Mark Johnson, CEO of Loyalty360, spoke with Tom Madden, Executive Vice President, and Katie Berndt, Vice President, at Phaedon, about expected trends in 2024, challenges and opportunities for brands, and how listening to customers will determine loyalty program success.
Mark Johnson, CEO of Loyalty360, spoke with Tom Madden, Executive Vice President, and Katie Berndt, Vice President, at Phaedon, about expected trends in 2024, challenges and opportunities for brands, and how listening to customers will determine loyalty program success.
Good afternoon, good morning. It's Mark Johnson from Loyalty 360. Hope everyone's happy, safe and well. Want to welcome you to another edition of Loyalty Live in this series we speak with leading agencies, technology partners and consultants in customer channel and brand loyalty, about the technology trends and best practices that impact the brand's ability to drive unique experiences, enhance engagement but, most importantly, impact customer loyalty. Today's focus is going to likely shape the customer loyalty industry in 2024 and beyond, and we have the pleasure of speaking with Tom Madden, who's the executive vice president, and Katie Berndt, who's the vice president strategy, research and insights at Phaedon about the challenges and opportunities they are seeing in the year ahead. Welcome both, Tom and Katie. Thank you for joining us today. Thank you, good to see you again. Nice seeing you, nice meeting you, Katie. Thank you very much. First off for those who may not be?
Mark Johnson:familiar. Can you give us a brief overview of Phaedon, how Phaedon works to with brands, to say, in conjunction with brands to help them enhance their customer experiences and loyalty?
Tom Madden:Absolutely, because that's the best part of the day. Phaedon helps. You know we help our clients move their customers towards becoming true advocates for their brand and their business, and it starts with awareness and understanding, you know, acquiring new customers, engaging with them in meaningful ways and ultimately driving them to be loyal customers.
Tom Madden:You know we work with them specifically to help design or, more oftenly, as the case is today, redesign their loyalty or CRM programs with leading strategies and loyalty focused analytics that come on a Katie's team and another team in our business, and additionally, we help our clients with customer experience. And then, finally, we have our proprietary loyalty platform called Tally, which is a recognized leader in loyalty engines and it actually powers some of the largest, the most valuable customer loyalty programs in the world.
Mark Johnson:Absolutely. When you look at the last 12 months, we have seen a number of different brands who are looking to improve and revamp their customer loyalty efforts. We talked about that a little bit coming into this call. They're interested in having functionality, changing program structure, essentially changing the benefits, looking at their customer value proposition, you know, is this something that you're seeing and, if so, what changes have your clients been focused on?
Tom Madden:Yeah, in short, I'll kick this off, and if Katie want to add some color, please do. In short, Mark, yes, we are. We're working with our clients to ensure that the value is in the right place for their customers, right? It's one thing to offer something, but if that doesn't mean anything to the members of the program, then it's just going to fall flat. So we're seeing programs adding more benefits through their brands, but also by adding proven external partnerships to extend the value on more of a day-to-day basis, right? So some companies don't have customers transacting with them every day. It might be once in a while, and so how do you continue with the engagement and the value? And that's through partnerships that can help more of the day-to-day interactions.
Mark Johnson:When you talk about partnerships, are you talking about partnerships with other brands or partnerships with organizations like yourself who have strategy and kind of deep market insight, or is it a combination of both?
Tom Madden:So yeah, so I mean when it comes to the program, when it comes to the program of value in the leg, it's through external partnerships, other brands yes, other brands that can bring some additional value to the program, as seen by the members.
Mark Johnson:That's awesome Okay. What program changes and enhancements do you think brands will be focused most in 2024?
Tom Madden:Well. So it's funny because I was thinking about how I was looking at this at the beginning of 2023 and it is my. It has evolved some in that I think there's going to be a renewed focus on utility of points, elements of enhancing the experience. So option redemption options are expanding outside the existing ecosystem of the brand and they can use those points to make other purchases or to earn points in other ways.
Tom Madden:I also think people are getting smarter about getting the most out of their programs, especially with an ongoing threat about the economy and the like. It's just, people are getting smarter about it, continue to do so, and so, if you think about points as a true currency, it helps you think through things that you can do differently. I will say also, though it's not just about the loyalty programs themselves, but also about the entire CRM experience. If you look at, you know, just, for example, looking at the customer journey helps us identify where we can effectively engage with customers, where they need attention. And then lastly and you heard me say this before, mark as you look at loyalty over a longer period of time, there's always a shiny object. Two years ago, nfts were the shiny object and what nobody's talking about. You don't hear many talking about them anymore. So the more we can help keep brands focused and less pulling out a squirrel right, the better and more effective we know our clients can be with their programs.
