POSTED : October 16, 2018
BY : Nate Waters

Building loyalty with privacy in mind

When building a loyalty program, it is more important than ever to include considerations around loyalty pain points like privacy and data security right from the start. New laws around consumer data, in particular the General Data Protection Regulation (GDPR), which governs personal information of individuals in the EU, are causing major headaches for marketers and loyalty managers who are tasked with ensuring “Privacy by Design” in programs involving customer data.

The concept of “Privacy by Design” requires companies to take data privacy into account during the earliest stages of planning the policies and systems around a project like a loyalty program. Companies will also have to take into consideration the lifecycle of the data and take proper steps to ensure a secure flow of personal information.

CrowdTwist, a loyalty and engagement platform company, recently published the research report, “Engaging Consumers in an Age of Increasing Brand Distrust”. The report finds that consumers are skeptical of how brands use their data. Brands can solve pain points associated with consumer data collection and privacy and how by adopting omnichannel loyalty programs brands can rebuild trust through value and relevancy.

While the responsibility of adhering to these new laws falls heavily on the technology side, loyalty marketers need to incorporate “Privacy by Design” into the program strategy phase early on as well, to avoid costly setbacks later in the process. During the initial design phase for an international retail client’s custom global loyalty program, great care was taken to build both the technical back-end and the marketing communication strategy in a way that ensure personal information was collected in the right way and through the right channels. While there may be some reticence to do this type tedious work early, it could save companies countless hours and, potentially, astronomical regulatory fines later.

Driving consent with value

In addition to affecting the architecture of a loyalty program, privacy regulation changes also vastly alter the way in which those programs ask users for their consent. For programs that use personal information of members in the EU, the GPDR contains a host of new requirements that include obtaining updated consent from existing members, using explicit and unambiguous language to explain the purpose for collecting specific data, and obtaining new consent should that data be used for any new purposes.

For loyalty marketers, these requirements represent potential points of friction in the loyalty experience. Industry analysts expect loyalty program membership rates to decrease by 30% to 50% as customers ignore or refuse requests to opt back in. To mitigate this risk, marketers not only need to reevaluate the amount and type of data they request from users, they also need to reassess the value they provide in exchange for that data. While brands may lose a sizeable chunk of their members, those that do remain will likely be a company’s most valuable customers. Understanding what drives them and building a program around what they want, and value is key to creating not only an impactful experience, but a sustainable membership program as well.

Moving forward with data

Data is at the heart of what powers a compelling, personalized loyalty program but, improperly handled, it can also be liability. Once companies have begun building their program with privacy in mind and properly acquired consent, major pain points still exist in the actual implementation and utilization of the personal information obtained from users.

While marketers may grumble that the new regulations will hurt their membership base, they also provide a significant benefit: The laws are aimed at ensuring the members in a program want to be there. This raises the bar for the value exchange inherent to loyalty programs, and allows the programs that really drive value for their members to stand out and differentiate themselves.
Once companies have the right users and the right data within a loyalty program, they will be charged with developing those users into consistent, advocating, brand-loving customers. You can accomplish this by diving right into the data:

  • What caused them to sign up? Which channels are most effective?
  • What are customers doing once they part of the program?
  • What’s the interaction, purchase process or desired goal of the user like? Are these customer behaviors aligning with organizational KPIs?
  • Where do customers drop off? Are they sticking around for more than the “hook” (the benefit provided at sign-up)?
  • Can we design nudges to address parts of the program with high-churn?
  • Where are we seeing the highest levels of engagement and how do we get more customers there?

The answers to all these questions lie within the data. It’s important to note that most of these metrics are not productivity metrics like open rates or clickthrough Rates. These strategic measurements help organizations understand drivers of customer behaviors. The data gives a clear picture of what they like, what they don’t, and how to change it. Marketing now has the fun—yet challenging—job of optimizing the product to give customers the best possible experience.

If these, or any other, loyalty pain points are impacting your organization, don’t hesitate to contact us. We’d love to learn more about the work you’re doing.

To learn more about how to solve the loyalty pain points that are impacting your organization, download A new methodology for predicting the ROI of a loyalty program.


About the Author

Nate WatersNate Waters is a senior consultant at PK with a background in product management, building apps, and creating programs to drive customer engagement. He has worked across a variety of companies including Sports Illustrated, Microsoft, the PGA, SC Johnson and more. Nate enjoys finding ways to understand the voice of the customer, tying in data, and building new products.

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