The Loyalty Iceberg: Creating Human-Centered Experiences

Originally published December 9, 2019. Updated October 31, 2023.

For a long time, customer loyalty focused on two things: signups and discounts. The commonly accepted thinking was to capture email addresses and send promotions in order to increase transactions. In sum, traditional loyalty = transactional loyalty.

But we now know that when it comes to creating enduring customer relationships, transactions are just the tip of the iceberg. A customer must choose you over the competition over and over – and for reasons beyond price. They must feel that they are understood and valued; thus, the experience has to be about more than the transactional cycle of spending money to earn rewards in order to spend more money.

When we go beyond transactions, and dive below the flat, one dimensional surface of spend-based loyalty programs, we discover the idea of Experiential Loyalty. This is the next generation of loyalty,  and it is comprised of six core concepts:

  • Recognition
  • Understanding
  • Embracing
  • Removing Friction
  • Knowing
  • Adding Value

Recently, these concepts have grown exponentially thanks to the role AI is now playing in retention marketing tactics. AI empowers businesses to collect, process, and leverage vast amounts of customer data to personalize interactions and deliver experiences that are tailored to individual preferences. 

In our new thought leadership series, The Loyalty Iceberg: Creating Human-Centered Experiences, we will explore each concept, providing concrete advice for how to create the kinds of engagements that result in true loyalty as well as look at how AI is driving these concepts forward to be more effective and efficient. These recommendations will help you retain customers, drive more revenue from those relationships, and succeed in beating out the competition.

To start our series, we’ll explore the need to be recognized, remembered, and acknowledged as an individual.

Part 1: Recognize Me

Customers expect to be recognized and appreciated in places where they are “regulars,” and nearly half (47 percent) of consumers will abandon a brand when not treated as a recognized customer. And since every brand is constantly collecting data on their customers, there’s really no excuse for businesses not to use the data effectively, and at a minimum to remember their customers’ identities and their patronage. Here are five tips to make sure your customers know that you see them, and you know they’re there, and you’re so glad they came.

  1. Address customers by name. As Dale Carnegie once said, “Names are the sweetest, most important sound in any language.” We are all simple creatures, and the humble acknowledgement of our individual identity is a powerful thing: the mere act of hearing one’s own first name uniquely activates portions of the brain related to feelings of self-worth and personal identity. When someone uses our name, it immediately grabs our attention: we turn toward the speaker, returning the attention paid to us with reciprocal regard. In short, when we say (or show) a person’s name, we are demonstrating how important they are.

How AI supports: AI-driven personalization enables businesses to automatically greet customers by their names in various channels, from email marketing to chatbots. AI algorithms analyze customer data to ensure the right name is used, making every interaction feel uniquely tailored.

  1. Know where they are…. Proximity technology allows brands to know when customers are in an area where they can engage with a brand, enticing nearby customers with sales and promotions, and welcoming customer as they enter a store or place of business. With an average clickthrough rate as high as 80 percent, proximity marketing is a powerful weapon in any marketer’s arsenal, making its explosive market growth of proximity technology, more than doubling from 2012 to 2019.

How AI supports: AI-driven geolocation services allow businesses to track customer locations and send timely, location-based offers. AI algorithms can predict customer movements and preferences, providing opportunities to engage customers when they are most receptive.

  1. …And where they’ve been. If a customer has been to a website or an app recently, start from there to continue their journey at their last touchpoint. It builds a sense of continuity in the customer relationship, instead of starting over with each interaction. Like the 2004 RomCom 50 First Dates where Adam Sandler struggles to connect with a woman with short term memory loss, so every date is a first date… if every interaction with your customer is the same as the first one, you’re missing out on opportunities to build upon that first initial encounter and create anything approaching loyalty.

How AI Supports: AI-powered customer journey analytics provide insights into past interactions and behaviors. This data helps businesses pick up the conversation from where it left off, avoiding repetitive or irrelevant experiences.

  1. Know their story. If you have a customer loyalty program, let them know where they stand when they enter your store, visit your website, open your app. Tell them about their point totals, and make relevant product recommendations. Advise them of ways they can use their loyalty perks, or reasons why they might want to hold off if some new promotion is in the works. The more you can engage with your customers and get them excited about a loyalty program, the more likely they are to repay you in, well, loyalty. And with the endowed progress effect, every reminder of how much progress they’ve made in their journey to a reward makes them less likely to defect to a competitor.

How AI Supports: AI-driven customer relationship management (CRM) systems analyze loyalty program data and deliver personalized recommendations. Whether it's suggesting products based on purchase history or offering tailored rewards, AI enhances the value of loyalty programs.

  1. Say Goodbye… and Thanks. Follow-up contacts with customers, whether through apps, emails or SMS, work to heighten the customer experience, give the opportunity for feedback, share any upcoming promotions, but, most importantly, reinforce the customer relationship through a simple “thank you.” A customer who thinks a company is indifferent to his or her patronage is a customer who can be drawn to competitors… and with 42 percent of consumers willing to pay more for a friendly, welcoming experience, it’s an easy leap to make the experience friendly by saying “thank you” after it’s completed.

How AI Supports: AI can automate follow-up communications, sending personalized thank-you messages and collecting feedback. It also helps businesses monitor sentiment and respond to customer comments effectively.

Simply remembering a customer can start you on the path to creating a meaningful and memorable experience for your customers. Taking the next step by Incorporating AI into your loyalty strategy enhances your ability to recognize and remember customers in a way that feels truly personal. It goes beyond simply storing data; it's about using that data to create meaningful interactions. 

AI’s ability to process and analyze data at scale ensures that even as your customer base grows, no one gets left behind. It's the key to delivering human-centered loyalty experiences that keep customers coming back, not just for discounts. Recognition is the opening gambit for any relationship, and one that will pave the way for further opportunities to build your brand…and your customers’ devotion to it.

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