Creating a Loyalty Program Fueled By Zero-Party Data!
Loyalty programs run on data, and zero-party data is premium grade.
Loyalty programs! If not for them, I would have spent thousands of extra dollars on ribeye steaks in the past 12 months (according to my receipts), not to mention the amount saved on one of the world’s most precious resources…gas for my 2007 Toyota Corolla. I willingly gave Kroger some of my personal information in exchange for some discounts on my gas and groceries. On top of this, it’s well known that Kroger is taking a peek at my shopping history including the products I buy, when I visit, and how much I spend.
What else is going on? A whole bunch of market research and number crunching. After all, reward and loyalty programs weren’t created just to make customers happy. They are an impactful method to collect and mine valuable data to fuel business decisions, optimize products and services, seek out and create partnerships, and much more. The sophistication and application of loyalty programs have become refined over the decades, but is there room for…hold my beer…even more refined sophistication and application? Well, I wouldn’t have asked if I wasn’t gonna tell you. It’s 2023, not 1981. Time for the zero-party data loyalty program revolution! Yeah!
Loyalty programs have technically been around since before there was money. The ancient Egyptians were rocking a tiered loyalty program consisting of beer and bread tokens well before American Airlines dropped the first frequent flier program in the early 80s.
Since then, the popularity of loyalty programs have increased to the point where 80% of Americans participate in at least one loyalty program.
75% of those cite the ability to earn points leading to discounts, rewards, and other benefits as the main reason for signing up.
From a business perspective, the rationale for implementing loyalty programs is obvious. Loyalty is the name of the game when it comes to retention. The probability of selling to an existing customer is between 60-70%, with the probability of selling to a new customer ranging between 5-20%. Acquiring a new customer is between 5-25x more expensive than retaining an existing one. Just a 5% increase in retention yields a 25% increase in profit. Simply put, existing customers provide extreme value to a business.
Loyalty programs are a great way of keeping customers, well…loyal. There’s tons of statistics out there, so I won’t completely inundate you with them, dear reader, but generally speaking, loyalty programs greatly increase retention, drastically improve customer lifetime value, enhance customer engagement, and lead to a metric f-ton of data being collected by businesses around the globe.
Loyalty Programs with and Without Zero-Party Data
You know how businesses are always hungry for data, like starving wolves in the wilderness? Well, zero-party data is a feast that customers willingly serve on a silver platter. It's the information customers provide directly to businesses, like their preferences, interests, and even their deepest desires (okay, maybe not their deepest desires, but you get the point).
When it comes to data, time and resources are lost in deciphering patterns and deriving meaningful insights. Loyalty programs were implemented to collect data directly from the consumer to mitigate against the guesswork of putting together accurate profiles on customer behavior and purchasing habits. Nothing is more valuable than data when it comes to optimizing the customer experience and increasing retention, and the most valuable type of data out there is zero-party data, because it is straight from the source. Like, actually from the source, not in a Dasani type of way.
The important factor to consider in implementing a zero-party-driven data loyalty program is that it is a mutual relationship between business and customer.
In a privacy-centric era, people are beginning to understand the true value of their data, and more and more people are expecting some form of compensation in return for giving up their data.
A loyalty program is an efficient and mutually beneficial way for businesses to acquire the data they want while simultaneously incentivizing participation from the customer.
There’s only so much information that can be derived from a purchase. It paints a picture, but not a full one. Zero-party data is the glue that ties data points together and improves upon pre-existing processes such as customer segmentation, predictive analytics, and cross-selling and up-selling, and therefore maximizes revenue and customer satisfaction.
If someone who is a part of your loyalty program purchases a pair of hiking boots, you can make some inferences. You know their boot size, the color they chose, the price, the brand (maybe it’s yours!), and can guess that maybe they are an outdoorsy type of person. I mean, they bought hiking boots after all.
But what if they also play pick-up basketball three nights per week, or that they’re the mother to a growing toddler, or that they don’t actually hike at all, they were just purchasing a gift for their friend? Historically, you’d need to be reliant on third-party data purchased from other businesses or provided via existing partnership programs, then cut through all of the potential noise, and arrive at the above conclusions, maybe..hopefully…hopefully maybe, after a lot of time and resource expenditure. Then maybe you can send them some promotions and ads for basketball shoes and baby Crocs, or whatever.
