the program execution stage, they’ve lost their way, and the program design is divorced from the economic challenges that created the need for it in the first place.
In contrast, successful loyalty programs are more than a collection of marketing tactics; they’re a core part of the company’s brand and its reason for being. These programs marry the brand promise to customer relationships to deliver both message consistency and an experience that delights customers in every way. Instead of just checking boxes to create a simple transaction-based loyalty program, create a program that sits at the heart of your experience delivery. Instead of a loyalty program, create a loyalty experience. Doing so requires a long-term vision, and some folks need some help transforming what might be a decent loyalty program into something that fulfils that vision. That’s where we come in.
Q. Rewards have always played a significant role in the loyalty equation. Do you see them remaining as part of the tool set?
Carter: Here’s an analogy. Most of us have had experience in digital marketing metrics – take media mix modeling, for example, in which you’re measuring the impact of both traditional and digital media together. One of my clients was a credit card company engaged in only digital media mix modeling; they decided their display ads were ineffective and killed them, and in the middle of my analysis I see an entire data set go dark. But when we looked at the whole integrated system of digital marketing, we could see the halo effect of those display ad impressions right in the middle of our model and quantified a five-to-one impact. So we turned them back on.
In my opinion, digital marketing gives you false sense of precision, and I think the same thing is true of rewards. We’ve relied solely on rewards in the past because the results are easy to observe and we can measure their impact on behavior. If you rely solely on rewards to drive behavior, however, then you don’t really get a full view of the customer – you only get a glimmer. Today, we need to place rewards in their proper context as one part of a holistic loyalty experience. We will always want to reward our best customers, but doing so will require us to evolve our understanding of rewards – to move beyond traditional models of rewards, and to incorporate new models to measure their impact – to maximize their ROI.
Q. How big a role do you see decision sciences playing in the future of customer loyalty?
Carter: Ray Kurzweil said that we always underestimate the pace of technological change, and I think that’s true of decision sciences as well: the pace of change will continue to surprise us all. I used to run a decision sciences shop at one of my former companies. We built predictive models based on machine learning, things like trying to understand who was most likely to buy a car in the next 90 days. In most cases, we can be fairly accurate, but traditional decision science stops at the point of prediction – at that point, you resort to testing a mix of marketing offers to see what works.
With the accelerating abilities of AI and machine learning, we’ve now converted so much of corporate decision-making to algorithms, to the point that we think traditional decision science has made us omniscient – but we’re not, because in many cases we still don’t know what to do about the predictions we’ve made. Now, we’re about to see a rapid evolution of decision science coupled with behavioral science, and this combination will transform marketing. We’ll be able to understand not only what behavior we’re likely to see from our customers, but what to do about it. We’ll develop a heuristic approach to predictive analytics to understand what levers work best to drive customer engagement – and it will be like igniting nuclear fusion.
Q. How will our traditional approaches to loyalty marketing need to change to address these challenges?
Carter: As I think of it, loyalty marketing is a subset of customer experience delivery, or CX. One of the first steps to transformation is to stop being transactional and short-sighted in loyalty program design, and to align your loyalty experience delivery with your brand promise. I was at a client meeting recently in which the internal team was very excited about offering customers a $25 voucher on their birthday. When I asked the program champion, ‘Is this tactic really what you’re excited about?’ she had to admit that the answer was no. Transformation requires us to step away from building transactional loyalty programs and thinking of them as part of the holistic customer experience. Stop assigning loyalty marketing – one of the most potent marketing systems we have – to transactional-minded thinkers, and assign it to a true customer champion. Embark on this journey now, and in ten years you’ll be amazed at the transformation of your business.