Mark Johnson:Okay and Katie, what are you seeing? Any program changes and enhancements you're seeing within your group.
Katie Berndt:Yeah, I mean I would say I echo what Tom has said around point utility and adding more partnerships. I also think that CRM is a huge topic that goes hand in hand with loyalty. We've been having a lot more conversations with clients around targeting and personalization and whether that's at the segment level or tier level or ultimately striving for those one-to-one interactions, because I think where you can personalize it right, that's where the relevance starts to ring more true and you can create more of those meaningful moments and that's where you're actually having those connections and driving emotional loyalty.
Mark Johnson:Okay, and how should brands be defining the success and measuring success to other programs when they're looking to make enhancements?
Tom Madden:Tom, Well, you know, I think there's going to be a sharp eye on liability right. Liability continues to grow and brands want to be sure they don't get kind of caught off guard there.
Tom Madden:So I think, there's a whole opportunity about bringing liability down through point utility that we've been talking about. That creates a win-win for both the brand and their books, but as well as the members and the value that they receive for engaging with the brand. People are familiar with programs re-leveling or reevaluating or reevaluing if they're such a word their programs, and when it's done poorly it creates a huge riff and a potential change in loyalty with the brand. But when it's done right, you know you can add more utility to the points. Some members feel like the brand is really looking out for them. It helps create, it helps increase trust and helps the members feel like they're part of something they want to continue to be part of.
Mark Johnson:Okay, interesting. What about you, katie?
Katie Berndt:You know. Aside from, you know redemption rate, which kind of gets at that liability question or what Tom had said about liability, I think, incremental lift in enrollments, you know the active member rate, net sales, frequency, retention rate these are all kind of the big ones that we hear about and that clients care about most and that we're helping them actively track and measure. But I do think too that kind of secondarily but perhaps should be first is kind of being able to measure that voice of customer. So you know whether that's through customer satisfaction, net promoter score, social listening I think keeping a pulse on that is just as important. I think that's going to be a secondary metric.
Mark Johnson:When you look at VOC, you know one of the things that we're focused on at Loyalty 360, we have a metric study we've worked on with our advisory board to figure out you know what kind of an overarching metric could be to compare brands, potentially. But the VOC measuring voice of the customer, because it's more of a point in time, you know, opportunity, it's like a balance sheet, right, how should we have been looking at VOC and how do they integrate it? Because listening to an understanding of customers is a challenge that we continue to see within the brand community, but understanding what the VOC or whatever the NPS or you know, the other scores, could mean to the loyalty efforts, it's somewhat of a challenge.
Katie Berndt:I mean, I do think it is a challenge but you know it's something that we're seeing. Over the last, I would say, 10 years clients have made huge investments in and you know it's made leaps and bounds improvements on. I do think something like a net promoter score helps you, you know, develop and kind of that benchmark and watch it over time. You can also then target specifically those who are, you know, giving you the poor, you know detractor type rates and then knowing where your promoters are is always good to make sure that you know those especially who are your top most active members, or clients are, or customers are the ones that are happiest. I do think that you know, just getting at listening to them will help you, no matter what kind of find those gaps in the customer experience and then being able to fix that part of the journey.
Tom Madden:Absolutely, katie, and I think how they can play out a little bit Mark is so obviously by understanding what the customers are really asking for and ultimately working towards net promoter scores and the like. It feeds the strategy. It feeds future changes or future additions, future partnerships that we talked about. It also is in the case of Tally. It's fed in through the customer care app. So when the call center agents of a particular client are on the phone with a member who's calling about something, some problem that needs to be resolved is generally the case. They already can see in the app that okay, this is Mark Johnson. He's actually a really big fan of our program. He participates in it as well. He's very unhappy about the situation. What can we do to fix it right so we can continue to keep the engagement with you at a loyal level, rather than create an opportunity to start looking somewhere else? So it plays out in all sorts of aspects of program design and implementation.
Mark Johnson:Excellent, and you mentioned, as we see, there's a great deal of focus on measuring efficacy of customer loyalty programs. Can you touch on that a little bit? You named a few metrics that our brand should focus on. Can you maybe go through this again and talk about how this should be important?
Katie Berndt:Sure, I think driving frequency is typically number one KPI, as far as you know, kind of is agnostic of industry. You know enrollment rates making sure that you're measuring not only month over month or year over year but just the incremental, especially when you've made changes to a program. I think enrollment rates by channel is also something to keep a very close eye on. You know whether that's, for example, a hotel loyalty program that could be online, it could be through an app, it could be at while you're staying at the hotel through their Wi-Fi or talking to someone at the front desk. Measuring by channel, you know revenue is another key one ROI right, how much, how much you're taking in and how much you're spending to get those people in. And then I think back to what Tom was saying around redemption rates.