But what if you can just…ask them what they want? And what if they just told you? That’s the value of zero-party data. You can just ask. So long as you provide the customer with something they want, they’re inclined to provide answers to your questions. For example, you could offer a discount or voucher for 25% a pair of shoes every 6-12 months in exchange for completion of surveys that ask what they’re interested in buying, or offer the same discounts in exchange for watching a series of advertisements and rating them in terms of their effectiveness and answering whether they are interested in the product being advertised.
Customers get what they’re looking for (after all, 85% of customers would trade data for a discount or coupon) and businesses get the data they want to help fuel revenue in their business all while gaining the ability to provide the customization and personalization customers expect.
So what can you do with all that zero-party data?
Putting Loyalty Program Data to Use
If you’ve heard it once, you’ve heard it thousands of times. Data is a goldmine. The data collected from loyalty programs shine bright. Every time someone swipes their card completing a transaction, a more complete profile of the consumer is being built. This in turn leads to more transactions (27% of consumers spend more money with brands that have a loyalty program), and therefore, more precious data. The objective isn’t simply to collect large swaths of data, it’s about extracting meaningful insights from said data.
Customer segmentation is a prominent tactic that is optimized via data collection. Customer A loves ribeye steaks and kimchi, Customer B loves turkey burgers and kale chips, for a baseline example. This information is then used to create targeted marketing campaigns, tailor promotions, and develop personalized and customized experiences that resonate with each of their segments.
Algorithms can sift through the data and find meaningful connections among data points that can be as basic as the above, or much more in-depth. The more in-depth, the more valuable, because connections can be formed that aren’t explicitly obvious on the surface level. Segmented customers can be basic like “Steak Dudes” and “Kale Chicks,” or more in-depth, like “Not Quite-Keto But Sort of Keto Eating the Same Foods Over and Over for Health Benefits,” or “Environmentally-conscious, Ethical Vegans who like Yoga and Enya Songs.” Depending on the type of business, the segmentation can be as specific or broad as your product line can offer.
Each segment can then be analyzed, from purchase patterns to engagement, to effectiveness of ads and promos. As time moves along, segments become more refined and businesses can tailor experiences with more accuracy. And the beauty of zero-party data? If your agreement is set up in the right-way, like it can be with TIKI, data is always accurate and up-to-date, perfect for keeping in swing with the never-ending tango that is customer segmentation.
Predictive analytics is a more in-depth product of data collection in loyalty programs. It’s sort of like the crystal ball of consumer behavior. Picture Zoltar, but less weird (and less creepy if the data is given to you willingly).
The initial stages of predictive analytics include the time- and resource-depleting effort of cleaning data. With zero-party data, the data for the most part should already be pretty clean and shiny. With TIKI offering the ability to index and search millions and billions of data licenses (aka agreements between the business and consumer), there’s plenty of time saved in ensuring the data being used is legally compliant and fits the parameters of the agreement.
From there, the world is your oyster. Regression analysis, decision trees, neural networks, oh my! Models are fed with historical data to teach it the ropes. It’s like teaching a dog new tricks, but instead of roll over it’s learning to predict consumer behavior. That’d be a pretty cool dog trick, but I don’t think we’ve advanced that far as a society (yet).
Anydangway, this isn’t a full-fledged breakdown on setting up predictive analytics (maybe that’s a future blog), but the point is that with zero-party data, you can train models to estimate all those important metrics like customer churn, future purchases, texting those segmentations you’ve built (would they like these new boots? Are they new boot goofin’?), personalize marketing efforts, predict demand, and pick out golden opportunities for a cross-sell or up-sell. Neato!
Personalization and Targeted Marketing
It’s no secret that one of the most coveted derivatives of loyalty program data is creating the personalization and customization customers desire while also ensuring that their money spent on marketing and advertising is money well spent. Segmentation and predictive analytics are key components of personalization and targeted marketing, but the effort extends beyond those things. The goals of all of these efforts are to increase the retention and LTV of their customers. Let’s dive in to how loyalty programs can foster growth in these important metrics and create brand advocates and ambassadors.
Building Retention and Advocacy through Loyalty Programs
Loyalty programs have a magical way of building retention and advocacy among customers. Let's explore how loyalty programs achieve this buy-in and create that special connection:
Rewards that Excite
Good loyalty programs offer enticing rewards that make customers feel appreciated and valued. It's like receiving a surprise gift in the mail that brings joy and excitement. When customers see the value and benefits, they can gain through the program, they become more invested and motivated to participate.
