In our most recent piece, we are joined by David Slavick, an accomplished loyalty professional and the Co-Founder of Ascendant Loyalty, an expert in building customer-centric programs for global companies in their pursuit of profitable lifetime value. Their Uniting Loyalty® proven method is dedicated to this capability.
At a time when not moving forward is equivalent to falling behind, partnerships are proving to be the missing piece in many successful loyalty program game plans. David talks us through the key reasons why partnerships, at both the strategic and tactical level, are gaining traction in the loyalty world; how to choose the right partner for your business; best practices, measuring success, as well as some of the ways this capability will develop over the next few years.
- Partnerships have become a hot topic as of late more so than usual; helping different companies generate greater program value leading to improved customer retention, as well as boosting their respective consumer business metrics such as conversion rate, visit frequency, average order value, and more.
- Customer expectations are changing fast, making partnerships an important element of business success.
- When deciding on an industry and business partner to pursue, voice of customer and research are paramount.
- A potential business partner should always satisfy a number of different criteria to ensure success and customer satisfaction.
- It’s important to put in place various measurement processes and metrics to analyze partnership performance and ensure value creation.
- Technological advancements and changing demographics will continue to drive loyalty partnerships and make customer loyalty programs more innovative.
- Partnerships have the potential to generate significant new revenue for the “spoke” program driver via performance-based deal structures.
Why are loyalty partnerships gaining popularity?
A recent survey by Demand Gen Report has found that as many as 82% of B2B leaders plan to seek out business partnerships in 2022. At the same time, Forrester finds that business leaders and marketers are increasingly choosing to forgo paid search in favor of sourcing strategic partnerships. While business partnerships are by no means a recent phenomenon, it seems companies are collectively waking up to the benefits of this type of collaboration, particularly in the loyalty ecosystem.
This is isn’t at all surprising given that when executed properly, loyalty partnerships offer tremendous measurable lift for both parties:
- Conversion rate
- Visit frequency
- Average order value
- Units per transaction
- Customer satisfaction and customer engagement
- Customer acquisition
At the same time, we’re finding that customers’ expectations are changing faster than ever. As instant gratification becomes the status quo, and great customer experience is becoming the norm, it’s no longer enough to expect our most frequent customers to remain so and engage with our brand while our offerings don’t change a great deal.
That’s why loyalty partnerships present a win-win for all parties. Especially suited to mature programs with long-standing/large member profiles, basic rewards program constructs, and sound operating practices, loyalty partnerships carry the potential of reinvigorating the business and giving today’s shoppers a whole new set of offerings and rewards.
“...loyalty partnerships carry the potential of reinvigorating the business and giving today’s shoppers a whole new set of offerings and rewards.”
Partnerships between two successful program owners allow both to add “freshness” to their original value proposition, shake up their scope of offerings, and capture both existing customers’ attention as well as attract their partners’ customer base.
As consumers become accustomed to being able to access many different products and services from a single source, partnering really does seem like a crucial component of staying relevant, delivering value in a more multilayered way, and thus staying competitive amid the fast rise of super-apps.
An example of a loyalty partnership could look something like the following:
A department store choses to partner with a restaurant chain that complements their store trading area geography. In return, the department store loyalty program members receive a free appetizer or a percentage off of their meal or a free dessert during key day-parts.
While the department store owner benefits from revenue on a per-ticket basis for directing traffic to the restaurant, the restaurant is now able to capture new customers. They may, for example, drive these diners to their restaurant at typically quiet hours via the department store loyalty program, and thus fill revenue gaps. The customers may then also sign up for the restaurant’s very own loyalty program, thus building customer loyalty.
The economical benefits of a successful partnership can also hardly be overstated. It’s also why companies with long-standing loyalty programs make business partnerships a key element of their business model.
A great example would be airlines, who typically partner with hotel and car rental companies, and offer their services to customers booking their flights. While it may seem like a seamless experience purely for the benefit of the customer who, in the eyes of the airline, will typically require both, the airlines actually make a significant boost to their annual revenue from hotels and car rental companies booked through the former’s website.