Katie Berndt:I think you know, where you are getting higher redemption rates from your members particularly, and being able to attribute that back to members. I think we all know active members spend more, or those of us in the business have come to believe that. So I think kind of keeping track of that, not only in the liability side but just overall participation in the program, that really is an important metric that you shouldn't be scared of. You want people to redeem and get value out of the program.
Mark Johnson:Okay, what are clients asking you in regard to metrics? Are there different metrics they are looking for, asking of you?
Katie Berndt:You know we we've been talking a lot with our clients about participation as a whole and that's something you know that we believe in. You know this gets at almost like life-cycle targeting and understanding incrementalities just based on the promotions that they're doing or modifications that they're making to their program that could be related to CRM, modifications that they're testing and learning, or loyalty program specific. So I think from an analytics perspective, incrementality is is one of the most important things just trying to understand what lever, what levers that you can pull at any given time to drive more impact.
Mark Johnson:Okay, what new trends have you seen that are top of mind for brands in 23 going to 24?, and what innovations are your brands, the clients that you're working with, looking to implement in the new year?
Katie Berndt:Sure, I can start and, tom, if you want to add, that would be great, I guess I would say. First of all, I just want to call out that you can't really, or shouldn't really react to every trend that you're seeing just because you know. It really depends on the maturity of the program and the brand itself, and I think just getting the foundation right is key. But some of the trends that we continue to see are personalization and being able to provide more flexibility and choice. I think it's really important to put your customer at the center of your flywheel, so to speak, and really map and build the experience, whether that's UX, crm, loyalty benefits or the functionality of the program, building that around your customers and then, you know, letting your customers that are actively participating help you drive the enhancements.
Katie Berndt:Yeah, I definitely think that being on top of trends is important, but just don't take everything that you're you're hearing and you know thinking that it's exactly right for your brand. Similar to what Tom was saying around NFTs we put together several POVs last year on NFTs. Just, you know, knowing we have to know about them, but whether it is it something that you just chase and make sure that you have some representation. Some brands did that and other times it was more of a PR thing. So I think the best thing that you can do to add innovation to your program is really looking across industries. We find that when we're able to keep a pulse on, let's say, something that a retailer restaurant is doing and bring that to hospitality, or vice versa, that kind of inspiration really helps guide additional innovation.
Mark Johnson:Okay, excellent. And Tom, for brands done on a budget, how can they best incorporate a new trend? Or is there a trend that is budget friendly, is going to have some impactful, potentially behavior change or ROI, that you see?
Tom Madden:Yeah, I think, first and foremost, they got to start with their, with their members. Right, you got to understand what they're saying. You talked about VOC voice customer. This is where it's really important. So you know, and separately, you know a consulting mindset. A client will ask for something very specific, but a consultant will come at this and ask more questions to get further understanding and realizing. Often case, often, often, is the case that a client is asking for something but it's not exactly what they really want and you can't get there without understanding better. It's the same thing here with members.
Tom Madden:Members might say, oh, I love you know, you know board Ape. But then when you ask them about okay, well, you're sitting on 500,000 points, are you going to redeem that for board a NFT or are you going to redeem that for you know, a week at a week, in a mile or something, and then the reality hits it right. So so I just think understanding what the members truly want and what they're truly asking for is imperative in that.
Mark Johnson:Okay, when you look at some of the things that your clients are asking for you, retail sales have kind of slowed down at least in October that they did. There's economic concerns adding more value to the program that can help differentiate their offering. What are you seeing in the market, tom, and how are you advising your clients?
Tom Madden:You're saying.
Mark Johnson:Yeah differentiating But what is changing in 24? There's a lot of NFTs. That's something they were asking for. Things are definitely changing more fluid but with regard to the economy, with the US sales and kind of being up down, kind of hard to have a crystal ball what are you seeing and how are you advising your clients now? Maybe going back over the last year?
Tom Madden:Yeah, it's interesting because I'm seeing clients kind of in a couple different areas focusing on things they just have to, whether they want to or not, like privacy and things like that that are always going to continue no matter what year we're in. But then in terms of truly differentiating post now that we're a couple of years out of COVID so I'll call it well, past post COVID brands have been really doubling down on this market and how we can differentiate, and I think what they're doing first and foremost is understanding the customers that aren't in their programs today. What does it look like to get them in the program? What would they have to do to be attractive to the customers who aren't participating with their program? And for those in the program, where can they center the value most effectively?