75% of consumers say they favor companies that offer rewards. (Source:SmallBizGenius)
Loyalty programs have the power to tailor experiences to individual customers. It's like giving your customer a personal assistant who knows their preferences and caters to their every need. By understanding customer data and behavior, loyalty programs can deliver personalized offers, recommendations, and exclusive perks. This personal touch creates a sense of exclusivity and strengthens the bond between the customer and the brand.
68% of customers said they see value in shopping with a brand when the loyalty program sends them personalized discounts based on their purchase history. (Source:Digiday)
33% of customers will leave if the brand lacks personalization. (Source: Nextiva)
Emotional Connection, Social Proof, and Influence
Loyalty programs tap into customers' emotions, making them feel like part of a special community. If done right, loyalty programs can provide a sense of belonging and camaraderie. By fostering this emotional connection, loyalty programs create a sense of loyalty and advocacy. Customers become brand ambassadors, sharing their positive experiences with others and generating organic word-of-mouth promotion.
Loyalty programs harness the power of social proof to build advocacy. It's like having a friend recommend a product or service they genuinely love. When customers see their peers benefiting from the loyalty program and sharing their positive experiences, it creates a sense of trust and encourages them to become advocates themselves. This word-of-mouth influence amplifies the program's impact and attracts new customers.
Customers with an emotional relationship with a brand are 71% more likely to recommend the brand to others. (Source: Brandingmag)
13% of unhappy customers will share their experiences with others. (Source: Help Scout)
Gamification and Fun
Loyalty programs often incorporate elements of gamification, turning the experience into a fun and engaging adventure, sort of like (or sometimes actually) playing a game with exciting challenges and rewards. By adding elements like points, levels, badges, or competitions, loyalty programs create a sense of achievement and enjoyment. Customers actively participate and compete, fueling their motivation to stay engaged and loyal.
Brands that incorporate gamification into their customer engagement strategies see a 47% rise in engagement, a 22% rise in brand loyalty, and a 15% rise in brand awareness. (Soucre: The Manifest)
Creating an In-Ecosystem Economy and Currency Through Loyalty Programs
Loyalty programs are more than just a way to keep customers coming back for more. Oh no, they've got the power to create something extraordinary—an in-ecosystem economy or currency. It's like turning the world of loyalty into its very own bustling marketplace, where points are the name of the game.
You see, loyalty programs introduce a points system that's like having your own personal currency. With each purchase or interaction, customers earn these precious points that hold tremendous value. They can be traded in for all sorts of rewards, discounts, and exclusive benefits.
Good loyalty programs go beyond the simple earn-and-spend routine. They're like a game, a thrilling adventure where customers can accumulate points by referring friends, participating in promotions, or providing feedback. Earning by actively engaging with the brand…not bad.
Now, here's where it gets even more interesting. Loyalty programs often spice things up with tiered systems, emulating the feeling unlocking new levels in a game, but instead of power-ups, you get extra perks and privileges (or, sometimes power-ups). The higher you climb, the more valuable the rewards become.
But wait…there's more! Businesses with loyalty programs love to collaborate. They form partnerships with other businesses, expanding their reach and creating a network of participating brands, often creating what amounts to a universal currency that can be used not only with the program's parent brand, but also with its partners.
And let's not forget about the exclusive experiences. Loyalty programs know how to make customers feel special. They offer access to VIP events, behind-the-scenes tours, and personalized services that money can't buy. Incentivizing users to participate in loyalty programs is the first hurdle to overcome, but by offering exclusivity, you can build the buy-in and loyalty to create lifetime customers.
So now that we know the benefits of loyalty programs and their impact on both businesses and customers, let’s dive into a mock case study. It bears repeating if you’ve been following these case studies: we didn’t actually work with the brand below. But we’d like to!
Spirit Airlines' Epic Loyalty Program: Unlocking Personalized Experiences with Zero-Party Data
Welcome aboard, folks! Today, we're diving into the exhilarating world of Spirit Airlines and their relentless pursuit of customer loyalty beyond the allure of affordable flights. Get ready, because they've launched a game-changing loyalty program fueled by zero-party data that's set to redefine the sky-high standards of personalization.
The Challenge of Retaining More Than Price-Driven Travelers
Spirit Airlines faced a daunting challenge. While they were known for their wallet-friendly fares, they wanted to go beyond mere transactions and create lasting connections with their passengers. The catch? Their low-cost image often attracted customers solely driven by price, making it difficult to build meaningful loyalty. Determined to break free from this cycle, they embarked on a daring mission. Is it possible to be both the “save money” airline, and also one that customers willingly choose, regardless of price point?
