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#472: Leaders in Customer Loyalty Industry Voices: Capillary Technologies on Global Growth, AI, and the Next Wave of Customer Loyalty

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In this edition of Leaders in Customer Loyalty: Industry Voices, Loyalty360’s Ethan Perry spoke with Jim Sturm, President of North America at Capillary Technologies, about the company’s aggressive growth strategy, its differentiators in the crowded loyalty technology marketplace, and how artificial intelligence is reshaping loyalty programs for 2025 and beyond.

Speaker 1:

Good afternoon and good morning everyone. This is Ethan Perry from Loyalty360, welcoming you to another edition of our Leaders in Customer Loyalty Industry Voices series. In these episodes, we talk to the leading agencies, technology partners and consultants in customer and brand loyalty about the tech trends and best practices that are impacting brands and affecting their ability to drive unique experiences, enhance engagement and cultivate customer loyalty. Today we have the pleasure of speaking with Jim Sturm, President of North America at Capillary Technologies. Welcome, jim, I'm so glad you could join us today.

Speaker 2:

Thank you, Ethan. Always good to talk with the team at Loyalty360.

Speaker 1:

Well, we always love having folks from Capillary on because you guys always have a lot to say. Can you tell us a little bit about yourself and your role with Capillary Technologies and kind of your background in loyalty?

Speaker 2:

Sure, I've been in the loyalty industry for quite a long time, Previously worked for Briarley and Partners for quite a period until we sold the company, and then I've been with Capillary now for the last five years. I say that I was employee number one here in North America when I met the founders of Capillary. They had a strategic initiative about growing into the US market. So in a very serendipitous way I met Anish Reddy and Anant, the co-founders, and we've been on a very aggressive growth plan here in North America to the point that now gosh about 65% of the company's revenues are now out of North America. So we've grown significantly. I think we're around 200 employees here in North America out of North America. So we've grown significantly. I think we're around 200 employees here in North America. A lot of it has come through acquisitions that we have made, but growing quickly and having a good time in the process.

Speaker 1:

Excellent. Well, we know you recently were elevated to a new role, so we want to say congratulations on your new appointment as president of North America at Capillary Technologies. What does your new role mean for that continued North American expansion strategy?

Speaker 2:

I don't know how new it is, it's really, you know, those that know me know titles really don't matter. What's important is the growth that we've been seeing. So there's a need to really establish even a greater presence in the North America market, whether it's through our analyst relationships with Forrester and Gartner and folks like that, or whether it's through third-party partners, but, most importantly, when it's by working with clients. So the role is not that new, but what it is is acknowledgement of how important the US market is to us and how important it is to continue growing across the globe.

Speaker 2:

You know, there's a lot of firms I've been around the industry for quite a while and there's a lot of firms in the space whether they're agencies, whether they're technology companies that serve only certain markets. They're technology companies that serve only certain markets. Some serve the US. There's a lot of companies throughout Europe. There's companies throughout Asia, all who have strengths and weaknesses, just like we do, but our presence is very global and we are very honored to serve the many, many clients that we do across the globe.

Speaker 1:

Awesome. Well, for those who may not be familiar, can you explain a little bit more about how Capillary supports a brand's customer loyalty efforts and kind of give us a little overview of what you guys do and some of the industries you work with?

Speaker 2:

Sure, you know, what I want our clients to know is, as trusted advisors whether we are trusted technology advisors or whether we are trusted business advisors we will always have an opinion and a point of view and be an advisor to our clients.

Speaker 2:

So what we provide clients is strategic thinking first and foremost. So when a client comes to us and most companies these days, across all industries, typically already have some kind of loyalty initiative in place, at a minimum, they have significant marketing initiatives in place. So companies come to us looking for how to either make those initiatives better or how to launch something new, be it a loyalty program, be it a CRM initiative. But that's primarily what we provide is thought leadership on how to elevate whatever a brand has in market today or how to launch something new for them. And then we also have a technology capability that I think is unmatched in the industry, which can then enable the strategies that we discuss with our clients together. So look, at the end of the day, we're here to help our clients be more successful, to generate more incremental revenue, to find more customers, to get those customers to visit more, shop more. It's done with strategic thinking, which is what we are first, and foremost, but it's enabled through our technology.

Speaker 1:

Awesome. So you kind of touched on this already, but we see that the MarTech, especially in loyalty, the MarTech landscape is very crowded. What would you say sets Capillary apart from your competitors within the technology space?