Tom Madden:So, if somebody is shopping at a retailer once a year and has the propensity to shop at a retailer once a year, spending a lot of your marketing budget or your rewards budget on that person is probably not the best return on investment, Whereas if somebody is shopping with your brand a couple times a year, but you know that they're shopping somewhere else 50 other times a year okay, let's double down on this. What do we need to do to get them attracted to us? Give us a try, become aware of what we can bring to the table for them, how we can add value for them, ultimately to move them towards loyalty, and so that's where the efforts are being spent. I think they're looking at different customer or potential customer segments and saying if we've got a dollar to invest, where are we going to get the biggest return on investment for that?
Mark Johnson:Okay, when you look at the programs, we were talking about this little bit coming up as we prepared for this, but there's this belief in sea of sameness. That's something we saw last year and we're seeing it this year as well. Right Brands want to differentiate their offering, both internally from a normalization perspective, but externally to the consumers as well. But it's a significant challenge technology, having alignment, something that you've talked about through this, having the ROI and right customer value proposition. It can be hard to differentiate the customer loyalty from a sea of sameness perspective. What are you seeing that that's working, Katie?
Katie Berndt:I would say simplicity is still a guiding principle.
Katie Berndt:I don't know what maturity your program is in. I think when you try to stand out too much or stand out for the wrong reasons, it can absolutely backfire. I think something that we've been talking about is important to know your customer right, determine what they want and what they expect and then work to deliver on that to the highest level possible in every channel that you interact with them. I think that this idea of big L loyalty so your product, your service, your brand all help you stand out in that see-of-sayness. I think where you can eliminate silos amongst your team, like we were talking about a bit, too where loyalty programs it's not just the program, it's how you create loyalty as a whole. I think, too, where you're able to leveraging the data that you collect through loyalty programs helps you stand out CRM UX and the personalization just activating on it.
Mark Johnson:When you look at maybe a mistake or a challenge that brands make regarding their customer loyalty efforts. Can you give us maybe one or two that you see and how brands could address that going into 24?
Katie Berndt:I think that making big changes to your program without doing proper research is a first mistake, but you have to really be ready to deal with the repercussions. I think Delta Airlines is probably the biggest case study from 2023,. When they initially announced those upcoming changes that were coming in 2024 to their SkyMiles program back in September, this was a prime example of what not to do. They came out saying, hey, we've really simplified it, but then what they did was just create a firestorm for themselves. They were known as this trusted, best in class leader for loyalty. I think it really broke the trust. From an authenticity standpoint, it just didn't feel right for them because they had typically taken such good care of members.
Katie Berndt:I think most people would expect that you need to change your program over time and they would understand that. But communication is key in how you roll out changes. Just being able to keep that pulse so you can make small changes and iterate as you go, versus massive ones that get the social media storm going against you is difficult. Where you can, I think investing the time and energy into a fully thought out qual and quant research before launching anything major is rule number one Tom, are you going to add something?
Tom Madden:Clearly that's the best case study of the year because they managed, I think, three or four times throughout the year, between their clubs and their tiers, to change and then go back, and then change and go back.
Tom Madden:It does break the trust that Katie is talking about If you step up to 5,000 feet per moment. I think the biggest mistake is when they don't, when brands aren't looking at a long-term plan, long-term strategic plan, and then working out their annual objectives and goals to help get to that plan. When they've got that and you always have to make adjustments to plans that's okay. But when you've got that overriding strategic objective you're trying to get to, it just helps keep the noise at bay and it helps keep the shiny objects out where they belong.
Tom Madden:Okay and we talked about this a little bit.
Mark Johnson:There's an interest in rewards, incentive that they're changing a little bit. More personalized rewards, using the data more in a stewardly manner, right and from a content perspective, rewarding for special experiences, surprise and delight all kinds of unique opportunities out there. Are there some specific experiential rewards that brands have used recently, Katie, that you think that are impactful?
Katie Berndt:You know, I do think early access or special access, especially for those kind of one-of-a-kind experiences that are hard to come by, that are outside the typical program, or, you know, I think we're gonna see that more and more. I think what happened this last year with the Taylor Swift tickets Ticketmaster Debacle and luckily I had early access for being a Swiftie fan, so being able to do that I think you're gonna see that more and more as loyalty programs partner and try to go outside of their point utility and outside of, you know, adding those experiential rewards, looking at ways to give special access. Or, you know, unique access is gonna be part of that experiential rewards strategy. So, whether that's, you know, partnering with local businesses from a, you know, bringing that experience or supporting each other, whether that's from retail or restaurant or hospitality, I think you know there's definitely some of those that we've seen more lately.