Introducing Spirit Airlines' Zero-Party Data Loyalty Program
Hold on tight, because Spirit Airlines revolutionized loyalty programs with their groundbreaking zero-party data approach. Previously, Spirit’s Free Spirit Frequent Flyer program was relatively bare bones. Points were old solely for dollars spent on flights, and reward were limited to discounts on flights. Realizing that there was more potential in their loyalty program, they turned the tables, putting customers in control of their own loyalty destiny. It's a loyalty program like no other, where passengers hold the keys to their own kingdom of rewards and experiences.
Using TIKI’s zero-party data licensing and monetization platform, Spirit can create, manage and index licenses for all their flyers, keeping track of who agreed to what in terms of the data that can be used.
On the Spirit mobile application and on their website, customers are prompted with a pop-up notification that asks customers if they’d be willing to exchange data with Spirit in order for registering for their reward program and receiving exclusive rewards. Users can peruse the terms of service and know exactly what data they’re trading, and can make decisions to opt-in or out at any time. On iOS, which suffers from low ATT opt-in rates, the pop-up can be worked right into the flow and appear prior to the “Ask app not to track” notification. Upon agreement, a contract is created on the spot, AKA a consumer data license.
This agreement holds Spirit Airlines accountable, and all contracts are immutable and updated in real-time based on any decision changes from the customer. It also outlines the perks and benefits acquired by the customer. Check ‘em out below!
Unlocking Frequent Flier Miles
Prepare for takeoff as we explore the heart of Spirit Airlines' loyalty program: frequent flier miles. Just because this was the only feature of the previous program doesn’t mean it’s not an important one. But it's not just about earning miles through flights; it's an adventure that extends beyond the runway. Spirit Airlines encourages active participation, inviting passengers to complete surveys, share travel preferences, and provide feedback. The more they engage, the more miles they soar, unlocking a world of exclusive rewards. By opening up the avenues for customers to engage with Spirit, the airline unlocked new ways to reward users and utilize permissioned data to fuel their revenue.
Customized Deals and Partnerships
Get ready for a dynamic partnership that brings personalization to new heights. Spirit Airlines has joined forces with businesses in the destinations they serve, creating a symphony of collaboration that benefits passengers and local enterprises alike. With insights into where customers like to shop and where they’re traveling to, customers receive tailored deals and discounts on products and services that align with their unique tastes and travel aspirations, and Spirit reaps the benefits of partnership and affiliate programs while also building loyalty not only with their customers but with their partners.
Personalized Travel Experiences
Hold onto your seats because Spirit Airlines has harnessed the power of zero-party data to curate unforgettable travel experiences. Through advanced analytics and cutting-edge algorithms (or just like, some simple surveys and questionnaires), they understand passengers' preferences, travel histories, and desired adventures. Armed with this knowledge, they provide personalized recommendations for destinations, flight routes, and ancillary services, making every journey a customized masterpiece. Spirit can make accurate recommendations to certain destinations and activities upon the customer booking their flight, or even while they’re on the plane.
Data Re-Sell Programs
Depending on the chosen terms of the agreement, Spirit also has the opportunity to re-sell data on secondary marketplaces, such as Snowflake (hey don’t we have an integration for that?). As a competitive differentiator, Spirit can choose to funnel some or all of the revenue from data sales back to the customer through increased reward points.
Benefits and Impact
The impact of Spirit Airlines' zero-party data loyalty program has been nothing short of spectacular (or so we imagine). By offering personalized rewards and tailored experiences, the airline has taken customer engagement, retention, and satisfaction to new heights. Passengers feel valued, as their individual preferences are acknowledged and rewarded. Meanwhile, the partnership with local businesses has opened up exciting revenue streams while enriching the overall travel experience for passengers. The ability to re-sell data on secondary markets has created yet another revenue stream and another way for customers earn loyalty points and increase the frequency of their travel with Spirit.
Spirit Airlines has boldly elevated the loyalty game by embracing the power of zero-party data. By empowering customers and fostering personalization, they've taken loyalty beyond price, creating lasting connections that go above and beyond the thrill of a cheap flight. With their innovative loyalty program, Spirit Airlines has proven that when it comes to customer retention, the sky's the limit. This would not be a TIKI case study without one (or many) corny pun(s), would it?
Of course, loyalty programs are not limited to airlines. Any type of business with a product offering can benefit from implementing a loyalty program or optimizing an existing one. If you’re interested in learning more about the power of zero-party data and what it can do you your
airline business, give us a shout. In fact, you can just talk to our CEO, Mike.