As the customer receives extra air miles for choosing to book their accommodation and their ride while booking their flights, the flight company is paid at a rate of 3:1 by the hotel and car rental companies who now also have extra business. For the airlines in particular this amounts to billions of dollars in extra income - making up 40% of their overall profits.
While few other industries - if any - have perfected their loyalty-based partnerships quite to the same level, this example illustrates just how much can be gained when businesses come together to form a seamless, omnichannel experience that anticipates customer needs and delivers accordingly.
“Airlines offer a perfect example of how much can be gained when businesses join their loyalty marketing efforts, and form a seamless, omnichannel experience for their customers.”
Having said that, the key is, of course, finding the right partner, which we explore in the following section.
How do you determine whether a company is right for partnership?
Given that as many as 60-65% of strategic partnerships in general fail - whether due to unrealistic expectations, poor communication, or lack of trust - it’s extremely important to approach the process of finding a partner with due diligence and caution.
“The process of choosing a partner needs to be approached with due diligence and caution.”
The most important place to start, however, is always your customers. Putting in the time and effort to learn what would most appeal to your target audience is likely to pay great dividends. As such, it should be the voice of the customer to inform the business as to who and what industries and sectors to go after. Whether it’s events, travel, restaurants or streaming platforms that would best complement your existing offerings, your customers should have the very last say on the matter. After all, they will personally reap the benefits.
After you have consulted your target audience, you have some investigating to do on your own. Some of the key criteria to look at are:
Does the potential partner have identified customers on their database?
A customer database is a list that includes consumer data, such as first and last names, contact information, as well as demographic information, e.g. age and gender. Such databases will often feature information regarding buying behavior and past purchases, shopping preferences, and average spending sums.
Making sure your partner has such a database is key, as this is precisely what will inform your communication strategies, scale up marketing efforts, and ultimately aid you in driving customer loyalty. As far as customer loyalty goes, information will be the key to your success. Note, no PII is or needs to be shared in order to succeed here.
Do they have a permission-based relationship partnership construct?
A permission-based construct, or permission-based marketing, is a type of marketing strategy where brands work on getting customers’ permission before sending promotional offers. There are two types of “permissions” - explicit (where you ask customers outright whether you can send them offers from partners or third-parties) and implicit (where the permission is assumed, but the user can opt out).
Finding out where your potential partner stands on this will be important, as you want to make sure your promotions reach their target audience but with respect for their communications preferences.
Do they have a geography that matches up to my geography?
In many cases, it is important that you and your partner share the same, or at least very similar, geography. After all, you don’t want to promote to your partner’s customers with an offer that requires them to travel greater than 10 miles to redeem. You also don’t want your own members having to travel far distances to take advantage of your partner’s offers. Making benefits easily redeemable for customers is crucial whether via physical store or online where geography is not a blocker, but mutual attraction and a satisfying UX/UI is.
“Making rewards easily redeemable for customers is crucial.”
Is their audience size significant enough to make it worthwhile to make the investment to create the partnership?
Let’s face it, for the best chances of mutual success, you want to partner with a program provider with a large following. If your offers aren’t used by lots of people, then you won’t be achieving a significant return on your investment. It’s important to pick partners you are on par with in terms of the popularity of your respective loyalty programs, or at minimum worth the time/effort and allow for test/learn as well as growth over time.
If an ecommerce store - is the website experience they're offering attractive to customers?
As stated above, your customers are the most important variable in terms of whether the partnership will be successful or not. That’s why you want to make sure that the partner and their offerings you’re recommending to them will make them happy and satisfied. After all, you’re vouching for the partner, and if your program members end up having a negative experience, you’ll definitely hear about it via call centre or social posts - so, set that up in advance for program/response monitoring.
Is their business model attractive to my customers?
Again, you don’t want to be sending your customers somewhere where they’ll have a less than positive experience. Make sure your partner’s loyalty program won’t ask too much of your members from the get-go. Examples include signing up for difficult-to-cancel subscriptions or having to make a considerable commitment to benefit from the promotions.
Is their loyalty program omnichannel?
Your potential partner should be able to provide a great experience to your customers across every touchpoint - whether that be their mobile app or their offline store. Omnichannel loyalty programs are essential in generating sales, building brand loyalty, and - of course - providing seamless, pleasant experiences to consumers. That’s exactly what you want for yours.