Mark Johnson:Okay, great, when you look at some of the challenges or opportunities you see regarding customer loyalty offerings and, Tom, you talked about strategy can you give us some examples of what you think the biggest challenges may be with regard to strategy or even technology that that brand should be cognizant of and looking to address in 2024?
Tom Madden:Yeah, yeah, absolutely.
Tom Madden:I'm thinking of some examples where, well, so you know, forever we didn't have data.
Tom Madden:Now we've got tons of data with these programs and then forever we didn't have good loyalty focused analytics to try to look at the data in ways that bring out good, actionable insights.
Tom Madden:We've got that.
Tom Madden:We've got that now, but we still don't necessarily have the greatest storytelling going on in the industry.
Tom Madden:So, for example, to answer your question more specifically, when a brand is sending out an email every single day to you and it just becomes noise, right and you start to ignore it, even if they said I could have something for free, I'm gonna miss it just because I get these all the time and the day-to-day people sending those emails know that they probably could be more effective doing something else, but their executive team may not understand that and still wants this to continue as is, rather than go with what the data suggests you could do to get a bigger return. So I feel like there's this there's some great strategies coming out of Katie and her team. There's some great analytics and insights from that data coming out of Emily Merkel, who you've met before, and her team. But then how do we help the client tell the story to the executive team so that they can pick the right strategies and not keep doubling down on old strategies that are no longer producing. Okay, excellent.
Mark Johnson:Kind of a follow-up to that. Internal resource allocation alignment is a big challenge as well. We talked about that a little bit earlier. With regard to the difference between the little L, the programmatic loyalty, or the big L from an organizational perspective, are there any insights you can give to brands who are looking to address internal allocation alignment, making sure that they get on the same page, show the value of the program? Is there anything that these loyalty point of leaders that are driving these programs should be cognizant of doing to help increase resource allocation, increase the focus of the program?
Tom Madden:Yeah, we're working with a brand that I can't announce until things go live and kind of towards the end of quarter one. But this brand, this team, has been fantastic at bringing all aspects of all various aspects of their marketing team together throughout the discussions and throughout the process. So, while the loyalty team is driving the effort, they're bringing in their media team, they're bringing in their email team, they're bringing in all these other teams that have to understand what's going on, have to understand how they can be a part of this and how they will benefit from this, as well as the loyalty team and the members, obviously. So I think when a chief marketing officer looks at some of these initiatives and realize the effects throughout their organization and can bring those folks in early in partnership, I think you're gonna get just a wicked bang when that program goes live. It's gonna be such a great thing for members and customers and it's gonna be a great thing for the brand itself and now it's time for our quick fire question segment.
Mark Johnson:I'm gonna do this with Tom. We like to have one word responses or short phrases. It keeps me in good standing with them. The content team don't wanna run over. So, Tom, what is your favorite word?
Tom Madden:I love Miriam Webster's word of the day. Today's word is raconteur a person who excels in telling anecdotes. I think that's a great word for the day.
Mark Johnson:There you go. What is your least favorite word?
Tom Madden:Bore, boring or bored, Any of that. I hear it. I don't like it.
Mark Johnson:Okay, so then what excites you?
Tom Madden:People. Being home alone for a number of years is the antithesis of that. I like people and the energy that comes from it. Mark: Okay, well, what do you find tiresome? Being home all day without the people around?
Mark Johnson:What brand do you think does customer loyalty well?
Tom Madden:I think. So you're probably looking for specific and I'm not gonna give you that, but I'll say any brand that levels any brand that has levels that address different segments of their base, from a base loyalty program to tiers with added value, subscription program, add-ons, you name it.
Mark Johnson:Okay, what profession, other than the one you're currently in, would you like to attempt?
Tom Madden:I'm enthralled with Bob's burgers. I would love to own a little burger joint. That'd be fun.
Mark Johnson:Who inspired you to be the person you are today.
Tom Madden:My extended family and my closest friends.
Mark Johnson:How do you want to be remembered by your friends and family?
Tom Madden:Well, hopefully, as somebody who's generous and is always there for them when they need me to be.
Mark Johnson:Okay, great. Well, thank you very much, tom, for those quick fire, rapid response questions. Thanks to both Tom and Katie for taking the time to share a little bit with us about what they're seeing in regard to customer and channel loyalty, where it's going in 2024. It's great to have the insight from two proven market leaders and it's always great to catch up with the team and faith, and so thank you very much.
Tom Madden:Thank you very much to you and the entire Loyalty 360 organization Absolutely.
Mark Johnson:And thanks everyone for listening. Make sure you join us again for another edition of Loyalty Live soon and look forward to seeing you in 2024. Thank you.