Loyalty increasingly keys on 'soft' social recognition

Company loyalty programs, with a history that goes back at least 30 years, are being transformed by social media. No longer confined to a "do this, get that" model—with an accrual, for example, of points, travel miles or free hotel stays in exchange for repeat business—today's loyalty programs increasingly are incorporating such social elements as badging, recognition and status.

Customer loyalty and incentives company Maritz Research found in its "Consumer Preferences" survey of 1,400 people conducted online in April that 85% of customers are very happy when businesses respond to their public comments in online forums and social media venues. Moreover, 27% were "delighted" with a response to their public (social) feedback, compared with just 6% who were "delighted" with direct, one-to-one feedback.

These findings indicate that the public nature of social media offers a powerful sense of edification, feeding company loyalty.

"Increasingly, customers want recognition for a broader scope of activity than just 'do this, get that,' " said Scott Robinson, Maritz senior director-loyalty solutions. "While there is still a role for traditional rewards, it's just one element in customer loyalty. Today, customers are looking for 'soft' social benefits [or] effective emotional rewards that provide status and recognition."

Robinson said the rise of social gamification also is feeding customer loyalty programs. "If you think about the reasons we loved games as kids—they're social, fun and collaborative—all those have a role to play in loyalty," he said.

According to Ranjith Kumaran, founder and CEO of customer loyalty company PunchTab, social media has underscored the importance of a company staying top-of-mind among customers. "PunchTab is my second company; my first was the file-sharing company YouSendIt," Kumaran said. "That company was a free-to-paid model, and we found that converting people to paying customers was about mindshare, keeping them engaged in the conversation, and providing incentives to try the beta product or subscribe to our newsletter.

"We found that if customers were engaged with the company in just one channel, it might take up to four years to become a paid user. But if they were engaged in two or three channels, such as a trial and a couple of social sites, they were two-and-a-half times more likely to become a paying customer. The secret of loyalty programs is the frequency of engagement."

And rewards are more subtle than in the past, Kumaran added. For example, an IT customer might help others in a social forum troubleshoot problems; in return, the company might reward the customer with exclusive access to content or early access to products and events.

To be sure, social media activity can still leverage the rewards-type approach of traditional loyalty programs. For example, American Express' Amex Sync program offers cardholders couponless deals from merchants when they sync their cards with their Facebook, Foursquare and Twitter accounts.

"But social is unlocking different types of behavior beyond coupons, such as status, influence and thought leadership," Kumaran said.

Robinson said customer loyalty efforts present particular challenges. To help, Maritz has a platform called evolve24 that monitors social conversations and buzz around a company.

"These types of tools measure things in the aggregate," he said. "But the loyalty marketer wants to know about individual customers. The challenge is to connect activities down to the individual. For example, earning a badge and displaying that to my community might be meaningful, because that community understands the significance of the badge."

Robinson sees a change in the perception of customer lifetime value.

"The definition of customer lifetime value as we understand it is evolving," he said. "My value to a brand must go beyond purchases I made, to include recommendations, referrals, advocacies and reviews."