“Omnichannel loyalty programs are essential in generating sales, building brand loyalty and providing seamless experiences to consumers.”
What are some best practices for driving effective partnerships?
One of the most important best practices to bear in mind when seeking out profitable partnerships is - again - listening to your customers. If you have the time and resources, a good starting point would be approaching your loyalty program members directly and asking them what sort of rewards categories they would get the most value out of.
Whatever means you choose to do so, make sure to go across all the various sectors of the economy and have your customers indicate to you the ones they feel would be complementary to your existing set of offerings. Voice of the Customer is unlikely to fail you.
“Loyalty program member research is one of the key best practices for ensuring effective loyalty partnerships.”
Alternatively, analyze all the demographic data you have about your program members, and make educated guesses as to the kinds of products they may find appealing. Make sure to draw on other people’s help here - your analytical team especially - to decrease the chance of bias, which could cost you down the line.
Use your gathered research and data to decide on a sector where you’ll look for partnerships. Take the time to vet the companies you intend to outreach before beginning communication. Once the communications have started, however, make clear exactly how you envision the partnership and, in turn, what the benefits/win-win would be for both companies.
How do you measure the success of loyalty partnerships?
Once you’ve done all of the steps outlined above and “shook hands” with your partner (a letter of agreement or understanding is recommended), you now need to make sure you’re consistently measuring the performance of your newly acquired partnership to make sure things are running smoothly.
Some of the ways of measuring the success of your loyalty partnership are:
- Doing outbound research to find out about those participating in those programs
- Finding out from the partner who was acquired
- Information share
- Having your partner run a survey asking customers how satisfied they are with the service
- Social posts
- Comments to your call centre
- Setting up a reporting methodology that works both ways
- Studying satisfaction rates
- Looking at basic business metrics - are they spending more? Are they shopping with us more often? Are they responding more to promotions? Are satisfaction scores of our own program improving?
- Keeping track of referrals and acquisitions - are customers referring their friends and family?
- If it’s a revenue model (return on performance), then you know straight away.
Long-term loyalty partnership can yield great results for both parties, but as always, success calls for considerable investment of resources, money, and time. Given how much of both you will be devoting to the project, measuring the value of your partnership will allow you to monitor its progress and adjust the strategy accordingly to get your desired ROI. Do set up regular touch base to compare and share results - hindsight analysis and refinement are key.
In what ways is the world of loyalty partnerships changing and how is it set to develop over the next year or so?
Similar to every other aspect of our lives, loyalty partnerships are gradually changing under the pressure of digital transformation, evolving demographics and the aftermath of COVID-19.
As digital natives are gradually becoming a significant part of brands’ target audiences, loyalty program providers are having to reinvent their offerings to appeal to this important demographic. As such, we’re seeing things such as hyper-personalization and omnichannel functionality become a key strategic focus. Likewise, the types of rewards or benefits offered will need to evolve in order to capture the imagination of digital natives.
That’s why the future of loyalty partnerships is likely to feature less promotion-driven benefits, and more experience-based ones. Whether that be meeting your favorite sports star, getting early access to events, or earning NFTs that may end up accruing value over time. The scope of rewards and benefits that customers will be able to spend their points on is likely to evolve to an even greater, more personalized level with customer choice being the key.
To reiterate, the need to provide “freshness” and “new news” will forge ahead, while loyalty partnerships will continue to increase in popularity in response to this phenomenon.
How does Uniting Loyalty® by Ascendant Loyalty make partnerships work?
Uniting Loyalty is a unique process method for exploring partnerships. The methodology has been proven in a number of industries, from department stores, retail powerhouses, specialty retail as well as food/beverage operators.
Whether you’re a mature program owner looking to boost your loyalty program key metrics with a seasonal partner, or reinvigorate your business with additional offers/exclusive benefits, Uniting Loyalty® can help you achieve those goals. The planning and practice discipline Ascendant Loyalty provides helps clients with mature loyalty programs navigate the challenges of sourcing promising partnerships.
Starting with a strategic assessment, rigorous research and finally outreach, reach out to us to learn more as we will take you from A to Z in sealing the deal - with due diligence and high accountability at every juncture along the way.
Learn more here.