Speaker 2:

You know, feature functionality wise. There's a lot of companies, as you say, that can launch a loyalty program that can put in place tiers and points and currency and gamification and all of those kind of typical loyalty constructs. What sets us apart is the foundation being data. So the foundation of the platform we have today is highly flexible. It serves multiple industries and therefore data is one of our unique differentiators. Just like I mentioned before, there's a lot of companies that serve different regions or different geographies. There are also companies that serve specific industries. We are global and we serve multiple industries today and you cannot do that unless you have a very flexible data environment. Second thing that sets us apart is our established capabilities with artificial intelligence. So we have a lot of artificial intelligence that's been in the platform for greater than seven or eight years now and it's really making loyalty initiatives work harder for our clients. It brings to bear intelligence, it brings to bear best practices through an AI layer that's built within the platform. So that's the two differentiators Capital Area has over the others.

Speaker 1:

Awesome. Well, one thing you touched on earlier was how you guys have expanded and part of your strategy was through acquisitions. We know that you recently acquired Cognitive. How do you see that acquisition enhancing your capabilities and playing into your growth strategy in North America? What synergies do you see between Capillary and what they were already doing?

Speaker 2:

Look, the companies we've been buying are established loyalty firms that bring to bear many of the things that we have today strategic thinking and technology capabilities. So we've actually made four acquisitions. They've been very similar in many ways, but the thesis behind all of them has been if we're going, you know, remember I said I was employee number one here in the US that doesn't mean number one in terms of goodness, it means number one in terms of physical. I was just the first guy, but in order to establish a presence somewhere, it is very hard for brands to get to know you. So we took a strategy of direct selling and acquiring companies. We've acquired four companies Persuade, briarley Partners, digital assets of a company called Tenarity and now Cognitive and all have brought very similar things more strategic thinking, more customers, more technology capabilities. It's just more of what we have done to date. It's established us with even a greater presence here in North America and across the globe.

Speaker 1:

Awesome. Well, speaking of all the things that you guys are doing for brands, we saw in our most recent State of Customer of customer loyalty report, we're still seeing 64% of brands reported that they have an interest in updating, enhancing or completely redoing their customer loyalty offerings. Since you guys have a seat across so many industries, do you see any specific places or industries where they're really leading the charge in loyalty program innovation?

Speaker 2:

Yeah, you know almost every industry. I will say every industry has some type of loyalty initiative today, so I don't see any as further ahead than the others. You know the history of the industry. I've talked about this a million times but the you know, the airlines and the hospitality companies went first and retailers quickly came along and then it's growing throughout every industry. You know you see CPG initiatives, you see B2B companies with initiatives. There's no one company that I think is doing anything uniquely better than the others, and in life you learn from watching others. So I don't think there's one that's any better. It's been a game of catch up for many industries. If anything, those companies that have come more recently are probably on a more advanced technology capability, so they're using artificial intelligence, machine learning and advanced data practices better.

Speaker 1:

Interesting. So one of the areas that we continue to see interest in is gamification and other experiential rewards. How is Capillary leveraging those to drive deeper customer engagement with your clients?

Speaker 2:

Yeah, in all ways. So, first of all, there's traditional gamification. Gamification is a strategy for keeping a customer engaged between what I call between the transaction or between the purchase. Okay, so it may be a case of here's a scratch off to get an extra, uh, an extra coupon or uh, or an extra reward, um. But gamification does not take just the form of playing games or scratch off or spend, win, um.

Speaker 2:

Gamification also comes in terms of things like leaderboard, um, and in terms of you know, starbucks has done things like purchase three times a week and get something extra right. So gamification comes in terms of challenges, it comes in terms of leaderboards, it even comes in the form and you mentioned the word correctly and that's engagement. So engagement through participation in surveys, and that's engagement. So engagement through participation in surveys, completing a profile, completing your preference center, it's, it's. Gamification has become a word that's oftentimes misinterpreted. What it really means is how to keep a customer engaged between their purchases so that they can express their desire to have a relationship with the brand, they can learn more about the brand, but from a brand's perspective, it keeps the relationship active. Cool.

Speaker 1:

Awesome. Well, going back to some of our research from the State of Customer Loyalty Report, we saw that 58% of the brands that responded mentioned that new reward options are a focus for them this year. Responded mentioned that new reward options are a focus for them this year. How are brand and customer expectations evolving when it comes to more personalized or flexible reward offerings in 2025?

Speaker 2:

58% even seems low to me.

Speaker 2:

That's a high number, but it even seems low because every human being wants look, we're a time star, our attention spans are zero, you know, we watch videos as opposed to reading two lines of text, and we want everything personalized for us. So rewards flexibility, rewards personalization, reward selection is incredibly important to today's loyalty initiatives and those brands that are doing it well understand they collect enough data, not just transactional purchase data, but I mentioned before preference and profile and attitudes and beliefs. You collect this data so that we truly understand what reward will motivate you. The idea of rewards is to motivate someone to do something more, to visit more, to spend more to complete a survey, to fill in a preference center, to spend more to complete a survey to fill in a preference center. So the idea of a reward is very simple. It's about motivating a consumer to take a certain action that a brand wants you to take, and the need and the advancement in the industry today is such that making those rewards highly personal is critical. It is a differentiator for one brand versus another, definitely.

Speaker 1:

Well, we couldn't have an episode of a podcast about loyalty in 2025 without touching on AI. It seems like everyone's talking about it every day. How do you see those advanced technologies like AI, machine learning and real-time analytics reshaping the loyalty landscape this year and for 2026?

Speaker 2:

It's already changed the game. As I mentioned before, we've had AI on the platform for seven or eight years, and so traditionally, agencies brought human beings who took months to spin through data and look and get diagnostic data about what's happening with consumer behavior, and then humans would strategically make recommendations. Technology is eliminating all of that. We have predictive models. In our platform. We have a feature called Nudge, where Nudge actually is doing what humans of the past would do, and that was analyzing data. Nudge actually is doing what humans of the past would do, and that was analyzing data, understanding what's happening behind the scenes and making recommendations. So AI is also not only making recommendations on how to make the program work better, but it's also making recommendations around what is happening with your consumers today. Are consumers buying certain products versus others? Are some products more popular than others? Are consumers churning? Are consumers in certain regions shopping more than others? And it's getting to the root cause and it is then making recommendations and, after recommendations are made, it is actually building the campaigns or the new loyalty rules for you. So today in the platform, we have an ability where it will say hey, your customers are churning at an alarming rate. Press here and we have a campaign that we can build immediately for you and it can be put in market this week, tomorrow, later this afternoon to address this issue. So AI is completely changing the game and it's not just eliminating human things that humans did before, but it's doing the deep thinking around.

Speaker 2:

What is the data saying? So analytics is four. I talk about four phases of analytics descriptive, diagnostic, predictive and prescriptive. Ai has enabled all of that Very quickly. Ai can present to you your key KPIs How's the program performing? What's working, what isn't? Ai can compare it to benchmarks within your industry. Ai can then say let's get to some diagnosis of those things that aren't working or those things that are working. Let's then take that diagnosis and let us predict what's likely behaviors and then let us prescribe some solutions for how to make the program work better.

Speaker 1:

That's amazing and it's so cool to see how fast things are changing there, and you briefly mentioned they're talking about KPI and using those tools to help you measure it. That's something that we continue to hear about. As these new technologies are coming online and loyalty is kind of changing, how are you helping brands better measure loyalty program effectiveness and be able to go back and demonstrate clear ROI to their internal stakeholders?

Speaker 2:

We have something called the value delivery framework and sometimes companies overcomplicate this. It's actually quite simple. Let's look at consumer behavior. Are they purchasing more? Are they not purchasing more? You can do this over periods of time, you can do it versus control groups, but we start with looking at incrementality incrementality in terms of visits, incrementality in terms of revenue. We also look at important measures around how many customers are earning rewards, how many customers are redeeming rewards.

Speaker 2:

We look at we have a proprietary measure called BALOR, b-a-l-o-r how many customers are becoming active in a program versus lapsing out. Those are all financial-oriented, transactionally-oriented, revenue-oriented measures. Along with that we have an emotional loyalty gauge where we are looking at the sentiment, the heart and the passion of the consumer towards a brand. So we're helping brands understand number one transactionally, is this working? Are people purchasing more? Are they purchasing at a higher value? In other words, not just buying discounted items or not just buying things off the shelf that are inexpensively priced, but are they really transactionally, a value customer? And then we're helping, along with that, look at the emotional engagement of a consumer, because transaction you cannot guarantee a consumer is going to continue transactional behavior In other words, shopping, visiting and purchasing until you also understand their heart and soul and how they feel about a brand.

Speaker 1:

Definitely Well. Speaking of emotional loyalty, are there any loyalty programs that you personally admire or that you're loyal to, and what do you like about their offerings?

Speaker 2:

You know almost when it comes down to a personal preference here, I mean, I like programs that you know there's a pub around the corner that I'm part of the program and they know my name and it's important that they know me and they know my preferences. You know I really like Amazon Prime. I think that any program that can get you to spend money because of the benefits that you're going to accrue as part of that spending is a really strong program. I think Amazon's one of the most well-done programs. I had the unique opportunity to meet an individual who started the Amazon program and started some of the unique features.

Speaker 2:

I think one of the most amazing things about Amazon was when we all got that first email long ago when it said, hey, you bought this and people similar people bought things, bought these kind of things, and so they were developing these models that were predicting what more you would likely be likely to purchase, and this is going back 20 years ago. So I had the unique opportunity to meet the person to launch the prime program and put in place many of these predictive models. But I think that's a program that's a shining example of it learned from the predecessors. It learned from the hotels and the airlines and the retailers, launched a unique thing at the time in terms of a subscription type program and had very advanced use of data.

Speaker 1:

Interesting Well, so, looking ahead, how do you think that consumer expectations will continue to evolve in 2025?, and how should brands be prepared to meet them?

Speaker 2:

Consumers, as I said before, are time starved. Attention spans are are zero, so their expectation is personalization and speed. So how quickly can I earn in the program? How quickly? It's a two-way street from a consumer perspective. If I give you my hard-earned money, I expect you to give me something of value, and so, therefore, how quickly am I going to earn something as part of a loyalty initiative, and how personalized is that reward for me?

Speaker 1:

Awesome. Well, do you have any closing advice or thoughts, and can you tip your hand a little bit to what's next for Capillary Technologies as we head towards 2026?

Speaker 2:

More advancements in our platform. So Capillary continues. We invest heavily in the platform. We're ahead of the others in terms of artificial intelligence and you're going to see even more cool stuff coming out. You know, the tips I give every brand are number one. It's still human beings want to buy from human beings and so whatever that frontline associate is for your brand, whether it's an in-store associate, whether it's a customer service agent, whether it's a chat agent make sure that they are heavily focused on the consumer. They understand the consumer's desires and the consumer's behaviors. So always focus on the customer experience as opposed to the structure of a loyalty initiative.

Speaker 1:

That's great advice. Well, that brings us actually to our famous quickfire questions, so that the audience can get to know you a little bit better. So we ask that you just limit your answer to one word or a short phrase for each of these, and I'm just going to dive right in what is your favorite word.

Speaker 2:

Oh, I don't know if I have a favorite word. I use the word interesting a lot because it can mean a lot of things in a lot of circumstances, and I'm sorry that wasn't a one-word answer.

Speaker 1:

What do you find tiresome Spreadsheets?

Speaker 2:

What profession other than your own would?

Speaker 1:

you find tiresome Spreadsheets. What profession other than your own would you like to attempt?

Speaker 2:

So I completed my essentially the majority of the requirements to be a lawyer. So if I wasn't in this industry, I would be a lawyer. A lot of people would find that offensive. However, I find it's very. It's a very logical industry Cool.

Speaker 1:

What do you enjoy doing that you don't get to do as often as you'd like?

Speaker 2:

Just I would say reading. Who inspired you to become the person you are today reading who inspired you to become the person you are today.

Speaker 1:

You know my parents and a couple of mentors that I've had in my career. What do you typically think about at the end of the day?

Speaker 2:

If I can fall asleep or not. I try to think about nothing so that I can have a clear mind and get rest. Rest is important for us.

Speaker 1:

Yeah, and how do you want to be remembered by your friends and family?

Speaker 2:

You know it's a matter of doing what you said you would do. So to me it's important that if I say I'm going to do something, then I do it.

Speaker 1:

Awesome. Well, jim, thank you so much for taking the time to speak with us today and for giving us a great episode of Industry Voices. It was really great getting your perspective on customer loyalty and we look forward to learning more from you and the team at Capillary Technologies throughout the rest of this year and beyond.

Speaker 2:

Thank you, Ethan. It's good to spend this time together.

Speaker 1:

Awesome, and thank you everyone for tuning in to Leaders in Customer Loyalty. If you haven't already, please make sure that you subscribe to the podcast, follow Loyalty360 on YouTube and connect with us on LinkedIn. And then don't forget to join us every Tuesday for another edition of Industry Voices.